2019 (10) TMI 1356 - Tri - Insolvency and Bankruptcy

Rejection of Resolution Plan - rejection on the ground that subrogation clause is not incorporated in the application - HELD THAT - We are not inclined to pass any order allowing the instant application, more so, when CIRP has already been expired on 20.08.2018 and since then the instant intervention application is being adjourned for one or other reason. Consequent upon, which the application filed under section 33 of the IB Code sometime in 2018 could not be disposed-of by passing appropriate order. It is further observed that upon receipt of rejected resolution plan the Adjudicating Authority (NCLT) obliged to initiate liquidation process under section 33(1) of the Insolvency and Bankruptcy Code. Application rejected.

Summary

Issues:
1. Rejection of Resolution Plan by COC due to absence of subrogation clause.
2. Interpretation of judgment regarding personal guarantees and treatment of security.
3. Jurisdiction of NCLT in analyzing COC decisions and rejected resolution plans.

Analysis:
1. The Resolution Applicant filed an application seeking intervention and reconsideration of their rejected Resolution Plan by the COC. The Applicant argued that the absence of a subrogation clause led to the rejection. They relied on a judgment by NCLAT regarding the treatment of security and personal guarantees. However, the Tribunal noted that the judgment referred to a specific case and did not mandate the inclusion of a subrogation clause. The Tribunal emphasized that each case is unique, and the Applicant's attempt to draw parallels was unfounded.

2. The Tribunal highlighted that the COC's decision-making process should not be scrutinized by the NCLT, citing a Supreme Court judgment. The Supreme Court ruled that NCLT lacks the authority to question the commercial wisdom of the COC or the justification behind rejecting a Resolution Plan. Upon receiving a rejected plan, the NCLT is obligated to initiate liquidation proceedings under the Insolvency and Bankruptcy Code. In this context, the Tribunal found no justification for intervening in the Applicant's rejected Resolution Plan, leading to the rejection of the intervention application.

3. The Tribunal's decision underscored the limited scope of NCLT's authority in reviewing COC decisions and rejected Resolution Plans. The judgment emphasized the NCLT's role in following statutory provisions and initiating liquidation proceedings when necessary, rather than delving into the commercial aspects of COC decisions. As a result, the Tribunal deemed the intervention application as lacking merit and rejected it on the grounds of non-maintainability.