J.C. Flowers Asset Reconstruction Pvt. Ltd. Vs Harish Kant Kaushik (RP) and Anr. - The Adjudicating Authority does have jurisdiction to interfere with the decision of the Committee of Creditors taken in commercial wisdom, in event the plan violates any of the statutory provisions and is not in compliance with Section 30(2) the Adjudicating Authority can interfere.

NCLAT (2025.07.29) in J.C. Flowers Asset Reconstruction Pvt. Ltd. Vs Harish Kant Kaushik (RP) and Anr. [(2025) ibclaw.in 565 NCLAT, Company Appeal (AT) (Ins) No. 966 of 2025] held that;

• The Adjudicating Authority does have jurisdiction to interfere with the decision of the Committee of Creditors taken in commercial wisdom, in event the plan violates any of the statutory provisions and is not in compliance with Section 30(2) the Adjudicating Authority can interfere.

• There being very limited scope of interference by the Adjudicating Authority in the commercial wisdom of the CoC in approving the plan, we are of the view that order passed by Adjudicating Authority is unsustainable. In result, the order passed by the Adjudicating Authority is set aside. The plan approval application is revived before the Adjudicating Authority for passing a fresh order in accordance with law at an early date.

Excerpts of the Order;

29.07.2025: Heard counsel for the appellant as well as Ld. Counsel for the Resolution Professional.

# 2. This appeal has been filed against the order passed by the Adjudicating Authority dated 03.06.2025 in IA No. 62 of 2024 by the impugned order Adjudicating Authority has disposed of I.A. 62/2024 and sent the plan back to the Committee of Creditors (“CoC”) on the ground that the plan does not comply the statutory provisions that is Section 30(2) of the IBC. The CoC aggrieved by the order has come up in this appeal.

# 3. Ld. Counsel for the appellant challenging the order impugned submits that there was no non-compliance of Section 30(2). The Adjudicating Authority has observed that non-compliance of Section 30(2)(a) on the grounds that plan provides for payments of CIRP cost out of internal accruals of the Corporate Debtor and no separate amount for the same has been provided in the plan. It is submitted that the Adjudicating Authority has not adverted to the clause both in the original Resolution Plan and in the addendum that if internal accruals are not sufficient SRA shall make the payment towards CIRP Cost without effecting the payouts of the Financial Creditors. It is further submitted that finding that there is a non-compliance of Section 30(2)(a) is not correct. Committee of Creditors after considering all aspects of the matter has approved the plan. It is further submitted by the counsel for the appellant that although in the addendum the plan value was increased from Rs.92.15 Crores to Rs.110.10 Crores but equivalent changes have not been carried out in the fund infusion clause. It is submitted that when the addendum clearly has increased the amount to Rs.110.10 Crores that was commitment of the SRA on the basis of negotiation by the CoC and in the clause of fund infusion mention of figure Rs.92.15 is inconsequent and in any case its plan value has to be treated as Rs.110.10 Crores.

# 4. It is further submitted that another discrepancy pointed out by the Adjudicating Authority is that in Form-H for Operational Creditor amount mention was Rs.12.63 Crores whereas in addendum the amount admitted towards same category is Rs.12.05 Crores. It is submitted that above is only typographical mistake, the SRA accepts the figure of Rs.12.63 Crores and in the admission as well as the payment there is no change.

# 5. Ld. Counsel for the Resolution Professional (“RP”) supported the submissions of the CoC and submits that plan fully complied with Section 30(2) and Adjudicating Authority ought not to have interfered with the plan.

# 6. We have considered the submission of counsel for the parties and perused the records.

# 7. The Resolution Plan has been approved by the CoC who is appellant before us questioning the order impugned. The Adjudicating Authority has proceeded to hold the plan non-compliance of Section 30(2)(a) for the reasons as noticed in the paragraphs- 36 to 41.

