Sandeep Lucky Vs Rajeev Lochan (NCLAT Delhi)
In this case before the National Company Law Appellate Tribunal, the appeal challenged an order of the National Company Law Tribunal rejecting a resolution plan approved by the Committee of Creditors (CoC) with 100% voting share. The impugned order also removed the Resolution Professional (RP), directed a fresh Corporate Insolvency Resolution Process (CIRP), and stated that if the restarted CIRP was not completed within 120 days, the Corporate Debtor would stand deemed liquidated.
The Adjudicating Authority had observed that although a resolution plan being lower than liquidation value alone may not justify rejection, the approved plan value was only 10% of the liquidation value of the Corporate Debtor. The Tribunal also noted concerns regarding non-application of mind by the CoC because avoidance applications under Sections 43 and 66 of the Insolvency and Bankruptcy Code (IBC) were not placed before the CoC before approval of the resolution plan. The resolution plan was found to be in violation of Regulations 36(4A) and 38(2) of the CIRP Regulations.
The Successful Resolution Applicant (SRA) argued that the commercial wisdom of the CoC was non-justiciable and relied on several Supreme Court decisions, including Sashidhar v. Indian Overseas Bank, Essar Steel, and Maharashtra Seamless. The SRA also contended that avoidance applications are independent proceedings surviving beyond CIRP and that the SRA should not suffer for alleged lapses of the RP. It was further argued that the arrangement to share recoveries from PUFE transactions between creditors and the SRA was legally permissible.
