VALLAL RCK versus M/S SIVA INDUSTRIES AND HOLDINGS LIMITED AND OTHERS
[2022] 7 S.C.R. 577, Supreme Court of India, 2022
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
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VALLAL RCK
v.
   M/S SIVA INDUSTRIES AND HOLDINGS
LIMITED AND OTHERS
(Civil Appeal Nos. 1811-1812 of 2022)
JUNE 03, 2022
[B. R. GAVAI AND HIMA KOHLI, JJ.]
Insolvency and Bankruptcy Code, 2016: s. 12A – Withdrawal
of application admitted u/s. 7 – On facts, application u/s. 12A r/w
Regulation 30A for withdrawal of application filed u/s. 7, in view
of settlement plan submitted by the promoter of the Corporate Debtor,
being approved by 94.23% of the voting shares of the Committee of
Creditors – NCLT and NCLAT rejected the application – On appeal,
held: When 90% and more of the creditors, in their wisdom after
due deliberations, find that it would be in the interest of all the
stake-holders to permit settlement and withdraw CIRP, the
adjudicating authority or the appellate authority cannot sit in an
appeal over the commercial wisdom of CoC – 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 – In the instant case, the decision of the COC was taken after
due deliberations of pros and cons of the settlement plan and took
the decision exercising their commercial wisdom – Thus, interference
of the NCLT and the NCLAT not justified – Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 – Regulation 30A.
Allowing the appeals, the
Court
HELD: 1.1 Section 12A of the IBC was brought in the
statute book vide Insolvency and Bankruptcy Code (Second
Amendment) Act, 2018 (Act No. 26 of 2018). The Statement of
Objects and Reasons of the Act No. 26 of 2018 would reveal that
after the IBC was enacted in 2016, it had emerged that further
fine tuning of the IBC would be required. The Government
therefore constituted an Insolvency Law Committee to review
the functioning and implementation of the IBC. The SOR would
[2022] 7 S.C.R. 577
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further reveal that the recommendations of the said Committee
were examined by the Government and it was accordingly decided
to amend the IBC. One of the amendments proposed was for
making a provision for withdrawal of application for initiation of
CIRP admitted by Adjudicating Authority. It was recommended
that such an exit should be allowed provided the CoC approves
such action by 90% voting share. [Para 12][584-C-F]
1.2 Section 12A of the IBC was brought in the statute book
on the basis of the said Committee’s Report. Though by the
Amendment Act No. 26 of 2018, the voting share of 75% of CoC
for approval of the Resolution Plan was brought down to 66%,
Section 12A of the IBC which was brought in the statute book by
the same amendment, requires the voting share of 90% of CoC
for approval of withdrawal of CIRP. It could thus clearly be seen
that a more stringent provision has been made insofar as
withdrawal of CIRP is concerned. [Para 16][586-E-F]
1.3 A perusal of the Regulation 30A would reveal that where
an application for withdrawal under Section 12A of the IBC is
made after the constitution of the Committee, the same has to be
made through the interim resolution professional or the resolution
professional, as the case may be. The application has to be made
in Form-FA. It further provides that when an application is made
after the issue of invitation for expression of interest under
Regulation 36A, the applicant is
required to state the reasons
justifying withdrawal of the same. The RP is required to place
such an application for consideration before the Committee. Only
after such an application is approved by the Committee with 90%
voting share, the RP shall submit the same along with the approval
of the Committee to the adjudicating authority. It could thus be
seen that a detailed procedure is prescribed under Regulation
30A of the 2016 Regulations as well. [Para 18][588-C-D]
1.4 If the CoC arbitrarily rejects a just settlement and/or
withdrawal claim, the NCLT and thereafter the NCLAT can always
set aside such decision under the provisions of the IBC. [Para
20][589-C]
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1.5 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. 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. [Para 21][589-
D-E]
1.6 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%.
[Para 23][590-A]
1.7 When 90% and more of the creditors, in their wisdom
after due deliberations, find that it would be in the interest of all
the stake-holders to permit settlement and withdraw CIRP, 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. [Para 24][590-B-C]
1.8 In the instant case, the proceedings of the 13th, 14th
and 15th meetings of CoC would clearly
show that there were
wide deliberations amongst the members of the CoC while
considering the Settlement Plan as submitted by the appellant.
