AA Rightly Approved Resolution Plan of SRA, Affirming CoC’s Unanimous Commercial Decision and Viability Assessment | NCLAT

Case Details: Madhukar Shetty Ex-Director of Genesis Resorts (P.) Ltd. v. Bank of Baroda - [2024] 164 taxmann.com 290 (NCLAT-New Delhi)

Judiciary and Counsel Details

• Ashok Bhushan, Chairperson, Barun Mitra & Arun Baroka, Technical Member
• Siddhartha Chowdhury, Adv. for the Appellant.
• Abhijeet Sinha, Sr. Adv. Anuj Tiwari, Saikat Sarkar, Ms Soumya Kumar, Ms Monika, Ms Pooja Mahajan, Savar Mahajan, Ms Shreya Mahalwar, Kaustubh Prakash & Ms Prachi Bhatia, Advs. for the Respondent.

Facts of the Case

In the instant case, the corporate debtor had availed a loan from respondent no.1 (i.e. the financial creditor) to construct a hotel but later failed to repay, leading to its classification as a Non-Performing Asset (NPA).

The financial creditor filed an application under section 7 of the IBC to initiate a Corporate Insolvency Resolution Process (CIRP) against the corporate debtor, which was admitted by the Adjudicating Authority (NCLT).

The Resolution Professional (RP) was appointed, and the Committee of Creditors (CoC) unanimously approved the plan from the Successful Resolution Applicant (SRA) and filed an application before the NCLT, seeking approval of the resolution plan.

The appellant (i.e. ex-director of the debtor) contested this approval, alleging asset undervaluation and incomplete information disclosure; however, the NCLT rejected these objections and approved a resolution plan.

The appellant challenged the NCLT’s order on the ground that RP had conducted the CIRP process without ensuring the maximisation of the value of the corporate debtor’s assets.

NCLAT Held

The NCLAT observed that when the CoC has approved a resolution plan with a 100% voting share after considering its feasibility and viability, such a decision of the CoC is a commercial decision, and the commercial wisdom of the CoC in approving the resolution plan was not to be interfered in the exercise of jurisdiction of judicial review either by NCLT or NCLAT in the exercise of its appellate powers.

The NCLAT held that once a valuation report was submitted by RP to the CoC and the CoC was satisfied with the same, the NCLT could not go into the question of valuation of assets conducted by RP during CIRP and, thus, the allegation made by the appellant on pre-CIRP valuations conducted by the financial creditor in the past was misconceived and misplaced.

Therefore, the NCLT did not commit any error in rejecting the application of the appellant objecting to approval by the CoC of the resolution plan of SRA, the impugned order was to be upheld.

List of Cases Reviewed

• Bank of Baroda v. Genesis Resorts (P.) Ltd. [2024] 164 taxmann.com 289 (NCLT -Mum.) (para 24) affirmed.