NCLT cannot sit in appeal over the commercial wisdom of CoC in voting for withdrawal of CIRP, rules SC

Case Details: Vallal Rck v. Siva Industries and Holdings Ltd. - [2022] 139 taxmann.com 68 (SC)

Judiciary and Counsel Details

• • B.R. Gavai & Hima Kohli, JJ.

Facts of the Case

In the instant case, an appeal was filed before the Apex Court challenging the order passed by the NCLAT, the question for consideration in the appeal was whether the NCLT or the NCLAT can sit in an appeal over the commercial wisdom of the Committee of Creditors or not?

Supreme Court Held

The Apex Court held that when 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stake-holders to permit settlement and withdraw CIRP, 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.

“In the present case, the proceedings of the 13th, 14th and 15th meetings of CoC would clearly show that there were wide deliberations amongst the members of the CoC while considering the Settlement Plan as submitted by the appellant. Not only that, the proceedings would also reveal that after suggestions were made by some of the members of the CoC, suitable amendments were carried out in the Settlement Plan by the appellant. One of the members of the CoC having voting share of 23.60%, though initially opposed the Settlement Plant, subsequently decided to support the same. Accordingly, the NCLT itself, vide order dated 29th March 2021, directed the RP to reconvene the CoC meeting. As per the directions of the NCLT, on 1st April 2021, the 17th meeting of the CoC was reconvened, wherein the Settlement Plan was approved by 94.23% votes” the Apex Court observed

It is thus clear that the decision of the CoC was taken after the members of the CoC, had due deliberation to consider the pros and cons of the Settlement Plan and took decision exercising their commercial wisdom. Therefore, neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of CoC.