Sankalp Recreation Private Limited Vs Rohit Ramesh Mehra & Ors. - Considering the intent, purpose and wording of Regulations 36A and 39, we are of the view that clauses of IEOI/RFRP can never go beyond the provisions of the Code/CIRP Regulations, nor CoC, in the exercise of its commercial wisdom can contravene any express provisions of CIRP Regulations.

NCLT Mumbai-II (2024.07.10) in Sankalp Recreation Private Limited Vs  Rohit Ramesh Mehra & Ors. [IA.No.1085 & 1466 of 2023, IA.No.1478 of 2021 In C.P. (IB) 1171/MB/2018] held that; 

• This is further evidenced by Section 61 of the Code which permits any person aggrieved by the order of the Tribunal to prefer an appeal to the NCLAT on the grounds, inter alia, that the approved resolution plan is in contravention of the provisions of any law for the time being in force; or there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period.

• Further, Regulation 39 of CIRP Regulations specifies that the CoC shall not consider any resolution plan received from a person who does not appear in the final list of prospective resolution applicants or does not comply with the provisions of Section 30(2) of the Code.

• Considering the intent, purpose and wording of Regulations 36A and 39, we are of the view that clauses of IEOI/RFRP can never go beyond the provisions of the Code/CIRP Regulations, nor CoC, in the exercise of its commercial wisdom can contravene any express provisions of CIRP Regulations.

• The law remains trite that furnishing a copy of the resolution plan to the participants of the CoC including the erstwhile directors is not an empty formality for various reasons including for pointing out deficiencies in the resolution plan.

• On the basis of the above, we hold that not furnishing a copy of the resolution plan before the meeting held on 24.02.2023 is also a material irregularity. 

• The Resolution Plan submitted for approval of this Tribunal does not meet all the parameters laid down in sub-section (2) of Section 30 of the Code read with Regulations 36A and 39 of the CIRP Regulations on account of its contravention of provisions of the law and non-conformity to the requirements specified by IBBI,

• There has been material irregularity in non-furnishing the copy of the resolution plan to the erstwhile directors. Consequently, IA No. 1085/2023 seeking approval of the resolution plan is dismissed,

Excerpts of the Order;

1. By way of this common order, we propose to dispose of the following three Interim Applications as the issues raised and reliefs sought are intertwined:

• (a) IA No.1085/2023 filed by Resolution Professional (‘RP’) of Rajesh Business and Leisure Hotels Private Limited (‘the Corporate Debtor’) under Section 30(6) and Section 31(1) of the Bankruptcy and Insolvency Code, 2016 (‘the Code’) read with Section 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’) for approval of the Resolution Plan submitted by Rare Asset Reconstruction Limited in Consortium with Check-Inn Hotels Pvt. Ltd (‘the Successful Resolution Applicant’ / ‘SRA’);

• (b) IA No.1466/2023 filed under Section 60(5) of the Code by Sankalp Recreation Private Limited (‘Sankalp’) an unsuccessful Resolution Applicant to oppose the approval of the Resolution Plan submitted by Successful Resolution Applicant on the grounds that there have been material irregularities in the conduct of Corporate Insolvency Resolution Process (CIRP); and

• (c) IA No. 1478/2023 filed by Rajesh Patel and five others who are promoters and ex-directors of the Corporate Debtor under  Section 30 and Section 60(5) of the Code read with Rule 11 of the National Company Law Tribunal Rules, 2016 inter alia, seeking directions from this Tribunal to declare that the Resolution Plan as well as process adopted for approval of plan is contrary to law.

2. Brief facts of the case

2.1 On a Company Petition filed under Section 7 of the Code by ICICI Bank Limited, the Financial Creditor, this Tribunal initiated Corporate Insolvency Resolution Process (‘CIRP’) against Rajesh Business and Leisure Hotels Private Limited (‘Corporate Debtor’) vide its order dated 20.04.2022 and Mr. Rohit Mehra was appointed as Interim Resolution Professional (‘IRP’)

2.2 Pursuant to the said order, a public announcement in Form-A was made by the IRP on 27.04.2022 which was published in the newspapers- Business Standard (English) and Navshakti (Marathi) in the location of the registered office of the Corporate Debtor. Claims were called from the creditors of the Corporate Debtor specifying 04.05.2022 as the last date for submission of the claims. Based on the claims received, the Committee of Creditors (‘CoC’) of the Corporate Debtor was constituted on 11.05.2022 comprising of three Financial Creditors (ICICI Bank, Union Bank of India, and Bank of Baroda). In the 1st meeting of the CoC held on 20.05.2022, the CoC passed a resolution to confirm IRP as the Resolution Professional (‘RP’).

