NCLAT upholds Supreme Court ruling voiding resolution plan for lacking mandatory CCI approval under insolvency rules

The NCLAT upheld the Supreme Court's decision setting aside the CoC-approved resolution plan due to the absence of requisite CCI approval, rendering the plan null and void. Consequently, all actions pursuant to the plan were invalidated, and stakeholders' rights were restored to their pre-approval status. The issue of returning the Performance Bank Guarantees (PBG) was deemed consequential to the Supreme Court's order and required no separate adjudication. The appeals challenging the return of the PBG were dismissed as misconceived.

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ISSUES:

Whether the Resolution Plan approved by the Committee of Creditors (CoC) without prior Competition Commission of India (CCI) approval is sustainable under the Insolvency and Bankruptcy Code, 2016 (IBC).Whether any action taken pursuant to an unsustainable Resolution Plan stands nullified and the rights of stakeholders restored to the status quo ante.Whether the Performance Bank Guarantee (PBG) submitted by the Resolution Applicant (AGI Greenpc) after approval of the Resolution Plan should be returned following the setting aside of the Resolution Plan.Whether the Operational Creditor is entitled to intervene to prevent the return of the PBG and challenge the CoC's decision post the Supreme Court judgment.Whether the Adjudicating Authority's orders on intervention and replacement of the Resolution Professional (RP) were sustainable and based on majority opinion.

RULINGS / HOLDINGS:

The Resolution Plan approved by the CoC on 28.10.2022 without prior approval of the CCI is "unsustainable" and is set aside as per the proviso to Section 31(4) of the IBC."Any action taken pursuant to the Resolution Plan shall stand nullified, and the rights of all stakeholders shall be restored as per status quo ante, prior to the approval of the Resolution Plan by the CoC."The PBG submitted by AGI Greenpc on 31.10.2022 consequent to the approval of the Resolution Plan is "unsustainable" and the decision of the CoC to return the PBG is in accordance with the Supreme Court's directions dated 29.01.2025.The Operational Creditor's intervention to prevent return of the PBG and to set aside CoC decisions post-Supreme Court judgment was not justified; the CoC had duly discussed and recorded reasons for returning the PBG.The Adjudicating Authority's order directing replacement of the RP was not based on a majority opinion and is "unsustainable."

RATIONALE:

The Court applied the statutory framework of the Insolvency and Bankruptcy Code, 2016, particularly Section 31(4) and its proviso mandating prior CCI approval for Resolution Plans involving combinations.The Supreme Court's majority judgment emphasized a "literal interpretation" of the proviso to Section 31(4), holding that Resolution Plans requiring CCI approval must secure it before CoC consideration, thereby invalidating subsequent approvals lacking such approval.The nullification of the Resolution Plan and restoration of rights to status quo ante logically required returning the PBG submitted pursuant to the invalidated plan.The CoC's minutes explicitly recorded discussions on the Supreme Court judgment and the rationale for returning the PBG, negating claims of non-consideration or arbitrariness.The Court rejected attempts by the Operational Creditor to obstruct the CIRP process post-Supreme Court judgment, noting the need to comply with the apex court's directions and the inadmissibility of interventions aimed at derailing resolution.The Adjudicating Authority's split opinion on RP replacement lacked majority support, rendering the direction unsustainable under the principles governing multi-member tribunals.

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