Insolvency Code prevails over RBI-approval objection, making rejection of an ARCs-linked resolution plan unsustainable.

The insolvency framework was treated as prevailing over inconsistent SARFAESI-based objections, and prior RBI approval was held unnecessary on the facts for a resolution plan involving an asset reconstruction company as co-resolution applicant. The Tribunal noted that a Committee of Creditors-approved plan is ordinarily protected by commercial wisdom unless material irregularity is shown. On that basis, rejection of the plan for want of prior RBI permission was unsustainable, and the consequential liquidation direction could not stand. The matter was remanded for fresh consideration of approval of the resolution plan under the Insolvency Code, with liquidation described as a last resort in the revival process.

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Issues: (i) Whether a resolution plan submitted with an asset reconstruction company as a co-resolution applicant required prior approval of the Reserve Bank of India and could be rejected as being in contravention of the insolvency framework. (ii) Whether the order rejecting approval of the resolution plan and directing liquidation was liable to be set aside.

Issue (i): Whether a resolution plan submitted with an asset reconstruction company as a co-resolution applicant required prior approval of the Reserve Bank of India and could be rejected as being in contravention of the insolvency framework.

Analysis: The plan was approved by the Committee of Creditors with a high voting share. The Tribunal held that the insolvency code prevails over inconsistent provisions of the SARFAESI Act. It accepted the clarification that prior RBI permission was not required in the facts of the case and noted that the commercial wisdom of the Committee of Creditors is ordinarily not justiciable absent material irregularity. The rejection was therefore not justified on the ground that the plan was conditional merely because one co-applicant was an asset reconstruction company.

Conclusion: The requirement of prior RBI approval was negatived, and the rejection of the plan on that basis was held unsustainable.

Issue (ii): Whether the order rejecting approval of the resolution plan and directing liquidation was liable to be set aside.

Analysis: Since the plan was held not to suffer from the stated legal impediment, the consequential direction of liquidation could not stand. The Tribunal emphasised that revival of the corporate debtor is the object of the insolvency process and that liquidation is the last resort. The matter was therefore required to go back for consideration of approval of the plan under the Code.

Conclusion: The liquidation direction was set aside and the matter was remanded to the Adjudicating Authority for approval of the resolution plan.

Final Conclusion: The appeal succeeded, the impugned liquidation order was vacated, and the matter was sent back for fresh consideration of the resolution plan in accordance with the insolvency code.

Ratio Decidendi: Where the insolvency code governs the field, a resolution plan cannot be rejected solely on the assumption that prior RBI approval is required for an asset reconstruction company acting as a co-resolution applicant, unless such requirement is clearly shown to arise under the applicable legal framework.

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