• “36. At this juncture, it is pertinent to refer the relevant clauses of Resolution Plan submitted by the Successful Resolution Applicant. In the Resolution Plan the treatment for the CIRP Cost is mentioned as follow:

• “Treatment of CIRP Costs.-

• As per the Code, the CIRP Costs are accorded highest priority amongst the creditors of a Company and the CIRP Costs shall, amongst other things, include the costs, fees and charges incurred by the Resolution Professional, in running the operations of the Company as a going concern. It is evident from the records that during the CIRP period internal accruals and/or other cash flows of the Company will be sufficient to pay the CIRP Costs as approved by the CoC. The CIRP Costs will be paid in full and in priority to and other creditor of the Company upon the Resolution Plan becoming effective, out of the internal accruals of the Company. If the internal accruals of the Company are not sufficient to meet the CIRP Costs, the Resolution Applicant will make the payment towards the balance unpaid portion of the CIRP Costs (“Unpaid CIRP Costs”} out of the Total Resolution Amount on the Closing Date. It is clarified that any interim finance raised by the Resolution Professional from the Financial Creditors which has been utilized towards the payment of CIRP Costs shall be treated as part of the Unpaid CIRP Costs.”

• further as per Form -H and the Resolution Plan, the plan value is INR 110. 10 Crores, for clarity bifurcation is provided hereunder:

Particulars	Amount in Crore
Cash Component
(a) CIRP Cost	–
(b) Secured Financial Creditors	101.58
(c) Unsecured Financial Creditors	8.37
(d) Operational Creditors (Statutory Authorities)	0.02
(e) Other Operational Creditors	0. 13
Total Resolution Plan Value	110.10

• 37. On bare perusal of the aforementioned clauses under the Resolution Plan it transpires that the CIRP Cost will be paid out of the internal accruals of the Corporate Debtor and no separate amount for the same has been provided in the plan value. Further, the instant Resolution Plan does not give any specifics about the internal accruals of the Corporate Debtor from which the payment will be made and whether the same will be sufficient to provide complete payment towards the CIRP Cost.

• 38. Further, the clause under the Resolution Plan qua CIRP Cost mentions that if the internal accruals of the Corporate Debtor are not sufficient to meet the CIRP Cost, the SRA will make the payments towards the balance unpaid portion out of the total Resolution Plan value. Thus, the SRA will not introduce any additional funds in case the internal accruals are insufficient for meeting out the CIRP Cost. Further, the scheme proposed by the SRA for the payment of the CIRP Cost in case of insufficiency of the internal accruals will affect the whole disbursement as proposed in the plan towards other creditors of the Corporate Debtor. Hence, changing the very fundamentals of the Resolution Plan on the basis of which the plan was approved by the COC.

• 39. Henceforth, we are of the opinion that the Resolution Plan submitted by the SRA is in non-compliance of Section 30(2)(a) of the Code, 2016.

• 40. Besides the aforementioned non-compliance of the mandatory provisions of the Code, there are other discrepancies in the Resolution Plan and the addendum to the Resolution Plan. We have noticed that, the Resolution Plan value as provided under the Resolution Plan initially was Rs. 92.15 Cr. and the same was to be introduced through fund infusion. Further, the definition of the fund infusion as provided in the Resolution Plan stated that “INR 92.15 Cr [Indian Rupees Ninety Two Crores Fifteen Lakhs Only] to be infused in the CD through SPV(s) to make specified payments as per the Resolution Plan in the form of equity, debt or any other instrument as decided by the RA in its sole discretion.” There is no other mechanism provided in plan for making the payment to the creditors. Subsequently, the plan value was enhanced from Rs. 92.15 Crores to Rs. 110.10 Crores via the addendum to the Resolution Plan. However, requisite equivalent changes have not been carried out in the “Fund Infusion” clause of the Resolution Plan which still reflects the fund infusion to the extent of Rs. 92.15 Cr. Thus, there remains an ambiguity towards the introduction of the enhanced amount in the Resolution Plan i.e., Rs. 17.95 Cr.”

The ambit and jurisdiction of the Adjudicating Authority while considering the plan approved by Committee of Creditors is too limited. The Adjudicating Authority does have jurisdiction to interfere with the decision of the Committee of Creditors taken in commercial wisdom, in event the plan violates any of the statutory provisions and is not in compliance with Section 30(2) the Adjudicating Authority can interfere. It is submitted by the appellant and Ld. Counsel for the RP that there was no non-compliance of the Section 30(2). We thus need to examine the plan in above reference as to whether there is non-compliance of Section 30(2) or not?