Not only that, the proceedings would also reveal that after
suggestions were made by some of the members of the CoC,
suitable amendments were carried out in the Settlement Plan by
the appellant. One of the members of the CoC having voting
share of 23.60%, though initially opposed the Settlement Plant,
subsequently decided to support the same. Accordingly, the NCLT
itself directed the RP to reconvene the CoC meeting. As per the
directions of the NCLT, the 17th meeting of the CoC was
reconvened, wherein the Settlement Plan was approved by
94.23% votes. [Para 25][590-D-E]
VALLAL RCK v. M/S SIVA INDUSTRIES AND HOLDINGS
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1.9 The decision of the CoC was taken after the members
of the CoC, had due deliberation to consider the pros and cons of
the Settlement Plan and took a decision exercising their
commercial wisdom. Therefore, neither the NCLT nor the
NCLAT were justified in not giving due weightage to the
commercial wisdom of CoC. The impugned judgment delivered
by the NCLAT and the orders passed by the NCLT are quashed
and set aside; and the application filed by the Resolution
Professional before the NCLT for withdrawal of CIRP is allowed.
[Paras 26, 28][590-F; 591-D-E]
Swiss Ribbons Privated Limited and Another v. Union
of India and Others (2019) 4 SCC 17 : [2019] 3 SCR
535; K. Sashidhar v. Indian Overseas Bank and Others
(2019) 12 SCC 150 : [2019] 3 SCR 845; Committee of
Creditors of Essar Steel India Limited through
Authorised Signatory v. Satish Kumar Gupta and Others
(2020) 8 SCC 531 : [2019] 16 SCR 275; Maharashtra
Seamless Limited v. Padmanabhan Venkatesh and Others
(2020) 11 SCC 467 : [2020] 2 SCR 1157; Kalpraj
Dharamshi and Another v. Kotak Investment Advisors
Limited and Another (2021) 10 SCC 401; Jaypee
Kensington Boulevard Apartments Welfare Association
and Others v. NBCC (India) Limited and Others (2022)
1 SCC 401; Arun Kumar Jagatramka v. Jindal Steel
and Power Limited and Another (2021) 7 SCC 474 –
referred to.
Case Law Reference
[2019] 3 SCR 535
referred to
Para 19
[2019] 3 SCR 845
referred to
Para 21
[2019] 16 SCR
275
referred to
Para 21
[2020] 2 SCR 1157
referred to
Para 21
(2021) 10 SCC 401
referred to
Para 21
(2022) 1 SCC 401
referred to
Para 21
(2021) 7 SCC 474
referred to
Para 27
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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1811-
1812 of 2022.
From the Judgment and Order dated 28.01.2022 of the National
Company Law Appellate Tribunal, Chennai Bench, Chennai in Company
Appeal (AT) (CH) (Ins) Nos. 211 and 212 of 2021.
Dr. Abhishek Manu Singhvi, P. H. Arvind Pandian, Sr. Advs.,
Ankur Kashyap, Ajith S. Ranganathan, Aavishkar Singhvi, Rohit Rajershi,
Avinash Krishnan Ravi, Aman Bajaj, Aadarsh Prakash, Navid Ahmed,
Advs. for the Appellant.
Anish R. Shah, K. R. Samratt, Abhishek Swaroop, Shashank
Manish, Palash Agarwal, Advs. for the Respondents.
The Judgment of the Court was delivered by
B. R. GAVAI, J.
1. These appeals challenge the common judgment dated
28th January 2022 passed by the learned National Company Law
Appellate Tribunal, Chennai Bench, Chennai (hereinafter referred to as
the “NCLAT”) in Company Appeal (AT)(CH)(Insolvency) Nos. 211
and 212 of 2021, thereby dismissing the appeals filed by the present
appellant, which were in turn filed, challenging the two orders dated
12th August 2021 passed by the learned National Company Law Tribunal,
Division Bench-II, Chennai (hereinafter referred to as the “NCLT”),
thereby rejecting the application filed by the Resolution Professional
(“RP” for short) under Section 12A of the Insolvency and Bankruptcy
Code, 2016 (“IBC” for short) read with Regulation 30A of the Insolvency
and Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016
(hereinafter referred to as the
“2016 Regulations”), for withdrawal of the application filed under Section
7 of the IBC in view of the Settlement Plan submitted by the appellant.
