Shareholders lack standing to challenge Resolution Plan in CIRP; CoC's commercial wisdom upheld

The Tribunal held that shareholders do not have the locus standi to challenge the Resolution Plan in the Corporate Insolvency Resolution Process (CIRP) and can only do so in the liquidation process. The Tribunal upheld the approval of the Resolution Plan, emphasizing the commercial wisdom of the Committee of Creditors (CoC). The request for a forensic audit was rejected, noting the CoC's decision. No material irregularity was found in the conduct of the Resolution Professional. The Tribunal confirmed the Admission Order of CIRP and dismissed the appeal regarding related party transactions. Both appeals were dismissed, and the Resolution Plan approval was upheld.

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Issues Involved:
1. Locus Standi of Shareholders in Challenging Resolution Plan
2. Validity of the Resolution Plan Approval Process
3. Request for Forensic Audit
4. Material Irregularity in Conduct of Resolution Professional
5. Admission of CIRP and Related Party Transactions

Summary:

1. Locus Standi of Shareholders in Challenging Resolution Plan:
The Tribunal adjudicated whether a shareholder of the Corporate Debtor has the locus standi to challenge the Resolution Plan. It was held that shareholders do not have a right to file any claim in the Corporate Insolvency Resolution Process (CIRP) and can only do so in the liquidation process. The Tribunal emphasized that the Code does not envisage any representative capacity for shareholders in CIRP and they are excluded from representation, participation, or voting in the Committee of Creditors (CoC).

2. Validity of the Resolution Plan Approval Process:
The Tribunal upheld the Adjudicating Authority's decision approving the Resolution Plan, noting that the plan was compliant with Section 30(2) of the Insolvency and Bankruptcy Code, 2016. It was observed that the commercial wisdom of the CoC, which approved the Resolution Plan with a 96.45% voting share, should not be interfered with unless there is a material irregularity.

3. Request for Forensic Audit:
The Appellant's request for a forensic audit was dismissed by the Adjudicating Authority. The Tribunal noted that the CoC, by an overwhelming majority of 91.9%, had rejected the proposal for a forensic audit. It was concluded that the issues raised by the Appellant regarding fraudulent transactions were never raised earlier and there are other legal remedies available for such grievances.

4. Material Irregularity in Conduct of Resolution Professional:
The Tribunal found no material irregularity in the conduct of the Resolution Professional. It was noted that the Resolution Professional had adhered to the provisions of the law and the CoC had approved the Resolution Plan after due consideration. The Tribunal emphasized that the commercial wisdom of the CoC should be given paramount importance.

5. Admission of CIRP and Related Party Transactions:
The Tribunal confirmed the finality of the Admission Order of CIRP, which was previously challenged and dismissed. It was also noted that the Adjudicating Authority had determined that Mr. Poobalan was not related to the Corporate Debtor in any way other than as an agency. The Tribunal dismissed the Appellant's contention regarding the related party transactions and found no grounds to interfere with the approval of the Resolution Plan.

Conclusion:
Both appeals were dismissed, and the connected pending interlocutory applications were closed. The Tribunal upheld the Adjudicating Authority's approval of the Resolution Plan, emphasizing the limited role of shareholders in CIRP and the importance of the commercial wisdom of the CoC.

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