# 8. The first main ground which has been given by the Adjudicating Authority is with regard to non-providing for payment of CIRP cost in priority. The Adjudicating Authority in paragraph-36 has noted the clause in the Resolution Plan with regard to CIRP cost paragraph-36 is as follows:-

• “36. At this juncture, it is pertinent to refer the relevant clauses of Resolution Plan submitted by the Successful Resolution Applicant. In the Resolution Plan the treatment for the CIRP Cost is mentioned as follow:

• “Treatment of CIRP Costs.-

• As per the Code, the CIRP Costs are accorded highest priority amongst the creditors of a Company and the CIRP Costs shall, amongst other things, include the costs, fees and charges incurred by the Resolution Professional, in running the operations of the Company as a going concern. It is evident from the records that during the CIRP period internal accruals and/or other cash flows of the Company will be sufficient to pay the CIRP Costs as approved by the CoC. The CIRP Costs will be paid in full and in priority to and other creditor of the Company upon the Resolution Plan becoming effective, out of the internal accruals of the Company. If the internal accruals of the Company are not sufficient to meet the CIRP Costs, the Resolution Applicant will make the payment towards the balance unpaid portion of the CIRP Costs (“Unpaid CIRP Costs”} out of the Total Resolution Amount on the Closing Date. It is clarified that any interim finance raised by the Resolution Professional from the Financial Creditors which has been utilized towards the payment of CIRP Costs shall be treated as part of the Unpaid CIRP Costs.”

• further as per Form -H and the Resolution Plan, the plan value is INR 110. 10 Crores, for clarity bifurcation is provided hereunder:

• 
  

Particulars	Amount in Crore
Cash Component
(a) CIRP Cost	–
(b) Secured Financial Creditors	101.58
(c) Unsecured Financial Creditors	8.37
(d) Operational Creditors (Statutory Authorities)	0.02
(e) Other Operational Creditors	0. 13
Total Resolution Plan Value	110.10

9. The Ld. Counsel for the appellant has referred to the addendum of the Resolution Plan as well as similar clause in the original plan. It is useful to notice the clause-4 of the addendum which is brought on record as Annexure A-15. Clause-4 of the addendum provides as follows:-

• “4. It is evident from the records that during the CIRP period internal accruals and/ or other cash flows of the Company will be sufficient to pay the CIRP Costs as approved by the CoC. The CIRP Costs will be paid in full and in priority to any other creditor of the Company upon the Resolution Plan becoming effective out of the internal accruals of the Company. If the internal accruals of the Company are not sufficient to meet the CIRP Costs, the Resolution Applicant will make the payment towards the balance unpaid portion of the CIRP Costs (“Unpaid CIRP Costs”) at actuals without any deduction from the Upfront FC Debt Payment amount in terms of this Resolution Plan.”

The above clause clearly provides that in event internal accruals of the Company are not sufficient to meet the CIRP cost resolution applicant will make the payment towards the balance unpaid portion of CIRP Cost at actual without any deduction from the amount payable to Financial Creditor in terms of Resolution Plan. The above clause is clear and categorically makes provision for payment of CIRP Costs. It cannot be held that the above clause in any manner violates Section 30(2) or provisions of Regulation, 2016 which provides requirement of provisions for CIRP cost. We thus are of the view that Adjudicating Authority committed error in holding the plan non-compliance on the above ground.

# 10. Now we come to the next ground given by the Adjudicating Authority is that initially the plan value was Rs. 92.15 Crores which was increased to Rs.110.10 Crores vide addendum but the requisite equivalent changes have not been carried out in the fund infusion clause of the Resolution Plan which still reflects fund infusion to the extent of Rs.92.15 Crores. Paragraph-40 of the judgment is as follows:-

• “40. Besides the aforementioned non-compliance of the mandatory provisions of the Code, there are other discrepancies in the Resolution Plan and the addendum to the Resolution Plan. We have noticed that, the Resolution Plan value as provided under the Resolution Plan initially was Rs. 92.15 Cr. and the same was to be introduced through fund infusion. Further, the definition of the fund infusion as provided in the Resolution Plan stated that “INR 92.15 Cr [Indian Rupees Ninety Two Crores Fifteen Lakhs Only] to be infused in the CD through SPV(s) to make specified payments as per the Resolution Plan in the form of equity, debt or any other instrument as decided by the RA in its sole discretion.” There is no other mechanism provided in plan for making the payment to the creditors. Subsequently, the plan value was enhanced from Rs. 92.15 Crores to Rs. 110.10 Crores via the addendum to the Resolution Plan. However, requisite equivalent changes have not been carried out in the “Fund Infusion” clause of the Resolution Plan which still reflects the fund infusion to the extent of Rs. 92.15 Cr. Thus, there remains an ambiguity towards the introduction of the enhanced amount in the Resolution Plan i.e., Rs. 17.95 Cr.”