The appellant has also challenged the order passed by the learned NCLAT
of the even date vide which the appeal filed by the present appellant
against the order passed by the learned NCLT directing initiation of
liquidation proceedings in respect of M/s Siva Industries and Holdings
Limited-respondent No.1 herein (hereinafter referred to as the “Corporate
Debtor”), was dismissed.
2. A short question that falls for consideration in the present appeal
is as to whether the adjudicating authority (NCLT) or the appellate
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authority (NCLAT) can sit in an appeal over the commercial wisdom of
the Committee of Creditors (hereinafter referred to as the “CoC”) or
not.
3. The facts in brief giving rise to the present appeals are as
under:
IDBI Bank Limited had filed an application under Section 7 of the
IBC for initiation of Corporate Insolvency Resolution Process (hereinafter
referred to as the “CIRP”) in respect of the Corporate Debtor. The
learned NCLT, vide its order dated 4th July 2019, admitted the said
application. As a result of which, CIRP in respect of the Corporate
Debtor was initiated. The RP had presented a Resolution Plan before
the CoC, submitted by one M/s Royal Partners Investment Fund Limited.
However, since the said Plan received only 60.90% votes of the CoC
and could not meet the requirement of receiving 66% votes, the said
Plan could not be approved.
4. The RP, on 8th May 2020, filed an application being IA/837/IB/
2020 under Section 33(1)(a) of the IBC seeking initiation of liquidation
process of the Corporate Debtor. The appellant, who is the promoter of
the Corporate Debtor, filed a settlement application being IA/647/IB/
2020 before the NCLT under Section 60(5) of the IBC, showing his
willingness to offer one-time settlement plan. The appellant sought
necessary directions to the CoC to consider the terms of Settlement
Plan as proposed by him. From the month of October to December
2020, the 13th, 14th and 15th meetings
of the CoC were held to consider
the Settlement Plan as submitted by the appellant. Deliberations took
place in the said meetings with regard to the said Settlement Plan and
the final settlement proposal which was submitted by the appellant came
to be considered by the CoC in its 16th meeting held on 18th January
2021. Initially, the said Settlement Plan received only 70.63% votes.
However subsequently, one of the Financial Creditors viz. International
Assets Reconstruction Co. Ltd. (hereinafter referred to as “IARCL”)
having voting share of 23.60%, decided to approve the said Settlement
Plan and intimated the RP about the same.
5. Since the said Settlement Plan stood approved by more than
90% voting share, the RP filed an application before the learned NCLT
seeking necessary directions based on the request of IARCL. Vide its
order dated 29th March 2021, the learned NCLT ordered the RP to
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reconvene a meeting of CoC and place the e-mail of IARCL before it.
Accordingly, the 17th CoC meeting was convened on 1st April 2021,
wherein the said Settlement Plan was approved with a voting majority
of 94.23%. Accordingly, the RP filed an application being MA/43/CHE/
2021 in IBA/453/2019 before the learned NCLT seeking withdrawal of
CIRP initiated against the Corporate Debtor in view of the approval of
the said Settlement Plan by CoC.
6. The learned NCLT, vide its order dated 12th August 2021, while
holding that the said Settlement Plan was not a settlement simpliciter
under Section 12A of the IBC but a “Business Restructuring Plan”,
rejected the application for withdrawal of CIRP and approval of the
Settlement Plan. Vide another order of even date, the learned NCLT
initiated liquidation process of the Corporate Debtor in IA/837/IB/2020
as well. Being aggrieved thereby, the appellant preferred two appeals
before the learned NCLAT. Vide the common impugned judgment dated
28th January 2022, the same came to be dismissed. Hence, the present
appeals.
7. Notice was issued by this Court in the present appeals on 11th
March 2022. While issuing notice, this Court also granted stay of the
impugned judgment. Insofar as the respondent No.1 is concerned, no
one appeared. Shri Abhishek Swaroop, learned counsel appearing on
behalf of the respondent No.2 also does not wish to contest the matter.
As such, we could have very well allowed the appeals as being
uncontested. However, since an important question with regard to
interpretation of Section 12A of the IBC arises, we are inclined to consider
the matter for deciding the said issue.
8. We have heard Dr. Abhishek Manu Singhvi, learned Senior
Counsel appearing on behalf of the appellant.
9. Dr. Singhvi submits that it is more than well-settled that the
adjudicating authority or the appellate authority cannot sit in an appeal
over the commercial wisdom of CoC.  He submitted that the CoC, having
accepted the Settlement Plan with the voting majority of 94.23%, the
learned NCLT and the learned NCLAT have grossly erred in rejecting
the Settlement Plan and withdrawal of CIRP.
