Appeal dismissed; post-CIRP registered valuer valuation upheld; pre-CIRP valuations irrelevant; suspended director lacks standing to challenge resolution plan approval

NCLAT (PB) dismissed the appeal and upheld approval of the resolution plan. The Tribunal held pre-CIRP valuations irrelevant and affirmed the RP's post-CIRP valuation carried out by registered valuers as compliant. The appellant's failure to supply information was noted but did not vitiate the valuation process. Relying on precedent, the Tribunal found the suspended director/appellant lacked locus to challenge approval of the resolution plan. No error was found in the impugned order; the application approving the resolution plan stands affirmed.

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ISSUES PRESENTED AND CONSIDERED

1. Whether a suspended director/personal guarantor has locus to challenge approval of a resolution plan under the Code after CoC approval and Adjudicating Authority sanction.

2. Whether post-commencement or post-approval private/ pre-CIRP valuation reports can be relied upon to impugn the valuers' reports commissioned by the Resolution Professional and the CoC.

3. Whether the Resolution Professional and the CoC complied with statutory valuation and disclosure obligations under the IBBI (CIRP) Regulations, 2016 (including Regulations 27 and 35) and Section 30(2) of the Code in appointing valuers, preparing/updating the Information Memorandum (IM) and placing valuation summaries before the CoC.

4. Whether allegations of collusion, suppression of asset particulars and procedural irregularities in the CIRP justify setting aside CoC approval and plan sanction.

5. The extent to which the commercial wisdom of the CoC is justiciable and when judicial interference with plan approval is warranted (including delay, estoppel and abuse of process considerations).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Locus to challenge approved resolution plan

Legal framework: Section 61(3)(ii) provides appeal against order approving a resolution plan; jurisprudence distinguishes locus to challenge CIRP initiation from locus to challenge plan approval.

Precedent treatment: Tribunal followed prior Appellate Tribunal and Supreme Court rulings that ex-promoters/suspended directors lack locus to challenge approval of a resolution plan once approved, while they may challenge certain CIRP actions pre-approval.

Interpretation and reasoning: The Court examined prior decisions and found consistent authority restricting standing of suspended directors/promoters to challenge an approved plan; even recognising that suspended management may have locus to challenge CIRP initiation, the established line bars them from attacking a sanctioned plan. The Tribunal proceeded to consider merits notwithstanding, but held that the appellant's statutory position as suspended director and personal guarantor did not confer locus to challenge plan approval after CoC approval and AA sanction.

Ratio vs. Obiter: Ratio - suspended director lacks locus to challenge an approved resolution plan; Obiter - Court nonetheless considered substantive issues on merits.

Conclusion: Appeal on locus grounds rejected; suspended director does not have standing to challenge an approved resolution plan in these circumstances.

Issue 2 - Reliance on post-commencement / pre-CIRP valuations to impugn registered valuers' reports

Legal framework: Regulations 27 and 35 of the CIRP Regulations require appointment of IBBI-registered valuers after CIRP commencement and mandate provision of fair and liquidation values to CoC members.

Precedent treatment: Tribunal invoked its own and Supreme Court decisions holding pre-CIRP valuations irrelevant for CIRP purposes and that valuation is factual exercise done by experts; valuation in accordance with the Code generally does not invite interference.

Interpretation and reasoning: The Court rejected reliance on (a) pre-CIRP valuations and (b) a private valuation obtained long after CIRP commencement and plan approval. It held the RP appointed two registered valuers and an SFA valuer in compliance with Regulations; valuation summaries were shared with the CoC in line with Regulation 35(2). The post-approval private valuation was deemed untimely, self-commissioned, factually flawed (assumed clear title and absence of litigation) and therefore inadmissible to reopen plan approval.

Ratio vs. Obiter: Ratio - pre-CIRP valuations and post-approval self-commissioned valuations are not relevant to set aside CoC-approved plan when registered valuers appointed under the Regulations have produced reports; valuation conducted under the Code not ordinarily interfered with.

Conclusion: The appellant's valuation evidence was inadmissible and insufficient to impeach the registered valuers' reports or justify setting aside plan approval.

Issue 3 - Compliance by RP/CoC with valuation and disclosure obligations (IM updates, appointment of valuers)

Legal framework: CIRP Regulations (notably Regulations 27, 35) and Section 30(2) require appointment of registered valuers, preparation and dissemination of IM, and provision of fair and liquidation values to CoC members; AA reviews compliance at approval stage.