There is no dispute from the addendum which have been brought on the record the plan value has been increased to Rs.110.10 Crores after negotiation between CoC and the SRA. There is no dispute that increased plan value is Rs.110.10 Crores. The mere fact that in the Clause of fund infusion by mistake the mention Rs.92.15 Crores is there the said mention is in consequential since it is not the case of anyone that enhanced plan value is not Rs.110.10 Crores. Further, present is a case where no objection have been raised by any stakeholder before the Adjudicating Authority pointing out any non-compliance of provisions on any other reason. We thus, are of the view that said cannot be any ground for not approving the plan.

# 11. The third ground taken by the Adjudicating Authority is that in Form-H amount admitted towards the operational creditor is Rs.12.63 Crores and in the addendum the amount admitted is the shown as Rs.12.05 Crore. Ld. Counsel pointed out that the mention of admitted claim of Rs.12.05 Crore was only a typographical mistake since the payout in the plan is the same i.e; Rs.0.13 Crores which is not changed. Hence, the said in no manner effect the validity of the plan. Ld. Counsel for the appellant has submitted that in the addendum payment as part of the Resolution Plan is clearly mentioned which is as page-507 of the paper book where the payout to the Operational Creditor other than workman employee is same i.e. Rs.0.13 Crores. It is submitted that mention by typographical error with regard to admitted claim as Rs.12.05 Crores instead of Rs.12.63 Crores was also in consequential. No Operational Creditor has also raised any objection before the Adjudicating Authority with regard to any discrepancy in the Resolution Plan, the said mistake was only clerical error not effecting the validity of the plan and nor the above in any manner violates the provisions of Section 30(2) or payout being not in accordance with the requirement of Section 30(2).

# 12. In view of the above, we are of the view that none of the grounds given by the Adjudicating Authority for not approving the plan can be sustained. We found that the Resolution Plan is not in violation of Section 30(2). There being very limited scope of interference by the Adjudicating Authority in the commercial wisdom of the CoC in approving the plan, we are of the view that order passed by Adjudicating Authority is unsustainable. In result, the order passed by the Adjudicating Authority is set aside. The plan approval application is revived before the Adjudicating Authority for passing a fresh order in accordance with law at an early date.

With the above, Appeal is disposed of.

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Imp. Rulings - Resolution Plan, Commercial Wisdom of CoC & Jurisdiction of NCLT.

Imp. Rulings - Resolution Plan, Commercial Wisdom of CoC & Jurisdiction of NCLT.

Index;

1. SCI (2025.05.02) in Kalyani Transco Vs. Bhushan Power and Steel Ltd. and Ors. [(2025) ibclaw.in 173 SC,  Civil Appeal No. 1808 of 2020] [Commercial wisdom of CoC]

2. Supreme Court (2023.05.03) in M. K. Rajgopalan Vs. Dr. Periasamy Palani Gounder [Civil Appeal Nos. 1682-1683 of 2022] [Operation of the other Law of Land & Distribution to related party.]

3. Supreme Court (2022.06.03) in Vallal Rck v. M/s. Siva Industries And Holdings Limited And Ors [Civil Appeal Nos. 1811-1812 of 2022] [Section 12A application]

4. Supreme Court (17.12.2021) in Ngaitlang Dhar Vs. Panna Pragati Infrastructure Pvt. Ltd. & Ors. [Civil Appeal Nos.3665-­3666 of 2020 with Civil Appeal Nos. 3742-­3743 of 2020] [Commercial wisdom of CoC]

5. Supreme Court (2021.08.10) Pratap Technocrats (P) Ltd. & Ors. Vs. Monitoring Committee of Reliance Infratel Limited & Anr.[Civil Appeal No 676 of 2021] [Jurisdiction of NCLT]

6. Supreme Court (2021.03.10) in Kalpraj Dharamshi & Anr Vs. Kotak Investment Advisors Ltd. & Anr. [Civil Appeal Nos. 2943-2944 of 2020] [Jurisdiction of NCLT]

