NCLAT upholds resolution plan with 97.36% CoC approval, dismisses operational creditor's challenge under Section 30(2) IBC

NCLAT dismissed appeal challenging resolution plan approval. Operational creditor appellant received proper notices and participated in CoC meetings, having full knowledge of CIRP proceedings. Resolution plan was approved by CoC with 97.36% vote share and subsequently approved by Adjudicating Authority beyond 330 days, though extension was properly granted. NCLAT held no material irregularities or legal contraventions occurred. Court emphasized limited judicial review scope under Section 30(2) and Section 61(3) of IBC, stating adjudicating authorities cannot substitute commercial wisdom of CoC unless plan violates express legal provisions or public interest. Appeal dismissed as no valid grounds established.

---

---

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment are:

• Whether the resolution plan was approved in violation of the prescribed time limits under Section 12 of the IBC.
• Whether there were material irregularities in the exercise of powers by the Resolution Professional (RP) during the Corporate Insolvency Resolution Process (CIRP).
• Whether the claims of the Operational Creditors were prejudiced, and if the resolution plan complied with Section 30(2)(b) of the IBC.
• Whether the procedural requirements, such as the publication of Form-G and sharing of valuation reports, were adhered to.
• Whether the Adjudicating Authority erred in approving the resolution plan, given the alleged procedural and substantive irregularities.

ISSUE-WISE DETAILED ANALYSIS

Violation of Time Limits under Section 12 of the IBC

• Legal Framework: Section 12 of the IBC mandates the completion of the CIRP within 330 days, including any extensions. The Supreme Court in the Essar Steel case emphasized this time limit.
• Court's Interpretation: The Tribunal acknowledged that the resolution plan was approved beyond 330 days. However, it noted that the Adjudicating Authority had extended the CIRP period before the expiration of the 330 days, based on the CoC's decision.
• Key Findings: The Tribunal found that the CoC had taken a considered decision to seek an extension, and the Adjudicating Authority was justified in granting it.
• Application of Law: The Tribunal concluded that the Essar Steel judgment does not entirely preclude extensions beyond 330 days, especially when the CIRP is near completion.
• Conclusion: The Tribunal rejected the Appellant's contention that the resolution plan could not have been approved due to the exhaustion of the CIRP timeline.

Material Irregularities in the Exercise of Powers by the RP

• Legal Framework: Sections 24(3)(c) and 30(2) of the IBC, along with CIRP Regulations, outline the RP's duties, including providing notices and valuation reports to the CoC.
• Court's Interpretation: The Tribunal noted that the Appellant was informed of the CoC meetings and participated in them, indicating no procedural denial.
• Key Findings: The Tribunal found that the RP had shared the fair and liquidation values with the CoC, and the decision to not share detailed valuation reports was deliberated upon and agreed by the CoC.
• Conclusion: The Tribunal found no material irregularity in the RP's conduct regarding the sharing of valuation reports.

Claims of Operational Creditors and Compliance with Section 30(2)(b) of the IBC

• Legal Framework: Section 30(2)(b) requires that the resolution plan provides for the payment of debts of operational creditors, which should not be less than the amount in a liquidation scenario.
• Court's Interpretation: The Tribunal observed that the plan provided Rs 60 lakhs to Operational Creditors, which was more than their liquidation entitlement.
• Key Findings: The Tribunal found that the liquidation value for Operational Creditors was nil, and thus, the plan's provision exceeded the statutory requirement.
• Conclusion: The Tribunal held that the resolution plan was compliant with Section 30(2)(b) of the IBC.

Procedural Requirements: Publication of Form-G and Sharing of Valuation Reports

• Legal Framework: Regulation 36-A(2) of the CIRP Regulations requires the publication of Form-G in specified manners.
• Court's Interpretation: The Tribunal noted that the Appellant's objection regarding Form-G publication was belated and not raised at the appropriate time.
• Key Findings: The Tribunal found that the issue of Form-G publication did not prejudice the Appellant's interests.
• Conclusion: The Tribunal dismissed the Appellant's procedural objections as untimely and inconsequential.

Approval of the Resolution Plan by the Adjudicating Authority

• Legal Framework: Sections 30 and 31 of the IBC outline the approval process for resolution plans by the Adjudicating Authority.
• Court's Interpretation: The Tribunal emphasized the limited scope of judicial review and the supremacy of the CoC's commercial wisdom.
• Key Findings: The Tribunal noted that the resolution plan was approved by 97.36% of the CoC vote, indicating strong backing.
• Conclusion: The Tribunal upheld the Adjudicating Authority's approval, finding no contravention of statutory provisions.

SIGNIFICANT HOLDINGS

• The Tribunal reaffirmed the limited scope of judicial review concerning CoC decisions, emphasizing that the commercial wisdom of the CoC should not be interfered with unless there is a clear contravention of law.
• The Tribunal held that extensions beyond 330 days are permissible under certain circumstances, particularly when the CIRP is near completion.
• The Tribunal concluded that the resolution plan complied with Section 30(2)(b) of the IBC, as the payment to Operational Creditors exceeded their liquidation entitlement.
• The Tribunal dismissed the appeal, finding no merit in the Appellant's arguments and upholding the Adjudicating Authority's decision to approve the resolution plan.

---