2021 (7) TMI 290 - AT - Insolvency and Bankruptcy

Seeking direction to Liquidator to consider the proposals of the Applicant under Section 230 of the Companies Act - OTS cum Compromise proposals placed before the CoC, were both cancelled - HELD THAT - The Appellant has not pointed out any irregularity in exercise of the powers committed by Ld. Adjudicating Authority. The CoC has taken commercial decision of rejecting the OTS proposals. It is settled law that the statute has not invested jurisdiction and authority either with NCLT or NCLAT to review the commercial decision exercised by the CoC of approving the resolution plan or rejecting the same. It is also to be noted that in this Appeal the Appellant has raised the ground that the CoC has rejected the OTS cum Compromise proposals without assigning any valid reason and without any suitable opportunity to the Appellant to discuss with the Respondent No. 1 on OTS Proposals. Such objection was never raised before the Adjudicating Authority. There is no allegation against the liquidator and no prayer for replacement of liquidator was made. The Appellant in the Appeal first time prayed for replacement of the liquidator. Such prayer cannot be considered at this stage, particularly when there is no allegation in the Application. Appeal dismissed.

Summary

Issues Involved:
Dismissal of Application seeking direction to consider proposals under Section 230 of the Companies Act; Rejection of OTS cum Compromise proposals by CoC; Allegation of rejection without valid reasons and lack of opportunity for discussion; Request for replacement of liquidator.

Analysis:

1. The Appellant, an Ex-Director of a Corporate Debtor, filed an Appeal against the Adjudicating Authority's order dismissing the Application as infructuous. The Application sought direction for the Liquidator to consider OTS proposals under Section 230 of the Companies Act. The CoC rejected the Appellant's proposals on the grounds of non-viability.

2. The Appellant submitted two OTS cum Compromise proposals, which were rejected by both Financial Creditors. The Appellant alleged lack of valid reasons for rejection and absence of an opportunity for discussion. However, the CoC's commercial decision to reject the proposals is final, as the law does not allow NCLT or NCLAT to review such decisions.

3. The Appellant's argument that the CoC rejected the proposals without valid reasons was not raised before the Adjudicating Authority. The Supreme Court has clarified that judicial review cannot interfere with the commercial decisions of the CoC. The law limits the scope of review within specific statutory provisions.

4. There were no allegations against the Liquidator in the Application, and no request for replacement was made at that stage. The Appellant's new prayer for the replacement of the Liquidator in the Appeal cannot be considered without proper grounds or allegations in the Application.

5. The Tribunal found no grounds to interfere with the Adjudicating Authority's decision to dismiss the Application. Therefore, the Appeal was dismissed without any order as to costs, maintaining the CoC's authority in commercial decisions related to OTS proposals and liquidation processes.

This detailed analysis covers the issues of dismissal of the Application, rejection of OTS proposals, lack of valid reasons, and the request for replacement of the liquidator, providing a comprehensive overview of the judgment delivered by the National Company Law Appellate Tribunal.