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SUPREME COURT OF INDIA
DINESH MAHESHWARI, VIKRAM NATH, JJ.
M.K. Rajagopalan – Appellants
VERSUS
Dr. Periasamy Palani Gounder & Anr. – Respondents
Civil Appeal Nos. 1682-1683 OF 2022 With C.A. No. 1756/2022, C.A. No. 1759/2022, C.A. No. 1757/2022, C.A. No. 1807/2022, C.A. No. 1810/2022, C.A. No. 1827/2022
Decided On : 03-05-2023
Key Points: - Supreme Court partially upholds NCLAT's rejection of the resolution plan due to resolution applicant's ineligibility under Section 88 of Trusts Act and Section 166(4) of Companies Act, and failure to place revised plan before CoC (!) (!) (!) . - Valuation process complied with Regulations 27 and 35 of CIRP Regulations as CoC was provided fair and liquidation values after confidentiality undertakings (!) (!) . - Non-publication of Form G on designated website was a directory requirement with no proven prejudice, not vitiating the CIRP (!) (!) . - Resolution applicant ineligible under Section 88 Trusts Act for relying on credentials of ineligible trust "Sri Balaji Vidyapeeth" while submitting individual plan (!) (!) (!) . - Revised resolution plan after ninth CoC meeting not placed before CoC for final approval, rendering it void as per Sections 30 and 31 of IBC (!) (!) . - No mandate under IBC for parity payment to related parties in resolution plans; differential treatment upheld as per CoC's commercial wisdom (!) (!) . - Settlement proposals of promoter under Section 12-A properly considered and rejected by CoC earlier; fresh proposal after new EOIs left open for NCLT (!) (!) . - Increase in RP fees not linked to procedural irregularities; NCLAT's observations thereon set aside (!) . - CoC's commercial wisdom paramount but presupposes full information and final plan approval (!) (!) .
JUDGMENT :
DINESH MAHESHWARI, J.
| Preliminary and brief outline |
| Particulars of the proceedings and the parties |
| The relevant factual and background aspects |
| Initiation of CIRP |
| CoC Meetings and ancillary proceedings |
| Resolution plan approved by the Adjudicating Authority (NCLT) |
| Disapproval of the Appellate Tribunal (NCLAT) |
| Proceedings in this Court |
| The events during pendency of these appeals |
| Rival submissions |
| Points for determination |
| Relevant statutory provisions |
| Objectives and scheme of IBC: crucial role-players: |
| Point A – Valuation: Regulations 27 and 35 |
| Point B – Publication of Form G: Regulation 36-A |
| Point C1 – Effect of Section 164(2)(b) Companies Act |
| Point C2 – Effect of Section 88 Trusts Act |
| Point C3 – Effect of Section 166(4) Companies Act |
| Point D1 – Revision of resolution plan after approval by CoC |
| Point D2 – Increase of fees of resolution professional |
| Point E – The matter concerning related party |
| Point F – NCLAT’s findings regarding settlement offer of promoter |
| Point G – Impact and effect of subsequent events |
| Summation |
| Conclusion |
Preliminary and brief outline
1. These civil appeals are essentially directed against the common judgment and order dated 17.02.2022, as passed by the National Company Law Appellate Tribunal, Chennai Bench,1[Hereinafter also referred to as ‘NCLAT’/‘the Appellate Tribunal’.] in a batch of appeals in relation to the Corporate Insolvency Resolution Process2[‘CIRP’, for short.] under the Insolvency and Bankruptcy Code, 2016,3[Hereinafter also referred to as ‘IBC’/‘the Code’.] concerning the corporate debtor, Appu Hotels Limited4[Hereinafter also referred to as ‘the corporate debtor’.], whereby the Appellate Tribunal has reversed the order dated 15.07.2021, as passed by the National Company Law Tribunal, Chennai5[Hereinafter also referred to as ‘NCLT’/ ‘the Tribunal’/‘the Adjudicating Authority’]; and while rejecting the resolution plan in question, has remanded the matter to the committee of creditors6[‘CoC’, for short.] with directions to the resolution professional7[‘RP’, for short.] to proceed from the stage of publication of Form ‘G’, and invite the expression of interest8[‘EOI’, for short.] afresh as per the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 20169[Hereinafter also referred to as ‘the CIRP Regulations’].
2. In view of multiple issues raised in this batch of matters, where several steps have been taken at different stages and different parties are having different stands and interests, we may draw a brief outline with salient features of the factual and background aspects, in order to indicate the contours of the forthcoming discussion.
2.1. CIRP against the corporate debtor got initiated on 05.05.2020, with the NCLT admitting an application moved under Section 7 of the Code by one of its financial creditors, Tourism Finance Corporation of India Limited10[‘TFCI’, for short.]. In the course of proceedings, after various rounds of CoC meetings, ultimately, the resolution plan in question was approved with 87.39 per cent. majority of voting share on 22.01.2021. However, the CoC recommended certain changes to be made in the resolution plan. After incorporating the changes as suggested by CoC, an application was moved before the Adjudicating Authority (NCLT) under Section 30(6) of IBC for approval of the resolution plan. During the proceedings before NCLT, several objections were raised by various financial creditors, other resolution applicants and by the promoter and erstwhile director of corporate debtor against the resolution plan. The promoter also stated his grievance about want of consideration of h
The commercial wisdom of the Committee of Creditors in approving a resolution plan cannot be interfered with unless there is non-compliance with regulatory requirements.
The Commercial wisdom of the Committee of Creditors in approving resolution plans must be respected, and judicial review is limited to statutory compliance under the Insolvency and Bankruptcy Code.
NCLT split verdict on resolution plan approval: Judicial Member approved CoC-endorsed plan as compliant; Technical Member rejected for procedural violations, conditionality, Section 29A/SPV/merger/de....
CoC's commercial wisdom in ranking resolution plans, negotiating with top bidders per RFRP, and rejecting others is non-justiciable absent proven material irregularity or statutory violation.
The court ruled that non-compliance with mandatory provisions of the Insolvency and Bankruptcy Code rendered the Resolution Plan invalid, necessitating liquidation of the Corporate Debtor.
The Appellant's challenge to the Resolution Plan was dismissed due to lack of locus standi and Res-Judicata, affirming the necessity for compliance with statutory provisions in insolvency proceedings....
The court emphasized compliance with mandatory timelines and statutory provisions during insolvency resolutions, finding NCLT failures in approving a plan, ruling it invalid and initiating liquidatio....
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