10. Dr. Singhvi submitted that one of the main objects of the IBC
is permitting the Corporate Debtor to continue as an on-going concern
and at the same time, paying the dues of the creditors to the maximum.
VALLAL RCK v. M/S SIVA INDUSTRIES AND HOLDINGS
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He submits that the impugned judgment dated 28th January 2022 passed
by the learned NCLAT and the orders dated 12th August 2021 passed by
the learned NCLT are totally contrary to the spirit behind the IBC.
11. For considering these submissions, it will be apposite to refer
to Section 12A of the IBC, which reads thus:
“12-A. Withdrawal of application admitted under Section 7,
9 or 10.—The Adjudicating Authority may allow the withdrawal
of application admitted under Section 7 or Section 9 or Section 10,
on an application made by the applicant with the approval of ninety
per cent. voting share of the committee of creditors, in such manner
as may be specified.”
12. It is relevant to note that Section 12A of the IBC was brought
in the statute book vide Insolvency and Bankruptcy Code (Second
Amendment) Act, 2018 (Act No. 26 of 2018). The Statement of Objects
and Reasons (for short “SOR”) of the Act No. 26 of 2018 would reveal
that after the IBC was enacted in 2016, it had emerged that further fine
tuning of the IBC would be required. The Government therefore
constituted an Insolvency Law Committee (hereinafter referred to as
the “said Committee”) to review the functioning and implementation of
the IBC. The SOR would further reveal that the recommendations of
the said Committee were examined by the Government and it was
accordingly decided to amend the IBC. One of the amendments proposed
was for making a provision for
withdrawal of application for initiation of
CIRP admitted by Adjudicating Authority. It was recommended that such
an exit should be allowed provided the CoC approves such action by
90% voting share.
13. It will be relevant to refer to Clause (vii) of the key
recommendations in the Report of the said Committee dated 26th March
2018, which reads thus:
“(vii) in order to cater to exceptional circumstances warranting
withdrawal of an application for CIRP post-admission, it has been
recommended to allow such exit provided the CoC approves such
action by ninety per cent of voting share;”
14. It will also be relevant to refer to paragraph (29) of the Report
of the said Committee, which reads thus:
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“29. WITHDRAWAL OF CIRP PROCEEDINGS
PURSUANT TO SETTLEMENT
29.1 Under rule 8 of the CIRP Rules, the NCLT may permit
withdrawal of the application on a request by the applicant before
its admission. However, there is no provision in the Code or the
CIRP Rules in relation to permissibility of withdrawal post
admission of a CIRP application. It was observed by the
Committee that there have been instances where on account of
settlement between the applicant creditor and the corporate debtor,
judicial permission for withdrawal of CIRP was granted. This
practice was deliberated in light of the objective of the Code as
encapsulated in the BLRC Report, that the design of the Code is
based on ensuring that “all key stakeholders will participate to
collectively assess viability. The law must ensure that all
creditors who have the capability and the willingness to
restructure their liabilities must be part of the negotiation
process. The liabilities of all creditors who are not part of the
negotiation process must also be met in any negotiated
solution.” Thus, it was agreed that once the CIRP is initiated, it is
no longer a proceeding only between the applicant creditor and
the corporate debtor but is envisaged to be a proceeding involving
all creditors of the debtor. The intent of the Code is to discourage
individual actions for enforcement and settlement to the exclusion
of the general benefit of all creditors.
29.2  On a review of the multiple NCLT and NCLAT
judgments
in this regard, the consistent pattern that emerged was that a
settlement may be reached amongst all creditors and the debtor,
for the purpose of a withdrawal to be granted, and not only the
applicant creditor and the debtor. On this basis read with the intent
of the Code, the Committee unanimously agreed that the
relevant rules may be amended to provide for withdrawal
post admission if the CoC approves of such action by a
voting share of ninety per cent. It was specifically discussed
that rule 11 of the National Company Law Tribunal Rules, 2016
may not be adopted for this aspect of CIRP at this stage (as
observed by the Hon’ble Supreme Court in the case of Uttara
Foods and Feeds Private Limited v. Mona Pharmacem) and
even otherwise, as the issue can be specifically addressed by
amending rule 8 of the CIRP Rules.”