7. Supreme Court (2019.11.15) in CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 OF 2019) [Approval of Resolution Plan]

8. Supreme Court (2019.11.15) in CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 OF 2019) [Differential Payments in Resolution Plan]

9. Supreme Court (2019.02.05) in  K. Sashidhar vs. Indian Overseas Bank & Ors. (Civil Appeal No.10673 of 2018) [Jurisdiction of NCLT]

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1). SCI (2025.05.02) in Kalyani Transco Vs. Bhushan Power and Steel Ltd. and Ors. [(2025) ibclaw.in 173 SC,  Civil Appeal No. 1808 of 2020] held that;

• # 73. The position of law, propounded by this Court is that commercial wisdom of CoC means a considered decision taken by the CoC with reference to the commercial interest, the interest of revival of Corporate Debtor and maximization of value of its assets. This wisdom is not a matter of rhetoric but is denoting a well-considered decision by the CoC as the protagonist of CIRP. The CoC therefore has to take into consideration the mandatory requirements of the Code as well as the Regulations framed by the Board, and to see that the Insolvency Resolution of the Corporate Debtor is completed in a time bound manner and for maximization of value of assets of the Corporate Debtor. The mandatory requirements under the Code are, the compliance of the time limit specified in  Section 12, the compliance of Section 29A to see whether the Resolution Applicant is an eligible applicant to submit the plan, the compliance of sub-section (2) of Section 30 of IBC etc. The mandatory requirements stated in Regulation 38 of the Regulations, 2016 are that the Resolution Plan must demonstrate that it addresses the cause of default, that it is feasible and viable, it has the provisions for its effective implementation and the Resolution Applicant has the capability to implement the Resolution Plan in a time bound manner. If the Resolution Plan does not comply with such mandatory requirements and such plan is approved by the CoC, it could not be said that the CoC had exercised its commercial wisdom while approving such Resolution Plan.

[ Link Synopsis ]

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2). Supreme Court (2023.05.03) in M. K. Rajgopalan Vs. Dr. Periasamy Palani Gounder [Civil Appeal Nos. 1682-1683 of 2022] held that;

• # 44.4. Although, the aspects aforesaid did not form the part of consideration of CoC but, they cannot be ignored merely with reference to the status assigned to the commercial wisdom of CoC. The principles underlying the decisions of this Court respecting the commercial wisdom of CoC cannot be over-expanded to brush aside a significant shortcoming in the decision making of CoC when it had not duly taken note of the operation of any provision of law for the time being in force.

• # 54.2. It has rightly been argued on behalf of the appellants and had rightly been observed by the Adjudicating Authority (vide extraction in paragraph 15.4.1 hereinabove) that there was no provision in the Code which mandates that the related party should be paid in parity with the unrelated party. So long as the provisions of Code and CIRP Regulations are met, any proposition of differential payment to different class of creditors in the resolution plan is, ultimately, subject to the commercial wisdom of CoC and no fault can be attached to the resolution plan merely for not making the provisions for related party.

[ Link Synopsis ]

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3). Supreme Court (2022.06.03) in Vallal Rck v. M/s. Siva Industries And Holdings Limited And Ors [Civil Appeal Nos. 1811-1812 of 2022] held that;

• # 19. In the case of Swiss Ribbons Privated Limited and Another v. Union of India and Others, 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 12A 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 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 12A 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 Others 

Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Others 

Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others

Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another and 

Jaypee Kensington Boulevard Apartments Welfare Association and Others v. NBCC (India) Limited and Others.

# 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. 

# 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 stakeholders 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.

[ Link - Synopsis ]

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4). Supreme Court (2021.12.17) in Ngaitlang Dhar Vs. Panna Pragati Infrastructure Pvt. Ltd. & Ors. [Civil Appeal Nos.3665-­3666 of 2020 with Civil Appeal Nos. 3742-­3743 of 2020].

