Resolution plan rejection upheld for nondisclosure, avoidance-transaction defects, and CIRP non-compliance despite committee approval.

A resolution plan can be rejected where the CIRP is not conducted transparently and in compliance with disclosure, avoidance-transaction and resolution-plan requirements. The record showed identified avoidance issues, a transaction auditor, and applications filed only after plan approval, but the CoC was not fully informed and the treatment of recoveries was inconsistent with the position that recovered assets belong to the corporate debtor. The appellate tribunal accepted that these defects, together with shortcomings in performance security and CIRP management, justified rejection of the plan, re-running of the CIRP, and further scrutiny of the Resolution Professional's conduct.

---

---

Issues: (i) Whether the rejection of the resolution plan and direction to re-run the CIRP were justified in view of the alleged non-disclosure and handling of avoidance or PUFE transactions, non-compliance with CIRP Regulations, and inadequacy in the conduct of the process. (ii) Whether the adverse findings against the Resolution Professional, including the direction for investigation by IBBI, were warranted.

Issue (i): Whether the rejection of the resolution plan and direction to re-run the CIRP were justified in view of the alleged non-disclosure and handling of avoidance or PUFE transactions, non-compliance with CIRP Regulations, and inadequacy in the conduct of the process.

Analysis: The record showed that avoidance issues had been identified during CIRP, a transaction auditor was appointed, and avoidance applications under the insolvency code were filed only after approval of the plan. The plan and its addendum provided for pursuit of those applications by the successful resolution applicant with sharing of recoveries, but the adjudicating authority found that the CoC was not fully apprised of the pending avoidance matters, that the treatment of such recoveries was inconsistent with the statutory position that recovered assets belong to the corporate debtor, and that the process suffered from non-compliance with the requirements governing disclosure, determination of avoidance transactions, and performance security. The tribunal found no infirmity in those conclusions and held that the CIRP had not been conducted in a transparent and fair manner.

Conclusion: The rejection of the resolution plan and the direction for a fresh CIRP were upheld against the appellant.

Issue (ii): Whether the adverse findings against the Resolution Professional, including the direction for investigation by IBBI, were warranted.

Analysis: The tribunal considered the chronology of the CIRP, the appointment of the transaction auditor, the filing of avoidance applications after approval of the plan, and the record placed before the CoC. It accepted the adjudicating authority's view that the Resolution Professional had not satisfactorily complied with the duties relating to disclosure, avoidance proceedings, and CIRP management, and that the process deficiencies justified further scrutiny of conduct by the regulator.

Conclusion: The adverse findings against the Resolution Professional and the direction for investigation were sustained.

Final Conclusion: Both appeals failed, and the impugned order directing rejection of the plan, re-run of the CIRP, and regulatory scrutiny of the Resolution Professional was maintained.

Ratio Decidendi: A resolution plan may be rejected where the CIRP is found to have been conducted without full disclosure and in breach of the statutory framework governing avoidance transactions, disclosure obligations, and resolution-plan compliance, notwithstanding CoC approval.

---