2022 (8) TMI 649 - Tri - Insolvency and Bankruptcy

Approval of Resolution plan which is already approved by the CoC, and pending before the Adjudicating Authority for approval - Seeking direction that the resolution plan of the Respondent No. 1 be remanded back to the CoC so that the CoC can reconsider all the resolution plans submitted during the corporate insolvency process of the corporate debtor - HELD THAT - Right to exercise commercial wisdom has an implied right to review the same. The Hon'ble NCLAT, in the BANK OF MAHARASHTRA AND ORS. VERSUS VIDEOCON INDUSTRIES LTD. AND ORS. 2021 (7) TMI 1292 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI , has clearly stipulated that along with the right to exercise commercial wisdom, the CoC has the right to review such a decision. In the instant case, even though CoC had approved the plan already, pursuant to an affidavit filed by the CoC, the Tribunal considered the request and allowed the plan to be sent back to the CoC for consideration. This was on the basis of the fact that CoC always has a right to review its decision. It is noticed that the present application was filed by the Asset Reconstruction Company (India) Ltd., being the authorised representative of the CoC by passing the resolution with 96.95% for filing the present application. It is also noticed that the parent company of Respondent No. 1, i.e., Gulf Petrochem FCZ has been declared bankrupt and there is a freezing injunction on the promoters. The credit rating of the Respondent No. 1 is in default as on June 04, 2021. The successful resolution applicant has defaulted in other CIRP of M/s. Allied Strips Ltd. and M/s. Tirupati Infraprojects Pvt. Ltd., wherein also he was the successful resolution applicant. In this background, the present application has been moved by the CoC/lenders, with 96.95% voting in its favour, for remanding back the resolution plan for reconsideration of the CoC. The resolution plan can be sent back for reconsideration to the CoC, considering the changed circumstances and the commercial wisdom of the CoC, with 96.95% voting, to seek permission of Adjudicating Authority for reconsideration of the resolution plan need to be considered for better prospects of Resolution. The Tribunal is well within its rights to send back the resolution plan for reconsideration to the CoC, on request made by the CoC in its commercial wisdom - thus, NCLT does have the right to send back resolution plans for reconsideration if requested by the CoC. Also, it is settled law that the CoC of any corporate debtor has the sole right to decide on the terms of the Resolution Plan and that exercise of commercial wisdom by the CoC is also non-justiciable. The present resolution plan remanded to CoC - application allowed.

Summary

Issues Involved:
1. Whether the resolution plan approved by the Committee of Creditors (CoC) can be remanded back for reconsideration.
2. Whether the National Company Law Tribunal (NCLT) has the authority to send back the resolution plan to CoC for reconsideration.

Issue-wise Detailed Analysis:

1. Whether the resolution plan approved by the Committee of Creditors (CoC) can be remanded back for reconsideration:

The Asset Reconstruction Company (India) Ltd., representing the CoC of GPT Steel Industries Ltd., filed an application to remand the resolution plan of Respondent No. 1 back to the CoC for reconsideration. The CoC had initially approved the resolution plan with an 82.41% voting share. However, subsequent developments raised concerns about the feasibility and viability of the plan. Specifically, the credit rating of Respondent No. 1 had deteriorated to a 'default rating', and the parent company, Gulf Petrochem FCZ, was declared bankrupt with a worldwide freezing injunction on its promoters. Additionally, Respondent No. 1 had defaulted in other CIRP cases (Allied Strips Ltd. and Tirupati Infraprojects Pvt. Ltd.), leading the CoC to seek reconsideration of the resolution plan to protect public interest and maximize the value of the Corporate Debtor.

The Tribunal noted that the CoC, with a 96.95% voting share, sought to remand the resolution plan due to these changed circumstances. The Tribunal emphasized that the CoC has the power and authority to approve or reject resolution plans and that their commercial wisdom is non-justiciable. Judicial precedents, including the Hon'ble Supreme Court's judgments in the cases of Jaypee Kensington Boulevard Apartments Welfare Association & Ors. vs NBCC (India) Limited & Ors. and Committee of Creditors of Essar Steel India Ltd. vs Satish Kumar Gupta & Ors., support the CoC's right to reconsider resolution plans if new facts or circumstances arise.

2. Whether the National Company Law Tribunal (NCLT) has the authority to send back the resolution plan to CoC for reconsideration:

The Tribunal considered whether it has the jurisdiction to send the resolution plan back to the CoC for reconsideration. The Tribunal referred to several judicial precedents, including the Hon'ble Supreme Court's judgment in Committee of Creditors of Essar Steel India Ltd. vs Satish Kumar Gupta & Ors., which held that the Adjudicating Authority (AA) could send back the resolution plan to the CoC if it finds that the relevant parameters have not been addressed. The Tribunal also cited the Hon'ble NCLAT's order in Bank of Maharashtra vs Videocon Industries Ltd. & Ors., affirming the AA's competence to remand a resolution plan to the CoC for reconsideration.

The Tribunal concluded that it is well within its rights to send back the resolution plan for reconsideration, considering the CoC's commercial wisdom and the changed circumstances. The Tribunal emphasized that the CoC's decision-making authority in relation to resolution plans is paramount and non-justiciable, as established in the Hon'ble Supreme Court's judgment in K. Sashidhar vs Indian Overseas Bank and Ors.

Conclusion:

In light of the above analysis, the Tribunal allowed the application and remanded the resolution plan back to the CoC for reconsideration. The Tribunal's decision aligns with the established legal principles that uphold the CoC's commercial wisdom and the AA's authority to ensure the resolution plan meets the necessary parameters. The application was disposed of in accordance with this order.