A Resolution Plan that redirects assets from avoidance transaction recoveries to the Resolution Applicant violates the Insolvency and Bankruptcy Code, and the failure of a Resolution Professional to apprise the Committee of Creditors of such transactions before plan approval warrants rejection of the plan for lack of transparency.

J U D G M E N T

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

This is an Appeal to set aside the Impugned Order of National Company Law Tribunal, Mumbai Bench in New Delhi, Bench-II in IA No. 52 of 2025 in CP(IB) No. 692/ND/2024 dated 07.11.2025. As per the impugned order, the Adjudicating Authority has rejected the Resolution Plan submitted by the Appellant / Successful Resolution Applicant (SRA) which was approved by the Committee of Creditors (CoC) with 100% voting share. Further this order removes the resolution professional and also directs re-run of the Corporate Insolvency Resolution Process (CIRP), and mandates that the restarted CIRP be completed within a period of 120 days, failing which the Corporate Debtor shall stand deemed liquidated. The relevant portion of the Impugned Order is as follows:

“27. It may be so that the plan value being less than liquidation value alone may not be a ground to reject the resolution plan. However, we cannot turn blind to the fact that the Resolution Plan value could only be 10% of the liquidation value of the CD. It hardly needs to be emphasized that in CIRP, the role of the CoC is that of a protagonist, who takes the key decisions in its commercial wisdom and also takes the consequences thereof. It cannot be gainsaid that the decisions of CoC must reflect the fact that it has taken into account the maximization of the value of the assets of the CD, and that the interest of all the stakeholders has been adequately balanced. The Hon'ble NCLAT could also view in Padmanabhan Venkatesh vs. Shri V. Venkatachalam & Ors. (Company Appeal (AT) (Insolvency) No. 128 of 2019), that the Resolution Plan must ensure not only maximisation of value of the assets of the Corporate Debtor as also the value of the Financial Creditors and the Operational Creditors thereby balancing the interest of the stakeholders. However, we are also unable to appreciate the non-application of mind of the CoC when the PUFE application were not put before it and the resolution plan could still be approved. We have noted our dissatisfaction in our order dated 25.08.2025 regarding filing of applications u/s 43 and 66 of IBC after approval of the Resolution Plan.

28. In the totality of the facts and circumstances, particularly the plan being in violation of Regulation 36(4A) and Regulation 38(2) of the IBBI (CIRP) Regulations, we reject the application filed for approval of Resolution Plan. As the RP could not show due diligence in conducting the process and could not comply with the provisions of Regulation 35(A)(1) & (2) of CIRP Regulations, 2016, and could prefer avoidance applications after approval of resolution plan, we deem it just and proper to replace him with Mr. Rajeev Lochan having IBBI Registration No. IBBI/IPA-002/IP N00606/2018-19/11885, mobile no.-9818034467 and e-mail csrajeevlochan@gmail.com. Mr. Rajeev Lochan, RP would prepare fresh Information Memorandum and would issue fresh Form-G, inviting expression of interest, after disclosing all required information therein correctly and properly. He would ensure that the CIRP is completed within 120 days from the date of uploading of this order. If process is not completed within given time, the CD would be deemed as liquidated and the newly appointed RP would perform all such functions as are incumbent upon liquidator in terms of the provisions of Sections 35 to 41 of IBC, 2016 and IBBI (Liquidation Process) Regulations, 2016. The application stands disposed of.”

2. The main ground taken by the Appellant- SRA is that commercial wisdom of the CoC is non-justiciable and the Adjudicating Authority cannot sit in appeal over decisions taken by the CoC in exercise of such commercial wisdom. It relies on various judgments of Hon’ble Supreme Court namely in K. Sashidhar v. Indian Overseas Bank, Committee of Creditors of Essar Steel India Ltd. v