• # 31. It is trite law that ‘commercial wisdom’ of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the processes within the timelines prescribed by the IBC. It has been consistently held that it is not open to the Adjudicating Authority (the NCLT) or the Appellate Authority (the NCLAT) to take into consideration any other factor other than the one specified in Section 30(2) or Section 61(3) of the IBC. It has been held that the opinion expressed by the CoC after due deliberations in the meetings through voting, as per voting shares, is the collective business decision and that the decision of the CoC’s ‘commercial wisdom’ is non­ justiciable, except on limited grounds as are available for challenge under Section 30(2) or Section 61(3) of the IBC. This position of law has been consistently reiterated in a catena of judgments of this Court, including:

(i) K. Sashidhar v. Indian Overseas Bank and Others

(ii) Committee of Creditors of Essar Steel India Limited Through Authorized Signatory v. Satish Kumar Gupta and Others,

(iii) Maharashtra Seamless Limited v. Padmanabhan Venkatesh and others,

(iv) Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another.

(v) Ghanashyam Mishra and Sons Private Limited Through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited Through the Director & Ors.

# 32. No doubt that, under Section 61(3)(ii) of the IBC, an appeal would be tenable if there has been material irregularity in exercise of the powers by the RP during the corporate insolvency resolution period. However, as discussed hereinabove, we do not find any material irregularity.

# 33. We may gainfully refer to the following observations of this Court in the case of Keshardeo Chamria v. Radha Kissen Chamria and others while considering the scope of the words ‘material irregularity’, as are found in Section 115 of the Code of Civil Procedure, 1908:

“Reference may also be made to the observations of Bose, J. in his order of reference in Narayan Sonaji v. Sheshrao Vithoba [AIR 1948 Nag 258] wherein it was said that the words “illegally” and “material irregularity” do not cover either errors of fact or law. They do not refer to the decision arrived at but to the manner in which it is reached. The errors contemplated relate to material defects of procedure and not to errors of either law or fact after the formalities which the law prescribes have been complied with.”

[ Link Synopsis ]

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5). Supreme Court (2021.08.10) Pratap Technocrats (P) Ltd. & Ors. Vs. Monitoring Committee of Reliance Infratel Limited & Anr.[Civil Appeal No 676 of 2021] held that;

• # 39. These decisions have laid down that the jurisdiction of the adjudicating authority and the appellate authority cannot extend into entering upon merits of a business decision made by a requisite majority of the CoC in its commercial wisdom. Nor is there a residual equity based jurisdiction in the adjudicating authority or the appellate authority to interfere in this decision, so long as it is otherwise in conformity with the provisions of IBC and the Regulations under the enactment.

• # 40. Certain foreign jurisdictions allow resolution/reorganisation plans to be challenged on grounds of fairness and equity. One of the grounds under which a company voluntary arrangement can be challenged under the United Kingdom’s Insolvency Act, 1986 is that it unfairly prejudices the interests of a creditor of the company12. The United States’ Bankruptcy Code provides that if a restructuring plan has to clamp down on a dissenting class of creditors, one of the conditions that it should satisfy is that it does not unfairly discriminate, and is fair and equitable13. However, under the Indian insolvency regime, it appears that a conscious choice has been made by the legislature to not confer any independent equity based jurisdiction on the adjudicating authority other than the statutory requirements laid down under sub-section (2) of Section 30 IBC.

• # 41. An effort was made by Mr Dushyant Dave, learned Senior Counsel, to persuade this Court to read the guarantees of fair procedure and non-arbitrariness as emanating from the decision of this Court in Maneka Gandhi v. Union of India [Maneka Gandhi v. Union of India, (1978) 1 SCC 248] into the provisions of IBC. IBC, in our view, is a complete code in itself. It defines what is fair and equitable treatment by constituting a comprehensive framework within which the actors partake in the insolvency process. The process envisaged by IBC is a direct representation of certain economic goals of the Indian economy. It is enacted after due deliberation in Parliament and accords rights and obligations that are strictly regulated and coordinated by the statute and its regulations. To argue that a residuary jurisdiction must be exercised to alter the delicate economic coordination that is envisaged by the statute would do violence on its purpose and would be an impermissible exercise of the adjudicating authority’s power of judicial review. The UNCITRAL, in its Legislative Guide on Insolvency Law, has succinctly prefaced its recommendations in the following terms [pp. 14-15.] :

“C. Balancing the goals and key objectives of an insolvency law

15. Since an insolvency regime cannot fully protect the interests of all parties, some of the key policy choices to be made when designing an insolvency law relate to defining the broad goals of the law (rescuing businesses in financial difficulty, protecting employment, protecting the interests of creditors, encouraging the development of an entrepreneurial class) and achieving the desired balance between the specific objectives identified above. Insolvency laws achieve that balance by reapportioning the risks of insolvency in a way that suits a State’s economic, social and political goals. As such, an insolvency law can have widespread effects in the broader economy.”

