2026 (4) TMI 225 - AT - IBC

Repayment plan reconsideration is discretionary under insolvency law; rejection stood where creditor voting support was insufficient.

A repayment plan proposed by a personal guarantor was rejected by the Committee of Creditors because it failed to secure the required voting support, with ... Rejection of the repayment plan under personal guarantor insolvency - Discretion under section 114(3) to direct reconsideration - Limited judicial interference with creditors' commercial decision. Repayment plan under personal guarantor insolvency - Discretion under section 114(3) to direct reconsideration - Commercial decision of creditors - HELD THAT: - The Tribunal held that the power under section 114(3) is enabling and can be exercised only where the Adjudicating Authority forms an opinion, on sufficient material, that the repayment plan requires modification. In the present case, the principal creditor holding 71.22% voting share had, after deliberation, declined to accept the plan, and the amount offered under the plan was far below the outstanding dues. The mere fact that the offered amount was higher than the assessed value of the appellant's assets did not, by itself, require acceptance of the plan or justify a direction for reconsideration. The Tribunal further held that no obligation could be cast on the financial creditor to accept the plan, and interference would arise only if the creditor's decision were shown to be arbitrary, which was not established. Complaints regarding non-disbursement and other actions of the bank were also held to be outside the scope of consideration at the stage of accepting the resolution professional's report on rejection of the repayment plan. [Paras 18, 19, 20, 21, 22] The order accepting the resolution professional's report and taking on record the creditors' rejection of the repayment plan was upheld, and the appeal was dismissed. Final Conclusion: The Tribunal found no ground to interfere with the Adjudicating Authority's acceptance of the resolution professional's report recording rejection of the repayment plan. The appeal was accordingly dismissed. Issues: Whether the Adjudicating Authority was bound to direct reconsideration of the repayment plan under section 114(3) of the Insolvency and Bankruptcy Code, 2016, after the Committee of Creditors rejected the plan by the requisite voting majority.Analysis: The repayment plan proposed by the personal guarantor was for a sum far below the admitted dues of the financial creditor. The plan was placed before the Committee of Creditors and was rejected by the creditor holding 71.22% voting share, and the plan did not secure the minimum required voting support. Section 114(1) requires the Adjudicating Authority to act on the basis of the report of the meeting of creditors, while section 114(3) confers only an enabling discretion to direct reconsideration where the Authority forms an opinion that modification is required. Such power is not automatic and can be exercised only when the record discloses sufficient circumstances justifying modification.Conclusion: The Adjudicating Authority was not obliged to direct reconsideration of the repayment plan, and no interference with the order accepting the rejection of the plan was warranted.