2.3 The RP published an Invitation for Expression of Interest (IEOI) (Form-G) on 29.06.2022 in newspapers- Business Standard (English) and Navshakti (Marathi). In terms of Form-G, the last date for submission of an Expression of Interest (EOI) was 19.07.2022 and the last date for the submission of Resolution Plan was 02.09.2022. At the request of some of the potential investors, a revised Form-G was published on 22.07.2022 under which the last date for submission of EOI was 02.08.2022 and the last date for submission of Resolution Plan was 16.09.2022.

2.4 In response to IEOI, 28 EOIs were received out of which all Prospective Resolution Applicants (PRAs) except one were found to be prima facie eligible. Accordingly, the final list of PRAs of 26 applicants was published by the RP on 27.08.2022.

2.5 While the last date stipulated for submission of the Resolution Plan as per Form-G was 16.09.2022, on the request of the PRAs and upon approval by the CoC, the last date for submission of the Resolution Plan was extended from time to time till 15.01.2023. The RP had received 6 Resolution Plans and the Resolution Applicants (‘RAs”) were allowed to give a brief presentation on their financial proposals and answer the queries from the members of the CoC. At the 12th meeting of the CoC held on 12.01.2023, the CoC approved the issuance of the challenge process document, and in the 13th meeting of the CoC held on 09.02.2023, the RP invited the RAs for the challenge process. The challenge process commenced and continued for 13 rounds, under which, the RP announced the end of the challenge process as only one RA was remaining in the process.

2.6 The CoC deliberated on the feasibility and viability reports in respect of Resolution Plans submitted by 3 RAs- (i) Rare Asset Reconstruction Limited in consortium with Check-Inn Hotels Private Limited, (ii) Consortium of Sankalp Recreation Private Limited and Globe Ecologistics Private Limited, and (iii) Shri Ram Multicom Private Limited. After detailed deliberations, the said three Resolution Plans were decided to be put to vote at the meeting held on 24.02.2023 (voting commenced on 01.03.2023 and ended on 10.03.2023). Pursuant to the same, the Resolution Plan submitted by Rare Asset Reconstruction Limited (‘Rare ARC’) in consortium with Check-Inn Hotels Private Limited (‘Check-Inn’) was approved by the CoC with 100% votes. (‘Successful Resolution Applicant’ or ‘SRA). The RP issued a letter of intent to the SRA on 10.03.2023 which was duly accepted on 11.03.2023 and SRA furnished a performance security of Rs. 30 Crore by way of performance bank guarantee on 11.03.2023.

2.7 Against the above backdrop, the following Interim Applications were filed before this Tribunal.

(i) IA.No.1085/2023 filed by RP seeking approval of the Resolution Plan submitted by Rare Asset Reconstruction Ltd in consortium with Check-Inn Hotel Private Limited, who was declared as the Successful Resolution Applicant. 

(ii) IA.No.1466/2023 filed by Sankalp Recreation Private Limited (unsuccessful Resolution Applicant) seeking the following reliefs:

a) This Tribunal may be pleased to hold and declare that there has been a material irregularity in the exercise of the powers by the resolution professional during the corporate insolvency resolution period.

b) This Tribunal may be pleased to hold and declare that the Rare ARC- Naman Developers Consortium is ineligible for the purpose of submitting resolution plan of Rajesh Business and

Leisure Hotels Private Limited.

c) This Tribunal may be pleased to dismiss I.A. No. 1085 of 2023 filed by the Resolution Professional seeking approval of the Resolution Plan submitted by Rare ARC- Naman Developers Consortium for Rajesh Business and Leisure Hotels Private Limited.

