2020 Supreme(SC) 524

SUPREME COURT OF INDIA
S.A. BOBDE, CJI., A.S. BOPANNA, V. RAMASUBRAMANIAN, JJ.
THE KARAD URBAN COOPERATIVE BANK LTD. – APPELLANT(S)
VERSUS
SWWAPNIL BHINGARDEVAY & ORS. – RESPONDENT(S)
CIVIL APPEAL NO.2955, 2902 OF 2020
Decided on : 04-09-2020

IMPORTANT POINT
Resolution Plan – There is an intrinsic assumption that financial creditors are fully informed about the viability of corporate debtor and feasibility of proposed resolution plan.

Headnote:

(A) Insolvency and Bankruptcy Code, 2016 – Section 7 – Resolution Plan – Scope of judicial review – There is an intrinsic assumption that financial creditors are fully informed about the viability of corporate debtor and feasibility of proposed resolution plan – Opinion on subject matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision – While Adjudicating Authority cannot interfere on merits with commercial decision taken by Committee of Creditors, limited judicial review available is to see that Committee of Creditors has taken into account fact that corporate debtor needs to keep going as a going concern during insolvency resolution process; that it needs to maximise value of its assets; and that interests of all stakeholders including operational creditors has been taken care of – If all factors that need to be taken into account for determining whether or not corporate debtor can be kept running as a going concern have been placed before Committee of Creditors and CoC has taken a conscious decision to approve resolution plan, then adjudicating authority will have to switch over to hands off mode – It is not the case of corporate debtor or its promoter/Director or anyone else that some of factors which are crucial for taking a decision regarding viability and feasibility, were not placed before CoC or Resolution Professional. (Paras 12 and 13)

(B) Insolvency and Bankruptcy Code, 2016 – Section 7 – Resolution Plan – Grant of approval – Reversal of approval by NCLAT – Fact that there was an issue with regard to ethanol plant and machinery, had been taken note of by Resolution Professional, Committee of Creditors and Successful Resolution Applicant – Once all three parties have taken note of said fact and taken a conscious decision to go ahead with Resolution Plan, it cannot be stated that question of viability and feasibility was not examined in proper perspective – Reliefs that would normally flow in light of the findings with regard to breach of confidentiality and defective Invitation to Offer, were not granted by NCLAT – Director/Promoter of corporate debtor has not come up with any appeal against failure of NCLAT to grant appropriate reliefs, connectable to the findings – Director/Promoter of corporate debtor is happy with limited relief, if at all it is one, granted to him for resubmission of Resolution Plan – However, NCLAT failed to take note of fact that Resolution Professional did not have any alternative except to respond in the manner that he did, to a point raised only in course of arguments, but not raised in Memorandum of Appeal – NCLAT has recorded a finding even beyond pleadings in Memorandum of Appeal – Second ground on which NCLAT was convinced to pass impugned order, is legally and factually untenable – Impugned order of NCLAT is flawed and liable to be set aside – Impugned order of NCLAT set aside and order of National Company Law Tribunal restored. (Paras 16, 20, 34, 39 and 47)

Facts of the case:

Challenging an order passed by the National Company Law Appellate Tribunal (NCLAT) (i) setting aside the approval granted by the National Company Law Tribunal (NCLT) to a Resolution Plan and (ii) remanding the matter back to the NCLT with a direction to have the Resolution Plan resubmitted before the Committee of Creditors, the financial creditor and the Resolution Professional have come up with these appeals.

Findings of Court:

Publication in newspapers made by the Resolution Professional, in the case on hand, on 30.03.2018, was something that was statutorily not required of him and hence the Promoter/Director of the corporate debtor cannot take advantage of the amendment that came later, to attack the advertisement.

Result : Civil Appeals allowed.