Precedent treatment: Tribunal relied on earlier decisions holding valuation a factual expert task and compliance with the Regulations as determinative unless material irregularity shown.

Interpretation and reasoning: Record showed valuers were appointed on 19.10.2020; valuation reports were furnished in September 2021; IM was circulated and later updated to correct inadvertent omissions (e.g., Kalina CTS numbers). The RP repeatedly sought information from the suspended management; persistent non-cooperation by that management was recorded. CoC members, including substantial creditors, received valuations and raised no contemporaneous objection. The Tribunal found that the RP complied with statutory obligations and that the IM and data room provided required asset information to PRAs and CoC members.

Ratio vs. Obiter: Ratio - where registered valuers appointed post-commencement, IM updated when new facts surfaced and CoC deliberated without objection, statutory compliance is established and does not warrant interference.

Conclusion: RP and CoC complied with valuation and disclosure requirements; no material statutory non-compliance to set aside plan approval was demonstrated.

Issue 4 - Allegations of collusion, suppression of asset particulars and procedural irregularities

Legal framework: Code prohibits collusion and mandates fair process; AA and Tribunal can set aside approvals where collusion or material suppression affects outcome.

Precedent treatment: Courts afford primacy to CoC's commercial wisdom but will intervene where collusion or manifest prejudice is proved.

Interpretation and reasoning: The appellant alleged collusion between RP and the successful applicant and non-inclusion of certain asset tracts and hotel FSI valuation. Tribunal found (i) CoC extensively deliberated; (ii) valuation reports considered IM and data room materials; (iii) IM was corrected when omissions were noticed and PRAs adjusted offers; (iv) major CoC members, including a later assignee with majority voting share, supported the plan; (v) appellant had repeatedly failed to cooperate and delayed raising valuation objections until years after approval. No material evidence of collusion or suppression sufficient to vitiate the approval was proved. Prior attempts to litigate similar objections had been dismissed and not pursued on appeal, invoking res judicata/estoppel considerations.

Ratio vs. Obiter: Ratio - allegations of collusion and suppression are insufficient to set aside plan absent cogent evidence showing material prejudice; delay and prior adjudications undermine such claims.

Conclusion: Collusion and suppression allegations were unsubstantiated; procedural irregularity not established to nullify CoC approval or AA sanction.

Issue 5 - Scope of judicial review of CoC commercial wisdom; delay, estoppel and abuse of process

Legal framework: Judicial review of CoC decisions is limited; commercial wisdom is largely non-justiciable except where decisions are illegal, mala fide, or suffer material irregularity; doctrines of delay, abuse of process and constructive res judicata apply.

Precedent treatment: Tribunal relied on binding authorities that shield CoC commercial decisions and limit re-evaluation absent prior objection or demonstrable illegality.

Interpretation and reasoning: The Tribunal emphasised (i) CoC's approval with overwhelming majority (95.40%) after deliberations; (ii) later majority support including a 51.66% voting member; (iii) the plan consideration exceeded fair and liquidation values; (iv) appellant's long delay (approx. 2.5 years) in raising valuation objections and prior dismissed applications indicate abuse of process and motive to derail CIRP and evade personal liabilities. Given these facts and settled law, intervention was unwarranted.

Ratio vs. Obiter: Ratio - commercial wisdom of CoC is not interfered with absent clear illegality or material prejudice; delay and prior adjudication bar re-agitation of issues.

Conclusion: Judicial interference was unwarranted; delay, estoppel and abuse of process doctrines justified dismissal of the challenge to plan approval.

Overall Conclusion

The Tribunal found no error in the Adjudicating Authority's dismissal of the intervention application or in approval of the resolution plan. The RP and CoC complied with statutory valuation and disclosure processes; pre-CIRP and post-approval private valuations were irrelevant; allegations of collusion and suppression were unproven; the appellant lacked locus to challenge the approved plan and, in any event, the objections were time-barred, constitute abuse of process and did not disclose material irregularity warranting judicial relief. The appeals were dismissed. (Ratio: standing, relevance of valuation reports, non-justiciability of CoC commercial wisdom, compliance with CIRP Regulations; Obiter: consideration of merits despite locus objections.)

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