Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLT) 1158

NATIONAL COMPANY LAW TRIBUNAL
Rajeev Bhardwaj, Judicial Member, Sanjay Puri, Technical Member
Prabhakar Reddy Nallapu – Appellant
Versus
Maligi Madhusdhan Reddy – Respondent
CP(IB) No. 69/9/HDB/2023|IA (IBC) 844/2025|IA(IBC) 456/2025|IA(IBC) (Liq.,) 05/2025|IA(IBC) 1284/2025|IA (IBC) 399/2026|IA (IBC) 431/2026|IA (IBC) 130/2025

Advocates:
For the Appellants/Petitioners: Mr. B. Nitish, Mr. Nitish Bandari
For the Respondents: Mr. Manav Gecil Thomas, Party-in Person

Commercial wisdom of CoC in rejecting resolution plan and approving liquidation is non-justiciable absent arbitrariness or Code violation; suspended director's locus upheld but challenge dismissed on merits.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 9, 60(5), 240A - Commercial wisdom of Committee of Creditors - Challenge by suspended director of MSME corporate debtor to rejection of resolution plan and approval of liquidation - Held, commercial wisdom of CoC in rejecting highest scoring resolution plan for being lower than liquidation value, lacking feasibility due to reliance on unconfirmed sale of non-core assets and non-substitution of guarantees, is non-justiciable - No interference absent arbitrariness, illegality or violation of Code - Locus standi of suspended director upheld where rights affected, but application dismissed on merits. (Paras 31, 39, 44)

(B) Insolvency and Bankruptcy Code, 2016 - Adjudicating Authority’s jurisdiction - Cannot substitute its view for CoC’s commercial decision or enquire into justness thereof - Interference warranted only if decision capricious, irrational or de hors statute - OTS proposal post-rejection not amenable to Tribunal adjudication. (Paras 20, 38, 46)

Facts of the case:
Suspended director of MSME corporate debtor in CIRP submitted revised resolution plan offering highest amount and score under evaluation matrix, but CoC rejected it (96% vote) citing inadequacy vis-à-vis liquidation value, feasibility issues, and approved liquidation (100% vote). Applicant challenged CoC minutes seeking reconsideration of plan or alternative OTS proposal offering higher value.

Findings of Court:
CoC decision reasoned and within commercial wisdom; resolution plan deficient despite highest bid; OTS concerns unaddressed; no material showing CoC decision arbitrary.

Issues: Whether suspended director has locus to challenge CoC rejection of resolution plan and liquidation approval; whether CoC rejection arbitrary or reviewable; whether direction for reconsideration of plan/OTS warranted.

Ratio Decidendi: Tribunal cannot supplant CoC’s commercial wisdom unless decision violates Code provisions; rejection valid due to plan’s lower value, feasibility risks; suspended director’s challenge examinable on merits if rights affected, but fails without proof of illegality.

Result: Application dismissed.

Table of Content
1. background of cirp, coc formation, rp appointment, and resolution plans. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16)
2. rp's limited role; coc commercial wisdom non-justiciable. (Para 17 , 18 , 19 , 20)
3. coc rejected highest resolution plan for inadequate value. (Para 21 , 22 , 23 , 24)
4. ots proposal rejected due to feasibility and property issues. (Para 25 , 26 , 27 , 28 , 29)
5. suspended director has locus standi to challenge coc decisions. (Para 30 , 31 , 32)
6. applicant's claims of arbitrary rejection unmeritorious. (Para 33 , 34 , 35 , 36)
7. coc's commercial wisdom non-justiciable absent code violation. (Para 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47)

ORDER

1. The present application is filed by Mr. Prabhakar Reddy Nallapu, Applicant, the suspended director of M/s. Naoline Infrastructure Private Limited 2, Corporate Debtor under section 60(5) of Insolvency and Bankruptcy Code, Code, 2016 r/w Rule.11 of NCLT Rules, 2016, against the Respondents, inter alia, seeking for the following relief:

To set aside the minutes of the 12^th Committee of Creditors meeting dated 11.03.2025 by consequently directing Respondent No. 2 to consider the Resolution Plan dated 11.03.2025 submitted by the Applicant; or, in the alternative, direct the CoC to consider the OTS offer dated 11.04.2025 and the letter dated 24.04.2025.

Case of the Applicant:

2. It is submitted that the Applicant is the suspended Director of the Corporate Debtor, an MSME incorporated on 20.05.2010 and engaged in infrastructure development and EPC works. This Tribunal, vide order dated 04.06.2024 admitted the Corporate Debtor into CIRP in a petition filed under Section 9 of the Code by M/s. Mytrah Vayu (Som)

Private Limited and appointed Mr. Pankaj Bhattad as the Interim Resolution Professional.

3. It is submitted that pursuant to commencement of CIRP, the Interim Resolution Professional issued a public announcement on 08.06.2024, inviting creditors to submit their claims on or before 20.06.2024. Upon verification of the claims received, the Resolution Professional prepared the list of creditors and constituted the Committee of Creditors, Respondent No.1/CoC comprising five financial creditors, with Canara Bank as the lead bank, along with Union Bank of India, Indian Overseas Bank, UCO Bank, and Karnataka Bank Limited, which was taken on record by this Tribunal vide order dated 03.07.2024 in IA (IBC) 1355/2024.

4. Subsequently, on an application filed by the CoC via I.A. (IBC) No. 1523 of 2024, this Tribunal, vide order dated 23.07.2024, replaced the Interim Resolution Professional and appointed Mr. Maligi Madhusudhana Reddy, Respondent No.1/RP as the Resolution Professional (RP) of the Corporate Debtor.

5. It is submitted that the Resolution professional issued Form-G on three occasions on 23.08.2024, 02.10.2024 and 14.11.2024, Pursuant to that the Applicant, being eligible under Section 240A of the Code, submitted his Expression of Interest and was declared a Prospective Resolution Applicant along with two others. The details of the PRAs

i. M/s. Ardha Holding Private Limited;

ii. Mr. Sandeep Om prakash Agarwal; and

iii. Mr. Prabhakar Reddy Nallapu (Applicant)

6. It is further submitted that the Applicant initially submitted a Resolution Plan dated 12.02.2025. Pursuant to suggestions made in the 11^th CoC meeting held on 18.02.2025, the Applicant submitted a revised Resolution Plan on 11.03.2025 for an amount of Rs. 15,31,75,318/-, which was placed before the CoC in its 12^th meeting.

7. According to the Applicant, the deliberations recorded in the 12^th CoC meeting indicate that the plan submitted by the Applicant was the highest among the three resolution applicants and secured the highest score under the Evaluation Matrix. However, the CoC rejected the said plan with 96% voting share and, in the same meeting, resolved with 100% voting to initiate liquidation of the Corporate Debtor.

8. The Applicant further submits that thereafter the Applicant has sub

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2026 Supreme(Online)(NCLT) 1158

Commercial wisdom of CoC in rejecting resolution plan and approving liquidation is non-justiciable absent arbitrariness or Code violation; suspended director's locus upheld but challenge dismissed on merits.

Cases Referred (3)