2022 (7) TMI 1192 - AT - Insolvency and Bankruptcy

NCLAT Upholds Decision Rejecting Resolution Plan, Emphasizes CoC's Commercial Wisdom

The National Company Law Appellate Tribunal (NCLAT) upheld the Adjudicating Authority's decision to reject the appellant's resolution plan and proceed ... Rejection of application seeking consideration of his resolution plan submitted - HELD THAT:- The CoC authorized the leader of lenders to submit the common view before the NCLT that the CoC is of the final view that no further opportunity should be given to prospective resolution applicant (PRA), as he has failed to provide desired comforts to the lenders for the acceptable terms in resolution plan, which could be successfully implemented. Looking at the total circumstances of the case, including the views of joint lenders and also at the fact that the CoC did not wish to consider any further revised resolution plan as he had failed to provide required comfort to the lender banks by submitting/revising the resolution plan despite being provided with enough opportunities to do so, it is opined that such decision is within the ambit of commercial wisdom of the CoC. The statutory scheme given in the IBC regarding the time period of CIRP in section 12 of IBC stipulates that a total of 330 days could be spent in obtaining prospective resolution plan. In the present case, approximately 559 days are over since the initiation of CIRP till the date of Impugned Order and enough opportunities have already been given to the prospective resolution applicant to provide resolution plan without success - the Adjudicating Authority has not erred in passing the Impugned Order, and while passing the order it has considered the views of the CoC as well as the lapse of stipulated time period of more than 330 days in the CIRP. Appeal dismissed. Issues Involved:1. Rejection of the appellant's resolution plan by the Committee of Creditors (CoC).2. Adjudicating Authority's refusal to direct CoC to consider the latest revised resolution plan.3. Timeliness and adherence to the Corporate Insolvency Resolution Process (CIRP) period.4. Commercial wisdom and decision-making authority of the CoC.5. Applicability of Supreme Court judgments on liquidation and resolution plans.Detailed Analysis:1. Rejection of the appellant's resolution plan by the Committee of Creditors (CoC):The appellant submitted multiple revised resolution plans, with the initial plan submitted on 22.1.2021 and subsequent revisions on 27.3.2021, 8.4.2021, 9.8.2021, and 10.9.2021. Despite these revisions, the CoC did not approve any of the plans. The appellant's final plan submitted on 10.9.2021 was not considered by the CoC, leading the appellant to file IA No. 192/2021, which was subsequently rejected by the Adjudicating Authority.2. Adjudicating Authority's refusal to direct CoC to consider the latest revised resolution plan:The Adjudicating Authority rejected IA No. 192/2021 on the grounds that the CoC had already considered a resolution plan from the appellant and that the CIRP period of 330 days was over, with an application for liquidation already filed. The Authority declined to direct the CoC to consider any further resolution plans.3. Timeliness and adherence to the Corporate Insolvency Resolution Process (CIRP) period:The CIRP was initiated on 29.5.2020, and the statutory period for the process is 330 days. By the time of the Impugned Order dated 9.12.2021, approximately 559 days had elapsed. The CoC had conducted multiple meetings and given the appellant several opportunities to revise and resubmit the resolution plan, but none met the CoC's expectations.4. Commercial wisdom and decision-making authority of the CoC:The CoC exercised its commercial wisdom in rejecting the appellant's resolution plans. The CoC's decision was based on the appellant's failure to meet the required financial and operational criteria despite multiple revisions. The CoC's decision to proceed with liquidation was also approved by a 100% vote share, reflecting a unanimous decision among the creditors.5. Applicability of Supreme Court judgments on liquidation and resolution plans:The appellant cited the Supreme Court judgment in Ghanashyam Mishra and Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. to argue against liquidation, emphasizing that liquidation should be a last resort. However, the respondents cited the Supreme Court judgment in Ebix Singapore Private Limited v. Committee of Creditors of Educom Solutions Limited & Anr., which emphasized the importance of adhering to statutory timelines and not delaying liquidation unnecessarily.Conclusion:The National Company Law Appellate Tribunal (NCLAT) upheld the Adjudicating Authority's decision, emphasizing the CoC's commercial wisdom and the necessity of adhering to statutory timelines. The Tribunal found no merit in the appeal and dismissed it, affirming that the CoC had provided sufficient opportunities to the appellant and that the decision to proceed with liquidation was justified given the circumstances and elapsed time. The Tribunal's decision aligns with the Supreme Court's emphasis on timely resolution and the CoC's authority in decision-making.