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15. It could thus be seen from the Report of the said Committee
that, the said Committee had observed that there have been instances
where on account of settlement between the applicant creditor and the
corporate debtor, judicial permission for withdrawal of CIRP was granted.
The Report would further reveal that it refers to Banking Law Reforms
Committee Report which emphasizes that the law must ensure that all
creditors who have the capability and the willingness to restructure their
liabilities must be part of the negotiation process. It also emphasizes that
the liabilities of all creditors who are not part of the negotiation process
must also be met in any negotiated solution. The said Committee states
that once the CIRP is initiated, it is no longer a proceeding only between
the applicant creditor and the corporate debtor but is envisaged to be a
proceeding involving all creditors of the debtor. The intent of the IBC is
to discourage individual actions for enforcement and settlement to the
exclusion of the general benefit of all creditors. The Report would further
reveal that a settlement may be reached amongst all creditors and the
debtor, for the purpose of a withdrawal to be granted, and not only the
applicant creditor and the debtor. The said Committee therefore
recommended that the relevant rules may be amended to provide for
withdrawal post admission if the CoC approves of such action by a
voting share of
ninety per cent.
16. It could thus be seen that Section 12A of the IBC was brought
in the statute book on the basis of the said Committee’s Report. It could
be noticed that though by the Amendment Act No. 26 of 2018, the voting
share of 75% of CoC for approval of the Resolution Plan was brought
down to 66%, Section 12A of the IBC which was brought in the statute
book by the same amendment, requires the voting share of 90% of CoC
for approval of withdrawal of CIRP. It could thus clearly be seen that a
more stringent provision has been made insofar as withdrawal of CIRP
is concerned.
17. It is further to be noted that after Section 12A of the IBC was
brought in the statute book, Regulation 30A of the 2016 Regulations
came to be inserted vide notification dated 3rd July 2018. The same
came to be substituted vide notification dated 25th July 2019. Regulation
30A of the 2016 Regulations reads thus:
“30-A. Withdrawal of application.—(1) An application for
withdrawal under Section 12-A may be made to the Adjudicating
Authority—
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(a) before the constitution of the committee, by the applicant
through the interim resolution professional;
(b) after the constitution of the committee, by the applicant
through the interim resolution professional or the resolution
professional, as the case may be:
Provided that where the application is made under clause (b) after
the issue of invitation for expression of interest under Regulation
36-A, the applicant shall state the reasons justifying withdrawal
after issue of such invitation.
(2) The application under sub-regulation (1) shall be made in Form
FA of the Schedule accompanied by a bank guarantee—
(a) towards estimated expenses incurred on or by the interim
resolution professional for purposes of Regulation 33, till the
date of filing of the application under clause (a) of sub-regulation
(1); or
(b) towards estimated expenses incurred for purposes of
clauses (aa), (ab), (c) and (d) of Regulation 31, till the date of
filing of the application under clause (b) of sub-regulation (1).
(3) Where an application for withdrawal is under clause (a) of
sub-regulation (1), the interim resolution professional shall submit
the application to the Adjudicating Authority on behalf of the
applicant, within three days of its receipt.
(4) Where an application for withdrawal is under clause (b) of
sub-regulation (1), the committee shall consider the application,
within seven days of its receipt.
(5) Where the application referred to in sub-regulation (4) is
approved by the committee with ninety percent voting share, the
resolution professional shall submit such application along with
the approval of the committee, to the Adjudicating Authority on
behalf of the applicant, within three days of such approval.
(6) The Adjudicating Authority may, by order, approve the
application submitted under sub-regulation (3) or (5).
(7) Where the application is approved under sub-regulation (6),
the applicant shall deposit an amount, towards the actual expenses
incurred for the purposes referred to in clause (a) or clause (b) of
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sub-regulation (2) till the date of approval by the Adjudicating
Authority, as determined by the interim resolution professional or
resolution professional, as the case may be, within three days of
such approval, in the bank account of the corporate debtor, failing
which the bank guarantee received under sub-regulation (2) shall
be invoked, without prejudice to any other action permissible
against the applicant under the Code.”
18. A perusal of the said Regulation would reveal that where an
application for withdrawal under Section 12A of the IBC is made after
the constitution of the Committee, the same has to be made through the
interim resolution professional or the resolution professional, as the case
may be. The application has to be made in Form-FA. It further provides
that when an application is made after the issue of invitation for
expression of interest under Regulation 36A, the applicant is required to
state the reasons justifying withdrawal of the same. The RP is required
to place such an application for consideration before the Committee.
