Adjudicating Authority may reject CoC-approved plan if demonstrable facts show misuse of IBC, lack of process integrity despite statutory compliance, beyond mere commercial wisdom scrutiny.

COMMON JUDGEMENT

Per Justice N. Seshasayee, Member (Judicial)

1.1 These appeals are preferred against the Order of the Adjudicating Authority (NCLT-I, Ahmedabad), dated 23.06.2025, in C.P.(IB) 69 of 2023, rejecting a resolution plan which the CoC had approved.

1.2 M/s Zep Infratech Ltd., the CD, underwent a CIRP process. It was partially successful in that the CoC had approved the resolution plan, but not the Adjudicating Authority. The CoC is aggrieved for whatever they along with the other creditors are entitled to receive is still at a distance. The Resolution Professional, someone who under the scheme of IBC is required to remain neutral and dispassionate, feels aggrieved since his conduct was adversely commented upon by the Adjudicating Authority. The SRA also feels aggrieved since the Adjudicating Authority had inter alia held that the plan was neither feasible nor viable since the SRA has not demonstrated its financial capacity. In short, the three principal players of a successful resolution process – the CoC, the RP and the SRA all were unhappy with the outcome and hence have preferred separate appeals challenging the Order of the Adjudicating Authority with the common objective of upholding the resolution plan which the CoC had approved. The details are as below:

Broadly their stand is either to attempt at vindicating their respective integrity vis-à-vis the CIRP process or/and to establish that the Adjudicating Authority had acted in excess of its authority under Sec.31 IBC.

Facts:

2.1 As outlined above, neither the RP, nor the COC, nor the SRA are happy with the approach of the Adjudicating Authority while exercising its jurisdiction under Sec.31 IBC. The basic facts which are essential for the current purpose are as below:

a) The CD was a M.S.M.E. It gave a corporate guarantee to a loan advanced by certain Raj Radhe Finance Ltd., to M/s Shree Ram Cottex Industries Pvt. Ltd., the principal borrower. When the principal borrower defaulted in repaying its debt, the financial creditor laid petition under Sec.7 in C.P.69 of 2023 against the corporate debtor. This was admitted by the Adjudicating Authority vide its Order dated 31.07.2023 and CIRP commenced against the CD. An IRP was also promptly appointed.

b) The IRP constituted a two member CoC with two unsecured financial creditors, comprising of the petitioning-creditor with a voting share of 9.5% for a loan of ₹1,47,86,567/- and another Rajendra M. Thakkar (Ravasia) & Sons Pvt., Ltd., with 90.5% representing a loan of ₹14,13,25,000. Besides there were three unsecured operational creditors with their combined claim of ₹ 251,78,96,210/-, of which the claim of Income tax Department alone is about ₹ 251.79 crores.

c) The assets of the CD included four items of immovable properties and they are shown in the Information Memorandum as Goa, Gujarat and Delhi properties. These were valued by two independent valuers, whose details are as below:

d) The RP would proceed to issue Form G and after the submission of EoI, four applicants, including the appellant in C.A.946 of 2025 were shortlisted as PRAs. SRA is a partnership firm and the combined net-worth of its partners is Rs.16,93,97,296. Indeed, since the CD is a MSME even the suspended Board of the CD wanted to submit its plan, but the CoC refused it as it was well beyond the time stipulated for it. And, it did not choose to challenge the same. This fact however, i