NCLAT upholds resolution plan approval despite operational creditor's challenge over 330-day CIRP timeline and inadequate dues

NCLAT dismissed the appeal challenging approval of resolution plan by operational creditor. The appellant contested plan approval after 330-day CIRP period expiry and claimed inadequate operational creditor dues. NCLAT held that operational creditor received proper notices, participated in CoC meetings, and was aware of timeline extensions but failed to raise objections timely. The resolution plan, approved by 97.36% vote share, complied with Section 30(2)(b) IBC provisions ensuring operational creditors receive amounts not less than liquidation entitlements. NCLAT emphasized limited judicial review scope and deference to CoC's commercial wisdom, finding no material irregularities or legal contraventions warranting interference.

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1. ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment were:

• 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 adequately addressed in the resolution plan.
• Whether the approval of the resolution plan by the Adjudicating Authority was in contravention of the provisions of the Insolvency and Bankruptcy Code (IBC), particularly concerning the timeline for CIRP and the rights of Operational Creditors.
• Whether the procedural requirements, such as the publication of Form-G and sharing of valuation reports, were complied with during the CIRP.

2. ISSUE-WISE DETAILED ANALYSIS

Material Irregularities and Procedural Compliance:

The appellant contended that the resolution plan was approved beyond the statutory 330-day timeline for CIRP, as stipulated under Section 12 of the IBC. The Court examined whether the extensions granted were justified. It was noted that the Committee of Creditors (CoC) had approved the extension due to the advanced stage of resolution plan consideration, and the Adjudicating Authority had granted the extension before the plan was approved. The Court referenced the Supreme Court judgment in Committee of Creditors of Essar Steel India Vs Satish Kumar Gupta, which allows for extensions beyond 330 days under certain circumstances. Thus, the extension was deemed justified.

The appellant also argued that the RP failed to comply with Regulation 36-A(2) of the CIRP Regulations by not publishing Form-G on the IBBI website. The Court found this argument unpersuasive, noting the appellant's delayed challenge and lack of prejudice to their interests.

Valuation Reports and Commercial Wisdom:

The appellant claimed that the RP did not circulate detailed valuation reports, only sharing fair and liquidation values. The Court reviewed the minutes of the 17th CoC meeting, which recorded the RP's explanation that confidentiality requirements under Regulation 35(2) of the CIRP Regulations limited the sharing of detailed reports. The Court emphasized that the appellant, as an Operational Creditor without voting rights, could not claim prejudice from this decision, as the CoC members were responsible for exercising commercial wisdom.

Operational Creditors' Claims and Section 30(2)(b) Compliance:

The appellant argued that the resolution plan did not comply with Section 30(2)(b) of the IBC, which mandates that Operational Creditors receive at least the amount they would in a liquidation scenario. The Court noted that the plan provided Rs. 60 lakhs to Operational Creditors, exceeding the nil liquidation value specified for them. Thus, the plan was compliant with Section 30(2)(b).

Approval of the Resolution Plan:

The resolution plan was approved by the CoC with a 97.36% vote share. The Court reiterated that the Adjudicating Authority's scope for reviewing a resolution plan is limited to ensuring compliance with Section 30(2) of the IBC. The Court found no material irregularity or legal contravention in the CoC's decision, emphasizing the supremacy of the CoC's commercial wisdom.

3. SIGNIFICANT HOLDINGS

The Court held that:

• The extensions of the CIRP timeline beyond 330 days were justified given the advanced stage of resolution plan consideration and were in line with the Supreme Court's guidance in Essar Steel.
• The RP's decision to share only fair and liquidation values, rather than detailed valuation reports, was compliant with confidentiality requirements and did not prejudice the appellant.
• The resolution plan's allocation to Operational Creditors exceeded their liquidation entitlement, thus complying with Section 30(2)(b) of the IBC.
• The Adjudicating Authority's approval of the resolution plan was correct, as it adhered to the statutory provisions and respected the CoC's commercial wisdom.

The appeal was dismissed, affirming the Adjudicating Authority's approval of the resolution plan. The Court underscored that judicial review should not interfere with the CoC's business decisions unless they contravene explicit legal provisions or public interest.

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