Supreme Court: NCLT/NCLAT should Not Sit In Appeal Over Commercial Wisdom Of CoC To Allow Withdrawal of CIRP

The Supreme Court in the case Vallal Rck v. M/s. Siva Industries and Holdings Limited And Ors observed that as per Section 12A of the Insolvency and Bankruptcy Code, 2016, the adjudicating authority (NCLT) or the appellate authority (NCLAT) cannot sit in appeal over such commercial wisdom of Committee of Creditors (CoC). The Top Court held that when 90% or more of the creditors decide that it will be in the interest of all the stakeholders to permit Settlement Plan filed by promoter of the Corporate Debtor and withdraw Corporate Insolvency Resolution Process. The Bench comprising of Justice B.R. Gavai and the Justice Hima Kohli contented while allowing the appeal filled assailing the National Company Law Appellate Tribunal (NCLAT) , Chennai Bench as the NCLAT had dismissed the appeal filled by National Company Law Tribunal (NCLT), while rejecting an application filled under Section 12A of the of the Insolvency and Bankruptcy Code, 2016 by the Resolution Professional seeking for withdrawal of an application filed by financial creditor under Section 7 of the of the Insolvency and Bankruptcy Code, 2016 and seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Promotor of the Corporate Debtor, the appellant had also come up to initiate liquidation process against NCLAT’s dismissal of the appeal challenging the order of the NCLT. The Apex Court observed the case Ajay Kumar Jagatramka v. Jindal Steel and Power Limited and Anr, while allowing the appeals. The Court emphasized the need for minimal judicial interference by the NCLAT and NCLT in the framework of IBC. The Facts of the Case An application filled under Section 7 of the IBC by IDBI Bank Limited seeking initiation of Corporate Insolvency Resolution Process (CIRP) against M/s Siva Industries and Holdings Limited (Corporate Debtor) and the application was admitted by the NCLT and CIRP was initiated on 04.07.2019. a resolution plan was proposed by Resolution Professional (RP) before the CoC and which was not approved as per the requirement of the statue as it did not receive 66% votes. The RP filed an application for initiating liquidation process. Therefore, the promoter of the Corporate Debtor, Vallal Rck filed a settlement application under Section 60(5) IBC to offer a one-time settlement plan. Furthermore, in its 13th, 14th and 15th meeting held between October and December, 2020, the COC considered the Settlement Plan. The CoC on 18.01.2021, c o n s i de r e d t h e f i n a l settlement proposal was submitted by the promoter. The application was rejected by the NCLT contending that the said application stating that the Settlement Plan was only a Business Restructuring Plan and the NCLT further ordered for the liquidation process. NCLAT dismissed the appeal.