The Supreme Court on Friday said it has time and again emphasised that there is need for minimal judicial interference by the National Company Law Appellate Tribunal (NCLAT) and the National Company Law Tribunal (NCLT) in the framework of the Insolvency and Bankruptcy Code (IBC).
A bench of Justices B.R. Gavai and Hima Kohli said: “When 90 per cent 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 (Corporate Insolvency Resolution Process), in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC (committee of creditors).”
It noted that the top court has consistently held that 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.
The bench added that 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, it said.
The bench also observed that this court has found that if the CoC arbitrarily rejects a just settlement or withdrawal claim, the NCLT and thereafter, the NCLAT can always set aside such a decision under the provisions of the IBC.
The top court made these observations while hearing appeals to the common judgment passed on January 28 by the NCLAT’s Chennai Bench, in a company appeal.
It had dismissed the appeals filed by the resolution professional (RP) challenging two orders of the NCLT, passed in August last year, rejecting the application filed by the RP under Section 12A of the IBC, 2016, read with Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, for withdrawal of the application filed under Section 7 of the IBC in view of the settlement plan submitted by the appellant.
The bench said it is thus clear that the decision of the CoC was taken after the members had due deliberation to consider the pros and cons of the settlement plan and took a decision exercising their commercial wisdom.
“We are therefore of the considered view that neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of CoC,” it said.
The bench noted that 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.
It said that as per the directions of the NCLT, on April 1, 2021, the 17th meeting of the CoC was reconvened, wherein the settlement plan was approved by 94.23 per cent votes.
The bench said: “Whereas under Section 30(4) of the IBC, the voting share of CoC for approving the Resolution Plan is 66 per cent, the requirement under Section 12A of the IBC for withdrawal of CIRP is 90 per cent.”
It said 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.
The top court set aside the orders passed by the NCLAT and the NCLT and allowed the application by the RP before the NCLT for withdrawal of the Corporate Insolvency Resolution Process.