• Hence, once the requirements of IBC have been fulfilled, the adjudicating authority and the appellate authority are duty-bound to abide by the discipline of the statutory provisions. It needs no emphasis that neither the adjudicating authority nor the appellate authority have an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework.’

• (emphasis supplied)

[ Link Synopsis 

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6). Supreme Court (10.03.2021.03.10) in Kalpraj Dharamshi & Anr Vs. Kotak Investment Advisors Ltd. & Anr. [Civil Appeal Nos. 2943-2944 of 2020] held that;

• Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power.

• It has been held, that the legislature has consciously not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the Adjudicating Authority and that the decision of CoC’s `commercial wisdom’ is made non-justiciable.

• It will therefore be clear, that this Court, in unequivocal terms, held, that the appeal is a creature of statute and that the statute has not invested jurisdiction and authority either with NCLT or NCLAT, to review the commercial decision exercised by CoC of approving the resolution plan or rejecting the same.

• It would thus be clear, that the legislative scheme, as interpreted by various decisions of this Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the I&B Code.

[ Link Synopsis ]

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7). SCI (2019.11.15) in CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 OF 2019) held that; 

• “46. This is the reason why Regulation 38(1A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. If nothing is to be paid to operational creditors, the minimum, being liquidation value – which in most cases would amount to nil after secured creditors have been paid – would certainly not balance the interest of all stakeholders or maximise the value of assets of a corporate debtor if it becomes impossible to continue running its business as a going concern. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or subclass of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal.

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8). SCI (2019.11.15) in CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 OF 2019) held that;

• # 40. The importance of the majority decision of the Committee of Creditors is then stated in Section 31(1) of the Code which is set out as follows:

“31. Approval of resolution plan

(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan.”

Thus, what is left to the majority decision of the Committee of Creditors is the “feasibility and viability” of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors. What is important is that it is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place.

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9).  Supreme Court (2019.02.05) in  K. Sashidhar vs. Indian Overseas Bank & Ors. (Civil Appeal No.10673 of 2018) 

• # 29.  . . . . . Concededly, Regulations 25 and 39 must be read in light of Section 30(4) of the I&B Code, concerning the process of approval of a resolution plan. For that, the “percent of voting share of the financial creditors” approving vis­ à ­vis dissenting – is required to be reckoned. It is not on the basis of members present and voting as such. At any rate, the approving votes must fulfill the threshold percent of voting share of the financial creditors. Keeping this clear distinction in mind, it must follow that the resolution plan concerning the respective corporate debtors, namely, KS&PIPL and IIL, is deemed to have been rejected as it had failed to muster the approval of requisite threshold votes, of not less than 75% of voting share of the financial creditors. It is not possible to countenance any other construction or interpretation, which may run contrary to what has been noted herein before.

• # 33. As aforesaid, upon receipt of a “rejected” resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC muchless to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. . . . . . Besides, 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 I&B Code. 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. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the adjudicating authority. That is made non­-justiciable.

• # 35. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan “as approved” by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2),when the resolution plan does not conform to the stated requirements.  . .   . 

• # 37. ………………..The provisions investing jurisdiction and authority in the NCLT or NCLAT as noticed earlier, has not made the commercial decision exercised by the CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order “approving a resolution plan” under Section 31.First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers “by the resolution professional” during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board.  Significantly, the matters or grounds be it under Section 30(2) or under Section 61(3) of the I&B Code are regarding testing the validity of the “approved” resolution plan by the CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by the CoC in exercise of its business decision.

• # 42.  ………… Be that as it may, the scope of enquiry and the grounds on which the decision of “approval” of the resolution plan by the CoC can be interfered with by the adjudicating authority (NCLT), has been set out in Section 31(1) read with Section 30(2) and by the appellate tribunal (NCLAT) under Section 32 read with Section 61(3) of the I&B Code. No corresponding provision has been envisaged by the legislature to empower the resolution professional, the adjudicating authority (NCLT) or for that matter the appellate authority (NCLAT), to reverse the “commercial decision” of the CoC muchless of the dissenting financial creditors for not supporting the proposed resolution plan. Whereas, from the legislative history there is contra indication that the commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority.

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