Only after such an application is approved by the Committee with 90%
voting share, the RP shall submit the same along with the approval of the
Committee to the adjudicating authority. It could thus be seen that a
detailed procedure is prescribed under Regulation 30A of the 2016
Regulations as well.
19. In the case of Swiss Ribbons Privated Limited and Another
v. Union of
India and Others1, 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 12-A 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
1 (2019) 4 SCC 17
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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 12-A 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 Others2, Committee of
Creditors of Essar Steel India Limited through Authorised Signatory
v. Satish Kumar Gupta and Others3, Maharashtra Seamless Limited
v. Padmanabhan Venkatesh and Others4, Kalpraj Dharamshi and
Another v. Kotak Investment Advisors Limited and Another5, and
Jaypee Kensington Boulevard Apartments Welfare Association and
Others v. NBCC (India) Limited and Others6.
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.
2 (2019) 12 SCC 150
3 (2020) 8 SCC 531
4 (2020) 11 SCC 467
5 (2021) 10 SCC 401
6 (2022) 1 SCC 401
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SUPREME COURT REPORTS
[2022] 7 S.C.R.
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 stake-holders
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.
25. In the present case, the proceedings of the 13th, 14th and 15th
meetings of CoC would clearly show that there were wide deliberations
amongst the members of the CoC while considering the Settlement Plan
as submitted by the appellant. Not only that, the proceedings would also
reveal that after suggestions were made by some of the members of the
CoC, suitable amendments were carried out in the Settlement Plan by
the appellant. One of the members of the CoC having voting share of
23.60%, though initially opposed the Settlement Plant, subsequently
decided to
support the same. Accordingly, the NCLT itself, vide order
dated 29th March 2021, directed the RP to reconvene the CoC meeting.
As per the directions of the NCLT, on 1st April 2021, the 17th meeting of
the CoC was reconvened, wherein the Settlement Plan was approved
by 94.23% votes.
26. It is thus clear that the decision of the CoC was taken after
the members of the CoC, had due deliberation to consider the pros and
cons of the Settlement Plan and took a decision exercising their
commercial wisdom. We are therefore of the considered view that neither
the learned NCLT nor the learned NCLAT were justified in not giving
due weightage to the commercial wisdom of CoC.
27.This Court has, time and again, emphasized the need for minimal
judicial interference by the NCLAT and NCLT in the framework of
IBC.  We may refer to the recent observation of this Court made in the
case of Arun Kumar Jagatramka v. Jindal Steel and Power Limited
and Another7:
7 (2021) 7 SCC 474
A
B
C
D
E
F
G
H
591
“95. ….However, we do take this opportunity to offer a note of
caution for NCLT and NCLAT, functioning as the adjudicatory
authority and appellate authority under the IBC respectively, from
judicially interfering in the framework envisaged under the IBC.
As we have noted earlier in the judgment, the IBC was introduced
in order to overhaul the insolvency and bankruptcy regime in India.
As such, it is a carefully considered and well thought out piece of
legislation which sought to shed away the practices of the past.
The legislature has also been working hard to ensure that the
efficacy of this legislation remains robust by constantly amending
it based on its experience. Consequently, the need for judicial
intervention or innovation from NCLT and NCLAT should be kept
at its bare minimum and should not disturb the foundational
principles of the IBC…..”
28. In the result, we pass the following order:
(i)
The appeals are allowed;
(ii)
The impugned judgment dated 28th January 2022 delivered
by the learned NCLAT in Company Appeal (AT) (CH)
(Insolvency) Nos. 211 and 212 of 2021 and the orders dated
12th August 2021 passed by the learned NCLT in MA/43/
CHE/2021 in IBA/453/2019 and in IA/837/IB/2020 in IBA/
453/2019 are quashed and set aside; and
(iii) The application bearing No. MA/43/CHE/2021 in IBA/453/
2019 filed by the Resolution Professional before the learned
NCLT for withdrawal of CIRP is allowed.
29. Pending application(s), if any, shall stand disposed of
in the
above terms. No order as to costs.
Nidhi Jain
Appeals allowed.
(Assisted by : Shashwat Jain, LCRA)
VALLAL RCK v. M/S SIVA INDUSTRIES AND HOLDINGS
LIMITED AND OTHERS [B. R. GAVAI, J.]