NCLAT sets aside order for violating natural justice principles, remands matter for fresh consideration following proper procedures

The NCLAT set aside the Adjudicating Authority's order dated 06.10.2023 for violating principles of natural justice. The Authority allowed an application without issuing notice, calling for replies, or providing hearing opportunities on grounds not originally pleaded. The Authority exceeded jurisdiction under Section 31(2) of the Code by remitting an approved resolution plan for reconsideration without establishing non-compliance with Code requirements. The matter was remanded to the Adjudicating Authority for fresh consideration following proper procedures.

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Issues Involved:
1. Violation of Principles of Natural Justice.
2. Jurisdiction of the Adjudicating Authority to interfere with the commercial wisdom of the CoC.
3. Allegations of incomplete financial data provided to the CoC.
4. Discrimination and perversity in the decision-making process.

Summary:

1. Violation of Principles of Natural Justice:
The Appellant argued that the Adjudicating Authority violated the Principles of Natural Justice by allowing I.A. 3399/2023 without issuing a notice or calling for a reply from the Successful Resolution Applicant (SRA), Resolution Professional (RP), or Committee of Creditors (CoC). The Adjudicating Authority reserved the order on the same day the applications were listed, without giving an opportunity to the concerned parties to respond. The Tribunal found substance in this submission and noted that the process adopted by the Adjudicating Authority was not in consonance with the Principles of Natural Justice. The Tribunal set aside the impugned order on this ground and remitted the matter back for fresh consideration.

2. Jurisdiction of the Adjudicating Authority to interfere with the commercial wisdom of the CoC:
The Appellant submitted that the Adjudicating Authority exceeded its jurisdiction by interfering with the commercial wisdom of the CoC. The Tribunal referred to several judgments, including K. Sashidhar vs. Indian Overseas Bank & Ors. and Pratap Technocrats Pvt. Ltd. vs. Monitoring Committee of Reliance, which emphasized that the commercial wisdom of the CoC is paramount and non-justiciable. The Tribunal reiterated that the Adjudicating Authority's jurisdiction is confined to ensuring compliance with Section 30(2) of the Insolvency and Bankruptcy Code (IBC) and cannot extend to examining the merits of the CoC's commercial decision.

3. Allegations of incomplete financial data provided to the CoC:
The Adjudicating Authority had concluded that incomplete financial data was placed before the CoC, which rendered the decision-making process perverse. The Tribunal noted that this finding was not based on any pleadings raised by Torrent Power Limited and Vantage Point Asset Management Pte. Ltd. The Tribunal emphasized that the Adjudicating Authority should have given an opportunity to the RP, CoC, and SRA to explain the financial data before arriving at such a conclusion. The Tribunal refrained from recording any findings on the issue of incomplete data or perversity in the process, as the matter was being remitted for fresh consideration.

4. Discrimination and perversity in the decision-making process:
Torrent Power Limited argued that there was discrimination in the process as the Appellant was given an opportunity to modify its offer in the guise of seeking clarification, which was not afforded to other Resolution Applicants. The Tribunal found that the clarification was sought from all Resolution Applicants in accordance with the CoC's decision and did not constitute discrimination. The Tribunal also noted that the Adjudicating Authority's finding of perversity was not supported by the pleadings and submissions before it. The Tribunal reiterated that a distinction must be maintained between decisions that are perverse and those that are not, and minor procedural infractions do not render a decision perverse.

Conclusion:
The Tribunal set aside the impugned order dated 06.10.2023 and remitted the Plan approval Application (IA No.2794 of 2023) and the other two Applications (IA No.3336 of 2023 and IA No.3339 of 2023) to the Adjudicating Authority for fresh decision. The Tribunal requested the Adjudicating Authority to dispose of the applications at an early date, preferably within 60 days. The Tribunal also denied any relief to the Intervenor, Jindal Power Limited, as it had not filed any application before the Adjudicating Authority.

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