d) This Tribunal may be pleased to direct the Resolution Professional to again conduct the process of invitation, scrutiny and voting for Resolution Plans strictly in accordance with law.

e) In the event prayer (b) mentioned hereinabove is allowed, this Tribunal may be pleased to direct the Resolution Professional to declare the Applicant as the Successful Bidder;

f) Pending the hearing and final disposal of the present Application, this Tribunal may be pleased to stay the hearing of I.A. No. 1085 of 2023 for the approval of the Resolution Plan submitted by Rare ARC- Naman Developers Consortium for Rajesh Business and Leisure Hotels Private Limited.

g) Pending the hearing and final disposal of the present Application, this Tribunal may be pleased to direct the Resolution Professional to supply a copy of I.A. No. 1085 of 2023 and minutes of CoC Meeting to the Applicant herein.

(iii) IA.No.1478/2023 filed by Rajesh Patel and five others (Promoters, Shareholders, and Erstwhile Directors) seeking:

a) That this Tribunal be pleased to quash and set aside the CIRP process to the extent of approval of Resolution Plan and declare that the plan as well as process adopted for approval of plan is contrary to law;

b) That this Tribunal be pleased to direct the CoC to conduct the process afresh after replacing the Resolution Professional; 

c) That this Hon'ble Tribunal be pleased to hold that Respondent No.2, should not be permitted to participate in future process till requisite approval in this regard is obtained by Respondent No.2 from the Reserve Bank of India;

d) That this Tribunal be pleased to restrain the CoC from including any person as prospective resolution applicant who is not part of the list of prospective resolution applicants;

e) That this Tribunal be pleased to declare that the fees fixed for Resolution Professional are illegal and contrary to law;

f) That this Tribunal be pleased to order fresh valuation of the assets of the Corporate Debtor:

g) That this Tribunal be pleased to direct the Resolution Professional, so appointed to conduct the process after keeping the Applicants herein informed and associated as per the provisions of the Code and Regulations;

h) Pending the hearing and final disposal of this Application, this Tribunal be pleased to direct the Resolution Professional to file affidavit disclosing the fact that they were aware of Respondent no.2’s Net Owned Fund being less than Rs. 1000 Crore.

i) That any other order as it may deem fit to this Hon’ble Tribunal be passed;

15. Maintainability of the IAs

15.1 It is contended that an unsuccessful resolution applicant, whose resolution plan was rejected, does not have the locus to challenge the resolution plan approved by CoC and that such applicant is neither a stakeholder nor a creditor of the Corporate Debtor. Further, the unsuccessful resolution applicant, on one hand, requested the return of the bid bond deposit and received the bid bond deposit and at the same time is now challenging the resolution plan on ulterior grounds. In support of the above contention, the RP referred to the decision of the Hon’ble Supreme Court in Arcelormittal India Private Limited v. Satishkumar Gupta and Ors (2019) 2 SCC 1 wherein it was held that a resolution applicant has no vested right that the resolution can be considered, no challenge can be preferred to the Adjudicating Authority at this stage. The RP has also referred to the following decisions of the Hon’ble NCLAT:

(a) M.K Rajagopalan Balaji Villa vs. S. Rajendran, RP Vasanealthcare Pvt. Ltd and Ors (Company Appeal (AT) (CH) (INS) No. 58 of 2023)

• “ 31. Petitioner/Appellant, being an ‘Unsuccessful Resolution Applicant has no ‘Locus’, to ‘assail’ a ‘Resolution Plan’ or it’s ‘implementation’, coupled with a candid fact that he is not a ‘Stakeholder’, as per Section 31(1) of the I & B Code, 2016, in relation to the ‘Corporate Debtor’, this ‘Tribunal’ without any ‘haziness’, holds that the ‘Petitioner/Appellant’, is not an ‘Aggrieved Person’ coming within the ambit of Section 61(1) of the I & B Code, 2016, especially when he is not a ‘Privy’ to the ‘Resolution Plan’.

(b) IMR Metallurgical Resources AG Versus Ferro Alloys Corporation Ltd and Others (Company Appeal (AT) (Insolvency) No.271 of2020

• “5. It is essential to mention that the Resolution Applicant has no vested right that his Resolution Plan must be considered. It is settled position of law as laid down by Hon’ble Supreme Court in MANU/SC/1123/2018: (2019) 2 SCC 1 in case of Arcelor Mittal India Pvt ltd vs. Satish Gupta held that the resolution applicant does not have any vested right that his Resolution Plan must be considered.

