Resolution plan approval upheld despite formal order delay as CoC voted within 330-day CIRP timeline

NCLAT Principal Bench dismissed appeal challenging resolution plan approval. CoC approved plan with 86.67% vote shares within 330-day CIRP period on 31.01.2023, though Adjudicating Authority approved it later on 14.05.2024. Court held Section 30(2)(b) compliance satisfied as dissenting financial creditors (13.44% vote share) received Rs.1.5 crore payout against Rs.10.94 crore admitted claims. Appellant's challenge regarding homebuyers receiving units without haircuts rejected. Court emphasized limited jurisdiction to interfere with resolution plan approval, finding no statutory non-compliance. Plan's timely CoC approval and application filing before 330-day expiry validated approval despite later formal order date.

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1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment were:

• Whether the resolution plan was approved after the expiry of the Corporate Insolvency Resolution Process (CIRP) period as stipulated under the Insolvency and Bankruptcy Code, 2016 (IBC).
• Whether the resolution plan complied with Section 30(2)(b) of the IBC, specifically regarding the allocation of payments to dissenting financial creditors.
• Whether the treatment of unsecured financial creditors, compared to homebuyers, was fair and equitable under the resolution plan.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Approval of the Resolution Plan Post CIRP Period

• Relevant Legal Framework and Precedents: The CIRP period is generally capped at 330 days under the IBC, beyond which a resolution plan should not be approved unless an extension is granted.
• Court's Interpretation and Reasoning: The Tribunal noted that the resolution plan was approved by the Committee of Creditors (CoC) on 31.01.2023, and the application for approval was filed within the 330-day period, which expired on 03.05.2023. The Tribunal emphasized that the date of the adjudicating authority's order (14.05.2024) is not pertinent to the 330-day calculation.
• Conclusions: The Tribunal concluded that the resolution plan was approved within the permissible period, and thus, the approval was validly within the statutory timeline.

Issue 2: Compliance with Section 30(2)(b) of the IBC

• Relevant Legal Framework and Precedents: Section 30(2)(b) mandates that dissenting financial creditors receive an amount not less than what they would receive in a liquidation scenario under Section 53 of the IBC.
• Court's Interpretation and Reasoning: The Tribunal observed that the resolution plan provided a payout of Rs.1.5 Crore to the unsecured financial creditors, which constituted 13.81% of the vote shares. This payout was deemed compliant with Section 30(2)(b) as it was not less than the liquidation value.
• Conclusions: The Tribunal found that the resolution plan was compliant with Section 30(2)(b), ensuring that the dissenting financial creditors received a fair and equitable distribution.

Issue 3: Fair and Equitable Treatment of Unsecured Financial Creditors vs. Homebuyers

• Relevant Legal Framework and Precedents: The Tribunal referenced previous judgments which established that homebuyers, as a class of financial creditors, are entitled to possession of units without additional financial burden, contrasting with the claims of unsecured financial creditors.
• Court's Interpretation and Reasoning: The Tribunal highlighted that homebuyers, holding 86.56% voting shares, had already paid consideration for their units and were entitled to possession. The Tribunal cited the judgment in 'Beacon Trusteeship Limited' which supported the differential treatment between homebuyers and financial creditors.
• Conclusions: The Tribunal concluded that the differential treatment was justified and aligned with the commercial wisdom of the CoC, which cannot be substituted by judicial intervention.

3. SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal reaffirmed the principle that the commercial wisdom of the CoC is paramount and should not be easily interfered with unless there is a clear violation of statutory provisions.
• Final Determinations on Each Issue: The Tribunal dismissed the appeals, upholding the resolution plan's approval, and confirmed that the plan complied with the statutory requirements under the IBC.

The Tribunal emphasized that the jurisdiction to interfere with the approval of a resolution plan is limited to instances of non-compliance with Section 30(2) of the IBC. The appeals were dismissed, affirming that the resolution plan was appropriately approved and binding on all creditors, including dissenting ones.

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