In a recent legal development, the Supreme Court has issued a significant ruling regarding the resolution plan of ACIL Limited under the Insolvency and Bankruptcy Code, 2016 (IBC). The court overturned the judgments of both the National Company Law Appellate Tribunal (NCLAT) and the National Company Law Tribunal (NCLT), emphasizing the need for a prompt and statutory resolution of insolvency cases.

The case stemmed from a petition filed under Section 62 of the IBC, challenging the NCLAT's decision that temporarily suspended the approval of ACIL Limited's Resolution Plan. The NCLT had directed the Official Liquidator to reevaluate the corporate debtor's assets, leading to a series of legal contentions.

ACIL had undergone the Corporate Insolvency Resolution Process (CIRP) with a total claim of approximately Rs. 1,830 crores. Despite the Resolution Plan gaining approval from an overwhelming 88.56% of the Committee of Creditors (CoC), the NCLT suspended the approval, prompting the appellant to challenge the decision.

One crucial argument raised was the contention that the NCLT had exceeded its jurisdiction by ordering a revaluation without identifying specific non-conformities under the IBC. Reference was made to the restricted power of judicial review granted to the NCLT in such matters, as highlighted in the Pratap Technocrats Private Limited vs. Monitoring Committee of Reliance Infratel Limited case.

The appellant also contested the appointment of the Official Liquidator for the revaluation process, asserting that it deviated from the established mechanism outlined in the IBC. The argument stressed that the NCLT's remarks on the offered amount being close to fair value lacked a basis, citing legal precedents emphasizing that aspects related to the valuation of the Corporate Debtor are not subject to judicial scrutiny.

Moreover, the appellant highlighted the provisions of the IBC and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, governing asset valuation. The argument posited that the NCLT's intervention lacked justification and was arbitrary, referring to the precedent set by K Sashidhar vs. Indian Overseas Bank, which establishes the supremacy of the CoC's commercial wisdom.

The Solicitor General and Additional Solicitor General aligned with the appellant's stance, emphasizing the paramount role of the CoC and the limited jurisdiction of the NCLT. Legal precedents, such as the decision in Arun Kumar Jagatramka vs. Jindal Steel and Power Limited, were referenced to underscore the necessity for minimal judicial intervention in insolvency proceedings.

The respondents, in agreement with the appellant's position on the NCLT's restricted jurisdiction, cited legal precedents like Vallal RCK vs. Siva Industries and Holdings Limited, highlighting the binding and conclusive nature of the Resolution Plan following approval by the CoC.

In its decision, the Supreme Court addressed issues concerning the jurisdiction and powers of the NCLT to order a revaluation, particularly in the absence of objections raised by any party regarding deficiencies or irregularities in the Resolution Plan. The Court emphasized that the statutory requirements were duly met, including the appointment of approved valuers to provide reports on fair market value and liquidation value.

Furthermore, the Court upheld the appellant's arguments, emphasizing that the commercial wisdom of the CoC is not subject to unnecessary judicial scrutiny. It reiterated that the NCLT has no jurisdiction or power to review the commercial wisdom of the CoC, intervening only if the decision is entirely capricious, arbitrary, irrational, and contrary to the provisions in the IBC or the Regulations.

Drawing from the Pratap Technocrats Case, the Court highlighted that the Indian legislature intentionally refrained from granting independent equity-based jurisdiction to the adjudicating authority, distinguishing it from foreign insolvency regimes. The Court dismissed the idea of contesting a Resolution Plan based on fairness and equity, stressing that such considerations fall outside the purview of the Indian insolvency regime.

The Court further underscored the significance of adhering to the statutory framework of the IBC, emphasizing the need for a swift and time-bound resolution of insolvency. It discouraged unnecessary impediments that could potentially hinder or derail the Corporate Insolvency Resolution Process (CIRP).

In its final verdict, the Supreme Court determined that the NCLT's order lacked comprehensive reasoning and suffered from a jurisdictional error. The Court asserted that courts and tribunals have a responsibility to provide coherent justifications for their decisions. Consequently, the Court allowed the appeal, overturning both the NCLT's order and the NCLAT's judgment. The NCLT was instructed to issue suitable orders concerning the approval application, thereby reaffirming the adherence to statutory procedures and the primacy of the CoC's commercial wisdom in insolvency proceedings.

Case: Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Professional of ACIL Limited and Anr,

Civil Appeal No.1527 of 2022.

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