• 6. The commercial wisdom of the CoC is paramount, and it has the absolute prerogative to decide the viability and feasibility of the Resolution Plans presented before them and the same is not to be interfered even by the Adjudicating Authority.

15.2 It is further contended that the ex-promoters/shareholders have no locus to challenge the resolution plan and relied on the decision in the matter of Mr. Ramesh Kesavan vs. CA Justin Jose & Another (Company Appeal (AT) (CH) (INS) No.422 of 2023) where the Hon’ble NCLAT observed that the shareholders have no locus to challenge a resolution plan.

15.3 However, it is to be noticed that in the matter of Arcelormittal (Supra), the Hon’ble Supreme Court was considering whether any challenge can be made at various stages of the corporate insolvency resolution process and held that given the timeline referred to above, and given the fact that a resolution applicant has no vested right that his resolution plan be considered, it is clear that no challenge can be preferred to the Adjudicating Authority at this stage. The facts of the present case are different for the reason that CIRP has come to the final stage of seeking approval of NCLT and the unsuccessful resolution applicant is alleging gross contravention of CIRP Regulations. Therefore, the decisions of Hon’ble NCLAT referred to by the RP are distinguishable. Furthermore, the same contentions have also been raised by the Ex promoters/directors of the Corporate Debtor, and in the case of Vijay Kumar Jain (supra), the interests of Promotes/guarantors to challenge the plan were recognized. Further, as per section 61 of the Code, contravention of the provisions of any law or material irregularity in exercise of the powers of the resolution professional are recognized grounds which can be raised by any person aggrieved, for challenging a resolution plan. In view of the above, the IAs are held to be maintainable.

16. Findings:

16.1 As a corollary to the above discussion, we hold that it is a trite position of law that the commercial wisdom of the CoC is beyond the pale of challenge before the Tribunal and with respect to the application for approval of the resolution plan, the jurisdiction of this Tribunal is

limited to determine whether or not the resolution plan, as approved by requisite majority of CoC, complies with the requirements specified under Section 30(2) of the Code. This includes, inter alia, examining whether the resolution plan contravenes any of the provisions of the law for the time being in force and conforms to such other requirements as may be specified by IBBI. This is further evidenced by Section 61 of the Code which permits any person aggrieved by the order of the Tribunal to prefer an appeal to the NCLAT on the grounds, inter alia, that the approved resolution plan is in contravention of the provisions of any law for the time being in force; or there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period.

16.2 We have discussed in detail in para.10 hereinabove, the legality of Check-Inn joining as a resolution applicant when its name did not appear in the final list of Prospective Resolution Applicants. It is further reiterated that Regulation 36A prescribes each step in the process to be taken by the Resolution Professional to ensure adherence to timelines, provide an opportunity to all resolution applicants who submitted the expression of interest to raise objection to the inclusion or exclusion of a provisional resolution applicant in the provisional list, etc. The Resolution Professional is also required to conduct due diligence of prospective resolution applicants based on the material made available to satisfy that the prospective resolution applicant complies with the applicable provisions of Section 29A and other requirements specified in EOI. The final list of prospective resolution applicants is to be prepared after following all the above processes. Further, Regulation 39 of CIRP Regulations specifies that the CoC shall not consider any resolution plan received from a person who does not appear in the final list of prospective resolution applicants or does not comply with the provisions of Section 30(2) of the Code. Thus, in CIRP Regulations there are certain boundaries prescribed both for RP and CoC which need to be strictly adhered to. In the present case, it is observed that the name of Check-Inn appeared for the first time in the revised resolution plan dated 17.02.2023 and due diligence on Check- Inn was conducted after the submission of the resolution plan just before putting the resolution plan for voting. Considering the intent, purpose and wording of Regulations 36A and 39, we are of the view that clauses of IEOI/RFRP can never go beyond the provisions of the Code/CIRP Regulations, nor CoC, in the exercise of its commercial wisdom can contravene any express provisions of CIRP Regulations.

