Resolution plan approval upheld as personal guarantees remain enforceable despite corporate debtor discharge under Section 128

NCLAT dismissed the appeal challenging approval of resolution plan. The tribunal held that the Resolution Professional properly conducted valuation exercise per Regulation 27 and Committee of Creditors' commercial wisdom cannot be questioned. Personal guarantees remain enforceable post-resolution as guarantee contracts are independent from loan agreements, and discharge of corporate debtor doesn't absolve guarantors under Section 128 Contract Act. The resolution plan complied with Section 30(2) IBC requirements. NCLAT affirmed limited judicial review scope over CoC's commercial decisions when statutory compliance is met.

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Issues Involved:
1. Propriety of the valuation exercise conducted by the Resolution Professional (RP).
2. Tenability of the contention regarding personal guarantees.
3. Allegation that the Successful Resolution Applicant (SRA) did not intend to keep the Corporate Debtor as a going concern.
4. Compliance of the resolution plan with Section 30(2) of the Insolvency and Bankruptcy Code (IBC).

Summary:

1. Propriety of the Valuation Exercise:
The appellants contended that the RP did not provide the valuation report to the suspended board of the Corporate Debtor, citing the Supreme Court's judgment in Vijay Kumar Jain Vs Standard Chartered Bank and Ors (2019) 20 SCC 455, which held that members of the erstwhile Board of Directors must have access to such documents. They also argued that the resolution plan was approved at a highly undervalued price and that significant variations in the valuation reports were ignored. The respondents countered that the RP conducted the valuation exercise per Regulations 27 and 35 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The CoC decided not to appoint a third valuer after considering the valuation reports. The Tribunal found no infirmity in the conduct of the valuation exercise and upheld the RP's actions.

2. Tenability of the Contention Regarding Personal Guarantees:
The appellants argued that the resolution plan violated the law by allowing lenders to pursue personal guarantees after the transfer of debts, citing the Tribunal's judgment in KV Jayprakash vs SBI in CA (AT)(Ins) No. 362 of 2022. The respondents cited the Supreme Court's judgment in Lalit Kumar Jain Vs UOI and Ors (2021) 9 SCC 321, which held that the approval of a resolution plan does not discharge a personal guarantor's liabilities. The Tribunal found that the resolution plan did not discharge the personal guarantors from their liability and upheld the CoC's commercial wisdom in approving the plan.

3. Allegation that the SRA Did Not Intend to Keep the Corporate Debtor as a Going Concern:
The appellants alleged that the SRA lacked the capability to run the Corporate Debtor and intended to sell its assets rather than revive it. The respondents pointed out that the resolution plan outlined a future business plan and that the SRA had successfully implemented the plan. The Tribunal found no irregularity in the submission of the resolution plan by the SRA and upheld the RP's compliance with Section 29A of the IBC.

4. Compliance of the Resolution Plan with Section 30(2) of the IBC:
The appellants contended that the resolution plan violated Section 30(2) of the IBC. The respondents argued that the CoC had approved the plan with 99.69% voting share and that the Adjudicating Authority had limited scope for judicial review. The Tribunal found that the resolution plan complied with Section 30(2) and upheld the Adjudicating Authority's approval of the plan.

Conclusion:
The Tribunal dismissed the appeal, finding no merit in the appellants' contentions and upholding the Adjudicating Authority's approval of the resolution plan. The appeal was dismissed, and parties were directed to bear their own costs.

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