Case Law Details
Sarda Energy and Minerals Limited Vs Ashish Arjunkumar Rathi (NCLAT Delhi)
Conclusion: Adjudicating Authority was not empowered in corporate insolvency resolution processes to substitute its judgment for the commercial decisions made by the CoC as cleared in a recent judgment by the National Company Law Appellate Tribunal (NCLAT) Delhi.
Held: Appellant argued that under the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority’s role was strictly defined, primarily focusing on evaluating resolution plans based on statutory provisions, not on questioning the commercial wisdom of the CoC. However, the Adjudicating Authority, in its order dated 06.10.2023, seemed to overstep its bounds. It delved into the minutiae of the financial data presented to the CoC, scrutinizing the evaluation matrix, minutes of meetings, and correspondence. This led to a direct challenge to the resolution plan approved by the CoC, raising concerns about the authority’s interference in matters of commercial judgment. It was held that all relevant materials were available before the CoC, which was deliberated, no perversity could be imputed in the decision. As noted above, the ground to interfere with the approval of Resolution Plan by the CoC by Adjudicating Authority were circumscribed by virtue of Section 31, sub-section (1). Thus, a fault could be found in the decision only when there was serious error in the decision-making process and by which error, the CoC was unable to take its commercial decision. in view of the Process Note of Appendix-1, the submission could not be accepted that all amounts were to be offered upfront. Appellant had also relied on Clause 4.1.8 of RFRP, which clearly provided that the CoC was under no obligation to any of the Resolution Applicant to approve the Resolution Plan, which had secured the highest value as per the Evaluation Matrix and any Resolution Plan should be approved solely on the basis of CoC’s commercial wisdom. To the same effect was Clause-9(c) and 9(d) of the Process Note dated 12.04.2023, where the CoC had reserved its right to evaluate the compliances of Resolution Plans and accept or reject the Resolution Plans. As observed above, The matter was remitted for fresh consideration.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
These three Appeals have been filed against the Order dated 06.10.2023, passed by the Learned Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court IV).
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