RP approved by CoC with 100% voting & NCLT approval was free from legal infirmity: NCLAT

Case Details: Rahul Khilnani v. Atul Kumar Jain - [2023] 148 taxmann.com 404 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Anant Bijay Singh, Judicial Member & Ms Shreesha Merla, Technical Member
  • Anubhav Gupta & Ajit Singh Joher, Advs. for the Appellant.
  • Pratik Malik & Ms Ekta Chaudhary, Advs. for the Respondent.

Facts of the Case

In the instant case, the resolution plan submitted by the successful resolution applicant (SRA) was approved by the Committee of Creditors (CoC) with a 100% voting share and subsequently by the Adjudicating Authority. However, the appellant (i.e. operational creditors) alleged that they were being paid only 2% under the resolution plan, while all other creditors were being paid 100%.

The appellants further claimed that the National Company Law Tribunal (NCLT) should have allowed the CoC to reconsider their plan in the interest of justice, however the NCLT approved the said plan even when members of the CoC having 82% of voting rights moved an application under regulation 18 for convening a meeting.

Thereafter, the appellant filed an appeal before the National Company Law Appellate Tribunal (NCLAT). The question raised before the NCLAT was whether the impugned order passed by the NCLT approving the resolution plan was free from any illegality and infirmity.

It was noted that 82% of the shareholders who according to the appellant had objected to the plan had attended the meeting where the plan was approved and had given their approval.

The NCLAT observed that since the resolution plan was approved by the CoC with a 100% voting share, and the operational creditors were not holding any voting right in the CoC, the commercial wisdom of the CoC was non-justiciable.

NCLAT Held

The NCLAT held that there were no material irregularities in the resolution plan and that the 82% of shareholders who had allegedly raised objections had themselves attended the CoC meeting and approved the plan.

Therefore, the impugned order passed by the NCLT approving the resolution plan was held to be free from any illegality and infirmity.

List of Cases Reviewed

• • Imperial Fastners (P.) Ltd. v. Solven Power Systems (P.) Ltd. [2023] 148 taxmann.com 403 (NCLT – New Delhi) (para15) affirmed [See Annex].
  • Kalpraj Dharamshi v. Kotak Investment Advisors Ltd. [2021] 125 taxmann.com 194/166 SCL 583/225 Comp Case 565 (SC) (para 14) followed.

List of Cases Referred to

• • Vijay Kumar Jain v. Standard Chartered Bank [2019] 102 taxmann.com 14/152 SCL 56 (SC)/AIR 2019 SC 2477 (para 5)
  • ANG Industries Ltd. v. Shah Brothers Ispat (P.) Ltd. [2018] 97 taxmann.com 34/209 Comp Case 110 (NCL – AT) (para 5)
  • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365/213 Comp Case 198 (SC)/[2019] 4 SCC 17 (para 5)
  • Kalpraj Dharamshi v. Kotak Investment Advisors Ltd. [2021] 125 taxmann.com 194/166 SCL 583/225 Comp Case 565 (SC) (para 14).