Appeal allowed; prior orders set aside and Resolution Plan approved under Section 31, preserving CoC's commercial decision

The SC allowed the appeal, set aside the NCLT order of 01.09.2021 and the NCLAT judgment of 19.01.2022, and approved the Resolution Plan for the corporate debtor. The Court held the Adjudicating Authority erred in directing a revaluation by the Official Liquidator and improperly overrode the CoC's commercial decision (approved by 88.56%). Interference was unwarranted because the Plan sought revival, met statutory requirements under Section 31, and remand would frustrate the time-bound CIRP. The CoC's assessment of financial components and monetization proceeds was respected.

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Issues Involved:
1. Jurisdiction and powers of the Adjudicating Authority (NCLT) in ordering revaluation.
2. Compliance with the statutory requirements under the Insolvency and Bankruptcy Code (IBC).
3. The role and supremacy of the Committee of Creditors (CoC).
4. Impact of avoidance transactions on the Corporate Insolvency Resolution Process (CIRP).

Summary:

Jurisdiction and Powers of the Adjudicating Authority (NCLT) in Ordering Revaluation:
The Supreme Court found that the NCLT exceeded its jurisdiction by ordering a revaluation of the assets of ACIL Limited by the Official Liquidator. The NCLT's order was based on the premise that the bid amount was very close to the fair value of the assets, which the Court found to be an unsubstantiated and erroneous observation. The Supreme Court emphasized that the NCLT's jurisdiction is limited to ensuring compliance with Sections 30 and 31 of the Code and does not extend to revaluation unless there are glaring deficiencies, which were not present in this case.

Compliance with the Statutory Requirements under the Insolvency and Bankruptcy Code (IBC):
The Resolution Professional (RP) had complied with the statutory requirement of involving two approved valuers to determine the fair market value and liquidation value of the Corporate Debtor's assets. The CoC, which has the paramount decision-making authority under the Code, had approved the final Resolution Plan by a majority of 88.56% votes. The Supreme Court reiterated that the NCLT's role is to ensure that the Resolution Plan meets the requirements of Section 30(2) of the Code and not to interfere with the CoC's commercial decisions.

The Role and Supremacy of the Committee of Creditors (CoC):
The Supreme Court upheld the principle that the commercial wisdom of the CoC is supreme and should not be subjected to unnecessary judicial scrutiny. The CoC had undertaken repeated negotiations and approved the Resolution Plan, which was then presented to the NCLT for approval. The Court emphasized that the CoC's decision is not to be interfered with unless it fails the tests of the Code's provisions, particularly Sections 30 and 31.

Impact of Avoidance Transactions on the Corporate Insolvency Resolution Process (CIRP):
The Supreme Court noted that the pendency of avoidance applications does not affect the CIRP proceedings. The Resolution Plan provided that proceeds from avoidance transactions would go to the Financial Creditors (FCs), ensuring that the Resolution Applicant would not benefit from such transactions. The Court found that the NCLT and NCLAT erred in considering the avoidance transaction as a factor for revaluation.

Conclusion:
The Supreme Court set aside the orders of the NCLT dated 01.09.2021 and the NCLAT dated 19.01.2022. The NCLT was directed to pass appropriate orders on the Approval Application within three weeks. The Court emphasized the need for quick and time-bound resolution of insolvency cases, as envisaged by the Code, and highlighted the limited scope of judicial intervention in the commercial decisions of the CoC.

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