NCLAT Overturns NCLT's Approval of Resolution Plan: Resolution Professional's Misconduct Cited

The National Company Law Appellate Tribunal (NCLAT) has delivered a significant judgment in Company Appeal (AT) (Ins) No. 916 of 2023, 792 of 2023 & 1034 of 2024 , overturning the National Company Law Tribunal (NCLT), Mumbai Bench's approval of a resolution plan for M/s. Prince MFG Industries Private Limited. The NCLAT's decision hinges on the finding of material irregularities and misconduct by the Resolution Professional (RP), Mr. Kairav Anil Trivedi .

Case Overview: Allegations of Misconduct and Fraud

The case involved an operational creditor, Mr. Amit Sangal , proprietor of M/s. Nitin Plastic, who initiated Corporate Insolvency Resolution Process (CIRP) against Prince MFG Industries. Mr. Trivedi was appointed as the Interim Resolution Professional (IRP). Mr. Sangal alleged that Mr. Trivedi , despite the Committee of Creditors (CoC) dissenting to his appointment as RP, misrepresented his appointment, manipulated voting results, and engaged in fraudulent transactions, including the execution of a Memorandum of Understanding (MoU) with a potentially related party, M/s. Sarvashree Industries Private Limited (SIPL), without CoC approval. These actions, Mr. Sangal argued, violated several sections of the Insolvency and Bankruptcy Code, 2016 (IBC) and the CIRP Regulations.

The NCLAT decision rests on the numerous allegations of misconduct, including:

• Improper Appointment: The CoC's initial dissent to Mr. Trivedi 's appointment as RP was overlooked. The NCLAT found that the RP was never formally appointed by the CoC.
• Violation of Section 28: The MoU with SIPL was executed without the CoC's prior consent, violating Section 28 of the IBC.
• Misrepresentation and Concealment: Mr. Trivedi allegedly misrepresented facts to the NCLT and the CoC regarding the MoU and the voting results.
• Violation of CIRP Regulations: Multiple violations of the CIRP Regulations, including inadequate notice for CoC meetings and delayed filings, were cited.
• IBBI Findings: The Insolvency and Bankruptcy Board of India (IBBI) had already suspended Mr. Trivedi 's registration for six months due to similar misconduct in this case and in other cases.

Arguments Presented

Mr. Sangal argued that Mr. Trivedi 's actions constituted fraud, misrepresentation, and contempt of court, rendering the approved resolution plan invalid. He presented evidence including emails from the e-voting platform, minutes of CoC meetings, and the IBBI's order suspending Mr. Trivedi .

Mr. Trivedi and the CoC countered that the CoC had ultimately withdrawn its application to replace Mr. Trivedi , and the resolution plan was approved fairly and successfully implemented, benefiting all creditors. They argued that Mr. Sangal lacked standing to challenge the plan after the CIRP's completion and that his actions were motivated by a desire for personal gain and harassment.

NCLAT's Decision and Implications

The NCLAT, after a thorough examination of the evidence and arguments, found in favor of Mr. Sangal . The Tribunal highlighted the multiple instances of misconduct and material irregularities by Mr. Trivedi , and the fact that the resolution plan was approved based on misrepresentations. The NCLAT specifically noted the IBBI's findings against Mr. Trivedi .

The NCLAT set aside the NCLT's order approving the resolution plan. This decision underscores the importance of procedural integrity and the accountability of Resolution Professionals under the IBC. It serves as a strong warning against misconduct and emphasizes the NCLAT's commitment to safeguarding the interests of all stakeholders in insolvency proceedings. The case is remanded back to the NCLT for further proceedings.

Key Details:

• Bench: Naresh Saleha , Member (Technical), NCLAT.
• Case Timeline: The CIRP was initiated on October 5, 2021. The NCLT approved the resolution plan on May 15, 2023. The NCLAT delivered its judgment on February 20, 2025.
• Legal Provisions Involved: Section 9, Section 22, Section 27, Section 28, Section 31, Section 61 of the IBC, 2016 and relevant CIRP regulations.

This judgment is likely to have significant implications for future CIRP proceedings, emphasizing the importance of transparency, proper procedure, and the accountability of insolvency professionals. The NCLAT's decision reinforces the need for rigorous oversight of RPs and the consequences of misconduct in insolvency proceedings.