Insolvency and Bankruptcy Code, 2016 – ‘Material irregularity’ – When not – Corporate Insolvency Resolution Process (CIRP) initiated in respect of Corporate Debtor – Resolution Plans were received from four prospective Resolution Applicants including the appellant, respondent no.2 and other two – In the meeting of Committee of Creditors (CoC), the appellant emerged as H-1 bidder – Resolution Plan of the appellant approved by CoC, further approved by NCLT – Respondent No.1- contended that in the proceedings before the CoC it had sought some time to submit its revised Resolution Plan and had accordingly submitted the same – Filed application seeking direction to the Resolution Professional (RP) to take on record its revised Resolution Plan – Rejected by NCLT – RP sought approval to the Resolution Plan submitted by the appellant – Allowed by NCLT – Both the orders challenged by respondent no.1 before NCLAT – Appeals allowed – Held: Commercial wisdom of the CoC should not be interfered with, it is only the process of decision making, which can be challenged if there is any material irregularity in the said proceedings – In the present case, CoC evaluated the Resolution Plans of all the four prospective Resolution Applicants – Equal opportunity was accorded to all – However, the respondent no.1, without improving his bid amount, went on insisting for more time – Procedure adopted by the RP as well as the CoC was fair, transparent and equitable – No material irregularity – NCLAT erred in interfering with the decision of the CoC which was duly approved by the NCLT – Impugned judgment set aside.
Insolvency and Bankruptcy Code, 2016 – ss.30(2), 61(3) – Held: Opinion expressed by Committee of Creditors (CoC) after due deliberations in the meetings through voting, as per voting shares, is the collective business decision – Decision of the CoC’s ‘commercial wisdom’ is non-justiciable, except on limited grounds for challenge u/ss.30(2) or 61(3).
Allowing the appeals, the Court
1.1 The respondent No.1-PPIPL was very much aware that the CoC has decided to finalise the proceedings by 12th February, 2020. It is also clear that though PPIPL was first called upon by the CoC to enhance the bid amount, it had specifically rejected the same. It insisted on disclosing the basis of score. In the proceedings of the 5th meeting of the CoC dated 11th February, 2020, post lunch, though the appellant had enhanced his bid from Rs.63 crore to Rs.64 crore, the representative of PPIPL subsequently came and requested for adjourning the meeting for few days. The said request was specifically rejected by the CoC by informing the representative of PPIPL that it had to adhere to the IBC timeline and would have to conclude the matter by next day. On the next day, i.e., 12th February, 2020, when the adjourned proceedings of the CoC were held, the respondent No.1-PPIPL had sent an email, stating therein that the Directors of its Company will not be available for the said meeting and requested for deferring the meeting by a day or two. On the insistence of all the prospective Resolution Applicants present, the CoC clarified that since the timeline was coming to an end, it had decided to exclude the prospective Resolution Applicants who were not present in the said meeting. In the said meeting, the appellant came to be declared as the highest bidder after he improved his bid in the open bidding held between him and Mr. ‘AA’. The Resolution Plan of the appellant was approved unanimously by Allahabad Bank having 68.34% voting rights and the Corporation Bank having 31.66% voting rights. It could thus be seen that the RP as well as the CoC had acted in a totally transparent manner. An equal opportunity was accorded to all the prospective Resolution Applicants. However, the respondent No.1-PPIPL, without improving his bid amount, went on insisting for more time, which request was specifically rejected by the CoC. [Paras 25-27][1019-D-H; 1020-A-B]
1.2 The procedure adopted by the RP as well as the CoC was fair, transparent and equitable. The CoC was facing the timeline, which was to end on 24 th February, 2020, before which it had to finalise its decision. In these circumstances, it cannot be said that the decision of the CoC, to not grant any further time to PPIPL for submission of its revised bid and to finalise the Resolution Plan on 12th February, 2020 itself, can be said to be falling in the category of the term ‘material irregularity’. [Para 29][1020-D]
1.3 ‘Commercial wisdom’ of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the processes within the timelines prescribed by the IBC. It has been consistently held that it is not open to the Adjudicating Authority (the NCLT) or the Appellate Authority (the NCLAT) to take into consideration any other factor other than the one specified in Section 30(2) or Section 61(3) of the IBC. The opinion expressed by the CoC after due deliberations in the meetings through voting, as per voting shares, is the collective business decision and that the decision of the CoC’s ‘commercial wisdom’ is non-justiciable, except on limited grounds as are available for challenge under Section 30(2) or Section 61(3) of the IBC. No doubt that, under Section 61(3)(ii) of the IBC, an appeal would be tenable if there has been material irregularity in exercise of the powers by the RP during the corporate insolvency resolution period. However, there is no material irregularity. In the present case, leave apart, there being any ‘material irregularity’, there has been no ‘irregularity’ at all in the process adopted by the RP as well as the CoC. On the contrary, if the CoC would have permitted the PPIPL to participate in the process, despite it assuring the other three prospective Resolution Applicants in its meeting held on 11-12th February, 2020, that the absentee prospective Resolution Applicant (PPIPL) would be excluded from participation, it could have been said to be an irregularity in the procedure followed. The dominant purpose of the IBC is revival of the Corporate Debtor and making it an on-going concern. In the present case, the said purpose is already achieved, inasmuch as all the dues of the financial creditors, i.e., the Allahabad Bank and the Corporation bank, have already been paid, and the Corporate Debtor, in respect of which CIRP was initiated, is now an on-going concern. The NCLAT grossly erred in interfering with the decision of the CoC, which was duly approved by the NCLT. The impugned judgment and order passed by the NCLAT is quashed and set aside. [Paras 31, 32, 34, 37 and 38][1020-F-H; 1021-A, D-E; 1022-B-C, G-H; 1023-A-B]
K. Sashidhar v. Indian Overseas Bank and Others (2019) 12 SCC 150 : [2019] 3 SCR 845; Committee of Creditors of Essar Steel India Limited Through Authorized Signatory v. Satish Kumar Gupta and Others (2020) 8 SCC 531 : [2019] 16 SCR 275; Maharashtra Seamless Limited v. Padmanabhan Venkatesh and others (2020) 11 SCC 467: [ 2020] 2 SCR 1157; Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another (2021) SCC OnLine SC 204; Ghanashyam Mishra and Sons Private Limited
Through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited Through the Director & Ors. (2021) 9 SCC 657; Keshardeo Chamria v. Radha Kissen Chamria and others [1953] 4 SCR 136 – relied on.
Pratap Technocrats (P) Ltd. and others v. Monitoring Committee of Reliance Infratel Limited and another 2021 SCC OnLine SC 569 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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