16.3 It is also an admitted fact that a copy of the resolution plan which was discussed in the CoC meeting held on 24.02.2023 and thereafter put to vote without another meeting was furnished to erstwhile Directors only on 27.02.2023. The law remains trite that furnishing a copy of the resolution plan to the participants of the CoC including the erstwhile directors is not an empty formality for various reasons including for pointing out deficiencies in the resolution plan. A combined reading of the Code as well as the CIRP Regulations, as held in the decision of Vijay Kumar (supra), leads to the conclusion that members of the rstwhile Board of Directors, being vitally interested in resolution plans  that may be discussed at meetings of the Committee of Creditors must be given a copy of such plans as part of the ‘documents’ that have to be furnished along with the notice of such meetings. On the basis of the above, we hold that not furnishing a copy of the resolution plan before the meeting held on 24.02.2023 is also a material irregularity. 

16.4 Based on the above discussions, we conclude that 

(a) the Resolution Plan submitted for approval of this Tribunal does not meet all the parameters laid down in sub-section (2) of Section 30 of the Code read with Regulations 36A and 39 of the CIRP Regulations on account of its contravention of provisions of the law and non-conformity to the requirements specified by IBBI, and 

(b) there has been material irregularity in non-furnishing the copy of the resolution plan to the erstwhile directors. Consequently, IA No. 1085/2023 seeking approval of the resolution plan is dismissed, while I.A. No. 1466/2023 and I.A No.1478/2023 objecting to the approval of the resolution plan are partly allowed to the extent indicated in the foregoing discussion. Liberty is granted to RP/CoC to re-run the process strictly in accordance with the Code and CIRP Regulations and in that event, an extension of the CIRP period of 4 months shall be deemed to have been hereby granted for the purpose. The CoC, however, shall be at liberty to take a contrary call if it so desires in its wisdom.

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Imp. Rulings - Resolution Plan, Commercial Wisdom of CoC & Jurisdiction of NCLT.

Imp. Rulings - Resolution Plan, Commercial Wisdom of CoC & Jurisdiction of NCLT.

Index;

1. SCI (2025.05.02) in Kalyani Transco Vs. Bhushan Power and Steel Ltd. and Ors. [(2025) ibclaw.in 173 SC,  Civil Appeal No. 1808 of 2020] [Commercial wisdom of CoC]

2. Supreme Court (2023.05.03) in M. K. Rajgopalan Vs. Dr. Periasamy Palani Gounder [Civil Appeal Nos. 1682-1683 of 2022] [Operation of the other Law of Land & Distribution to related party.]

3. Supreme Court (2022.06.03) in Vallal Rck v. M/s. Siva Industries And Holdings Limited And Ors [Civil Appeal Nos. 1811-1812 of 2022] [Section 12A application]

4. Supreme Court (17.12.2021) in Ngaitlang Dhar Vs. Panna Pragati Infrastructure Pvt. Ltd. & Ors. [Civil Appeal Nos.3665-­3666 of 2020 with Civil Appeal Nos. 3742-­3743 of 2020] [Commercial wisdom of CoC]

5. Supreme Court (2021.08.10) Pratap Technocrats (P) Ltd. & Ors. Vs. Monitoring Committee of Reliance Infratel Limited & Anr.[Civil Appeal No 676 of 2021] [Jurisdiction of NCLT]

6. Supreme Court (2021.03.10) in Kalpraj Dharamshi & Anr Vs. Kotak Investment Advisors Ltd. & Anr. [Civil Appeal Nos. 2943-2944 of 2020] [Jurisdiction of NCLT]

7. Supreme Court (2019.11.15) in CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 OF 2019) [Approval of Resolution Plan]

8. Supreme Court (2019.11.15) in CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 OF 2019) [Differential Payments in Resolution Plan]

9. Supreme Court (2019.02.05) in  K. Sashidhar vs. Indian Overseas Bank & Ors. (Civil Appeal No.10673 of 2018) [Jurisdiction of NCLT]

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1). SCI (2025.05.02) in Kalyani Transco Vs. Bhushan Power and Steel Ltd. and Ors. [(2025) ibclaw.in 173 SC,  Civil Appeal No. 1808 of 2020] held that;

