Page 52 - BANKING FINANCE APRIL 2024

ARTICLE

is not less than what they would have been paid in case
of liquidation under Section 53 of the IBC.
When the Appellant / Resolution Applicant submitted
the revised Resolution Plan, instead of placing it before
the CoC again for voting, the RP presented the same
before the Adjudicating Authority for approval. Notably,
while the matter was pending before the Adjudicating
Authority, the CD submitted another settlement
proposal to TFCIL and requested TFCIL to withdraw its
Application under Section 12-A of the IBC. The
adjudicating authority rejected the objections raised
against the resolution plan and approved the same.

Kalpraj and others were dissatisfied with the NCLAT Upon appeal, Appellate Tribunal reversed the decision
verdict and consequently filed appeals with the Supreme of the Adjudicating Authority, rejected the Resolution
Court. Plan, and remanded the matter back to the CoC.
Aggrieved by this, the appeals were filed before the SC
The Hon'ble three-judge bench of the SC, in the
by the RP and RA.
aforesaid case, confirmed that the CoC's Commercial
decision should not be interfered with except limits set The SC has observed that under the garb of commercial
forth in section 30 and 31 of the IBC. Furthermore, it wisdom of CoC, glaring irregularities in the submission
was ruled that the NCLAT's decision was unlawfull and and approval of a resolution plan and not affording an
exceeded its jurisdiction by interfering with the CoC opportunity to the CoC to deliberate on every aspect of
commercial decision-making. the resolution plan including its financial layout cannot
be ignored. Therefore, while considering and voting with
Vallal RCK v M/s Siva Industries & Anr. (2022) respect to a resolution plan, the CoC must consider
every aspect. If this process is not followed, it cannot
"Importance of the commercial wisdom" of the Committee
be said that the CoC has duly approved the resolution
of Creditors (CoC) was reaffirmed by the Supreme Court in
plan and exercised its commercial wisdom.
this case, where the court was presented with the question
of whether the Adjudicating Authority could challenge the The SC stated that presenting the revised resolution
CoC's decision to end insolvency proceedings based on a plan directly to the NCLT without final approval from
settlement agreement. The Supreme Court ruled that the the CoC cannot be dismissed as a mere technicality. It
Adjudicating Authority, when evaluating an application is necessary for the CoC to consider the financial layout
under Section 12A of the Insolvency and Bankruptcy Code of the plan before reaching a final decision. Therefore,
(IBC), cannot examine the substance of a settlement plan if a modified resolution plan, regardless of how minor
approved by the CoC. In this case, the Supreme Court upheld the modification/revision may be, is not approved by
the CoC decision even though it meant the lenders would the CoC, then presenting it to the Adjudicating Authority
have to take a 'haircut' of 93.50 percent. for approval is a serious irregularity that cannot be
rectified.
M. K. Rajagopalan v. Dr. Periasamy Palani

Gounder & Anr. (2023): Way Forward:
Tourism Finance Corporation of India Limited ("TFCIL") IBC, in India, imposes the duty of resolution largely on the
filed application under IBC against Appu Hotels Ltd (CD). CoC, which is best placed to maintain the CD as a going
The approved plan (by 87.39%) was sent back to concern. An appropriate code of conduct for CoC members
Appellant/Resolution Applicant to ensure that the has the potential to support procedural certainty and
amount to be paid to such dissenting financial creditors fairness to the CIRP.

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