Commercial wisdom review: adjudicator may reject patently non compliant resolution plans and order liquidation to protect process integrity.

Whether the adjudicating authority exceeded jurisdiction by overturning Committee of Creditors' commercial decision, the tribunal applied statutory tests under Section 30(2), Section 31 and Regulation 38(3) of the CIRP Regulations and assessed feasibility, viability, implementation capability, specification of approvals and timelines, and addressing cause of default; factual findings on asset disposals, limited liquid cash, low realisation value, absence of a revival strategy, and concerns of collusion and opacity rendered the plan non compliant. The authority's rejection of the plan and direction for liquidation under Section 33(1)(b) was sustained and the appeals dismissed.

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Issues: Whether the adjudicating authority exceeded its jurisdiction or improperly interfered with the commercial wisdom of the Committee of Creditors by rejecting the resolution plan and directing liquidation under Section 33(1)(b) of the Insolvency and Bankruptcy Code, 2016.

Analysis: The adjudicating authority examined factual and financial material including asset-sale proceeds, liquid cash on hand, absence of business operations and employees, the sequence of transactions leading to formation of a single-member CoC, and the contents of the resolution plan. The authority applied statutory requirements under Section 30(2) and Section 31 of the Insolvency and Bankruptcy Code, 2016 and the criteria in Regulation 38(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, focusing on whether the plan addressed cause of default, demonstrated feasibility and viability, provided for effective implementation, specified required approvals and timelines, and reflected the applicant's capability to implement the plan. Material findings included that the corporate debtor had largely disposed of tangible assets, retained limited liquid assets, the plan proposed a low realisation value, and the plan lacked measures to revive the corporate debtor as a going concern or to implement a viable revival strategy. The adjudicating authority also relied on concerns of potential collusion, opacity in the CIRP process, and possible non-compliance with other legal regimes as relevant to the integrity of the resolution process. Interference with CoC commercial wisdom was treated as permissible where the approval was patently arbitrary, non-compliant with statutory criteria, or corrosive of the insolvency process.

Conclusion: The adjudicating authority rightly found that the resolution plan failed to satisfy the statutory requirements of Section 30(2), Section 31 and Regulation 38(3) of the CIRP Regulations, 2016, and its rejection of the plan and consequent direction for liquidation under Section 33(1)(b) is upheld; the appeals are dismissed and the adjudicating authority's order is maintained.

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