• # 73. The position of law, propounded by this Court is that commercial wisdom of CoC means a considered decision taken by the CoC with reference to the commercial interest, the interest of revival of Corporate Debtor and maximization of value of its assets. This wisdom is not a matter of rhetoric but is denoting a well-considered decision by the CoC as the protagonist of CIRP. The CoC therefore has to take into consideration the mandatory requirements of the Code as well as the Regulations framed by the Board, and to see that the Insolvency Resolution of the Corporate Debtor is completed in a time bound manner and for maximization of value of assets of the Corporate Debtor. The mandatory requirements under the Code are, the compliance of the time limit specified in  Section 12, the compliance of Section 29A to see whether the Resolution Applicant is an eligible applicant to submit the plan, the compliance of sub-section (2) of Section 30 of IBC etc. The mandatory requirements stated in Regulation 38 of the Regulations, 2016 are that the Resolution Plan must demonstrate that it addresses the cause of default, that it is feasible and viable, it has the provisions for its effective implementation and the Resolution Applicant has the capability to implement the Resolution Plan in a time bound manner. If the Resolution Plan does not comply with such mandatory requirements and such plan is approved by the CoC, it could not be said that the CoC had exercised its commercial wisdom while approving such Resolution Plan.

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2). Supreme Court (2023.05.03) in M. K. Rajgopalan Vs. Dr. Periasamy Palani Gounder [Civil Appeal Nos. 1682-1683 of 2022] held that;

• # 44.4. Although, the aspects aforesaid did not form the part of consideration of CoC but, they cannot be ignored merely with reference to the status assigned to the commercial wisdom of CoC. The principles underlying the decisions of this Court respecting the commercial wisdom of CoC cannot be over-expanded to brush aside a significant shortcoming in the decision making of CoC when it had not duly taken note of the operation of any provision of law for the time being in force.

• # 54.2. It has rightly been argued on behalf of the appellants and had rightly been observed by the Adjudicating Authority (vide extraction in paragraph 15.4.1 hereinabove) that there was no provision in the Code which mandates that the related party should be paid in parity with the unrelated party. So long as the provisions of Code and CIRP Regulations are met, any proposition of differential payment to different class of creditors in the resolution plan is, ultimately, subject to the commercial wisdom of CoC and no fault can be attached to the resolution plan merely for not making the provisions for related party.

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3). Supreme Court (2022.06.03) in Vallal Rck v. M/s. Siva Industries And Holdings Limited And Ors [Civil Appeal Nos. 1811-1812 of 2022] held that;

• # 19. In the case of Swiss Ribbons Privated Limited and Another v. Union of India and Others, one of the challenges made was with regard to validity of Section 12A of the IBC. It was argued that the figure of 90% voting share was arbitrary. It was the contention that though the withdrawal was just and proper, the CoC could exercise the power arbitrarily to reject such a settlement. While rejecting the said contention, this Court observed thus:

“83. The main thrust against the provision of Section 12A is the fact that ninety per cent of the Committee of Creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the Committee of Creditors do not have the last word on the subject. If the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, NCLT, and thereafter, NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12A also passes constitutional muster.” 

# 20. It could thus be seen that this Court has found that if the CoC arbitrarily rejects a just settlement and/or withdrawal claim, the learned NCLT and thereafter the learned NCLAT can always set aside such decision under the provisions of the IBC.

# 21. This 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. 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. A reference in this respect could be made to the judgments of this Court in the cases of 

K. Sashidhar v. Indian Overseas Bank and Others 

Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Others 

Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others

Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another and 

Jaypee Kensington Boulevard Apartments Welfare Association and Others v. NBCC (India) Limited and Others.

# 22. No doubt that the aforesaid observations have been made by this Court while considering the powers of the CoC while granting its approval to the Resolution Plan. 

# 23. As already stated hereinabove, 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%.

# 24. When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, in our view, 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.

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4). Supreme Court (2021.12.17) in Ngaitlang Dhar Vs. Panna Pragati Infrastructure Pvt. Ltd. & Ors. [Civil Appeal Nos.3665-­3666 of 2020 with Civil Appeal Nos. 3742-­3743 of 2020].

