Vallal Rck vs. Siva Industries And Holdings Limited And Others - (Supreme Court) (03 Jun 2022)

Adjudicating authority or the Appellate Authority cannot sit in appeal over commercial wisdom Of CoC

MANU/SC/0753/2022

Insolvency

Issue in present case is with regard to withdrawal of the application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) in view of the Settlement Plan submitted by the Appellant. A short question that falls for consideration in the present appeal is as to whether the adjudicating authority (NCLT) or the appellate authority (NCLAT) can sit in an appeal over the commercial wisdom of the Committee of Creditors (“CoC”) or not.

The commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the IBC. It has been held that, there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts.

The provisions under Section 12A of the IBC have been made more stringent as compared to Section 30(4) of the IBC. Whereas under Section 30(4) of the IBC, the voting share of CoC for approving the Resolution Plan is 66%, the requirement under Section 12A of the IBC for withdrawal of CIRP is 90%. When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stake-holders to permit settlement and withdraw CIRP, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the statute or the Rules.

In the present case, the proceedings of the 13th, 14th and 15th meetings of CoC would clearly show that, there were wide deliberations amongst the members of the CoC while considering the Settlement Plan as submitted by the Appellant. Not only that, the proceedings would also reveal that, after suggestions were made by some of the members of the CoC, suitable amendments were carried out in the Settlement Plan by the Appellant.

One of the members of the CoC having voting share of 23.60%, though initially opposed the Settlement Plan, subsequently decided to support the same. Accordingly, the NCLT itself, vide order directed the RP to reconvene the CoC meeting. As per the directions of the NCLT, on 1st April 2021, the 17th meeting of the CoC was reconvened, wherein the Settlement Plan was approved by 94.23% votes. The decision of the CoC was taken after the members of the CoC, had due deliberation to consider the pros and cons of the Settlement Plan and took a decision exercising their commercial wisdom. Neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of CoC. The impugned judgment delivered by the learned NCLAT and the orders passed by the learned NCLT are quashed and set aside. Appeals allowed.

Tags : COMMERCIAL WISDOM COC JURISDICTION