• # 31. It is trite law that ‘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. It has been held that 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. This position of law has been consistently reiterated in a catena of judgments of this Court, including:

(i) K. Sashidhar v. Indian Overseas Bank and Others

(ii) Committee of Creditors of Essar Steel India Limited Through Authorized Signatory v. Satish Kumar Gupta and Others,

(iii) Maharashtra Seamless Limited v. Padmanabhan Venkatesh and others,

(iv) Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another.

(v) Ghanashyam Mishra and Sons Private Limited Through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited Through the Director & Ors.

# 32. 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, as discussed hereinabove, we do not find any material irregularity.

# 33. We may gainfully refer to the following observations of this Court in the case of Keshardeo Chamria v. Radha Kissen Chamria and others while considering the scope of the words ‘material irregularity’, as are found in Section 115 of the Code of Civil Procedure, 1908:

“Reference may also be made to the observations of Bose, J. in his order of reference in Narayan Sonaji v. Sheshrao Vithoba [AIR 1948 Nag 258] wherein it was said that the words “illegally” and “material irregularity” do not cover either errors of fact or law. They do not refer to the decision arrived at but to the manner in which it is reached. The errors contemplated relate to material defects of procedure and not to errors of either law or fact after the formalities which the law prescribes have been complied with.”

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5). Supreme Court (2021.08.10) Pratap Technocrats (P) Ltd. & Ors. Vs. Monitoring Committee of Reliance Infratel Limited & Anr.[Civil Appeal No 676 of 2021] held that;

• # 39. These decisions have laid down that the jurisdiction of the adjudicating authority and the appellate authority cannot extend into entering upon merits of a business decision made by a requisite majority of the CoC in its commercial wisdom. Nor is there a residual equity based jurisdiction in the adjudicating authority or the appellate authority to interfere in this decision, so long as it is otherwise in conformity with the provisions of IBC and the Regulations under the enactment.

• # 40. Certain foreign jurisdictions allow resolution/reorganisation plans to be challenged on grounds of fairness and equity. One of the grounds under which a company voluntary arrangement can be challenged under the United Kingdom’s Insolvency Act, 1986 is that it unfairly prejudices the interests of a creditor of the company12. The United States’ Bankruptcy Code provides that if a restructuring plan has to clamp down on a dissenting class of creditors, one of the conditions that it should satisfy is that it does not unfairly discriminate, and is fair and equitable13. However, under the Indian insolvency regime, it appears that a conscious choice has been made by the legislature to not confer any independent equity based jurisdiction on the adjudicating authority other than the statutory requirements laid down under sub-section (2) of Section 30 IBC.

• # 41. An effort was made by Mr Dushyant Dave, learned Senior Counsel, to persuade this Court to read the guarantees of fair procedure and non-arbitrariness as emanating from the decision of this Court in Maneka Gandhi v. Union of India [Maneka Gandhi v. Union of India, (1978) 1 SCC 248] into the provisions of IBC. IBC, in our view, is a complete code in itself. It defines what is fair and equitable treatment by constituting a comprehensive framework within which the actors partake in the insolvency process. The process envisaged by IBC is a direct representation of certain economic goals of the Indian economy. It is enacted after due deliberation in Parliament and accords rights and obligations that are strictly regulated and coordinated by the statute and its regulations. To argue that a residuary jurisdiction must be exercised to alter the delicate economic coordination that is envisaged by the statute would do violence on its purpose and would be an impermissible exercise of the adjudicating authority’s power of judicial review. The UNCITRAL, in its Legislative Guide on Insolvency Law, has succinctly prefaced its recommendations in the following terms [pp. 14-15.] :

“C. Balancing the goals and key objectives of an insolvency law

15. Since an insolvency regime cannot fully protect the interests of all parties, some of the key policy choices to be made when designing an insolvency law relate to defining the broad goals of the law (rescuing businesses in financial difficulty, protecting employment, protecting the interests of creditors, encouraging the development of an entrepreneurial class) and achieving the desired balance between the specific objectives identified above. Insolvency laws achieve that balance by reapportioning the risks of insolvency in a way that suits a State’s economic, social and political goals. As such, an insolvency law can have widespread effects in the broader economy.”

• Hence, once the requirements of IBC have been fulfilled, the adjudicating authority and the appellate authority are duty-bound to abide by the discipline of the statutory provisions. It needs no emphasis that neither the adjudicating authority nor the appellate authority have an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework.’

• (emphasis supplied)

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6). Supreme Court (10.03.2021.03.10) in Kalpraj Dharamshi & Anr Vs. Kotak Investment Advisors Ltd. & Anr. [Civil Appeal Nos. 2943-2944 of 2020] held that;

• Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power.

• It has been held, that the legislature has consciously not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the Adjudicating Authority and that the decision of CoC’s `commercial wisdom’ is made non-justiciable.

• It will therefore be clear, that this Court, in unequivocal terms, held, that the appeal is a creature of statute and that the statute has not invested jurisdiction and authority either with NCLT or NCLAT, to review the commercial decision exercised by CoC of approving the resolution plan or rejecting the same.

• It would thus be clear, that the legislative scheme, as interpreted by various decisions of this Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the I&B Code.

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7). SCI (2019.11.15) in CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 OF 2019) held that; 

• “46. This is the reason why Regulation 38(1A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. If nothing is to be paid to operational creditors, the minimum, being liquidation value – which in most cases would amount to nil after secured creditors have been paid – would certainly not balance the interest of all stakeholders or maximise the value of assets of a corporate debtor if it becomes impossible to continue running its business as a going concern. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or subclass of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal.

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8). SCI (2019.11.15) in CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 OF 2019) held that;

• # 40. The importance of the majority decision of the Committee of Creditors is then stated in Section 31(1) of the Code which is set out as follows:

“31. Approval of resolution plan

(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan.”

Thus, what is left to the majority decision of the Committee of Creditors is the “feasibility and viability” of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors. What is important is that it is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place.

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9).  Supreme Court (2019.02.05) in  K. Sashidhar vs. Indian Overseas Bank & Ors. (Civil Appeal No.10673 of 2018) 

• # 29.  . . . . . Concededly, Regulations 25 and 39 must be read in light of Section 30(4) of the I&B Code, concerning the process of approval of a resolution plan. For that, the “percent of voting share of the financial creditors” approving vis­ à ­vis dissenting – is required to be reckoned. It is not on the basis of members present and voting as such. At any rate, the approving votes must fulfill the threshold percent of voting share of the financial creditors. Keeping this clear distinction in mind, it must follow that the resolution plan concerning the respective corporate debtors, namely, KS&PIPL and IIL, is deemed to have been rejected as it had failed to muster the approval of requisite threshold votes, of not less than 75% of voting share of the financial creditors. It is not possible to countenance any other construction or interpretation, which may run contrary to what has been noted herein before.

• # 33. As aforesaid, upon receipt of a “rejected” resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC muchless to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. . . . . . Besides, 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 I&B Code. 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 opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the adjudicating authority. That is made non­-justiciable.

• # 35. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan “as approved” by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2),when the resolution plan does not conform to the stated requirements.  . .   . 

• # 37. ………………..The provisions investing jurisdiction and authority in the NCLT or NCLAT as noticed earlier, has not made the commercial decision exercised by the CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order “approving a resolution plan” under Section 31.First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers “by the resolution professional” during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board.  Significantly, the matters or grounds be it under Section 30(2) or under Section 61(3) of the I&B Code are regarding testing the validity of the “approved” resolution plan by the CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by the CoC in exercise of its business decision.

• # 42.  ………… Be that as it may, the scope of enquiry and the grounds on which the decision of “approval” of the resolution plan by the CoC can be interfered with by the adjudicating authority (NCLT), has been set out in Section 31(1) read with Section 30(2) and by the appellate tribunal (NCLAT) under Section 32 read with Section 61(3) of the I&B Code. No corresponding provision has been envisaged by the legislature to empower the resolution professional, the adjudicating authority (NCLT) or for that matter the appellate authority (NCLAT), to reverse the “commercial decision” of the CoC muchless of the dissenting financial creditors for not supporting the proposed resolution plan. Whereas, from the legislative history there is contra indication that the commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority.

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