Application For Approval Of Resolution Plan Can't Be Rejected Solely Based On Withdrawal Of Consent By One Of Coc Members: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) has held that an application seeking approval of a Resolution Plan, approved by an overwhelming majority of 98.15%, cannot be rejected solely due to the withdrawal of consent by one Committee of Creditors (CoC) member without granting the Successful Resolution Applicant (SRA) an opportunity to be heard. Brief Facts: This is an appeal against the impugned order dated 09.01.2024, passed by National Company Law Tribunal (NCLT), Mumbai in IA No. 68/2021 in CP(IB) 1874/MB/2019. The Appellant submitted that by the impugned order dated 09.01.2024, the NCLT rejected the resolution plan submitted by the Appellants solely on the basis of Respondent No. 2, State Bank of India, unilaterally withdrawing its consent to the plan. It was further submitted that the NCLT, without there being an application under Section 33 (2) of the Code had directed the Corporate Debtor to be liquidated. It was also contended that the NCLT did not address the allegations of fraud made by Respondent No. 2 against the Appellants in their objection application. Importantly, the NCLT did not issue a notice to the Appellants, denying them the opportunity to respond to the one-sided and frivolous allegations raised by Respondent No. 2. It was also submitted that these allegations were used to justify the unilateral withdrawal of consent, which was made in connection with an application filed by Respondent No. 3 (the Insolvency Resolution Professional) under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 ('Code') seeking approval of the resolution plan. Instead of addressing these concerns, the NCLT directed the liquidation of the Corporate Debtor. It was further submitted that on 25.07.2014, the Appellant mortgaged the subject Girgaon property through a Mortgage Deed with a consortium of banks, including Respondent No. 2 (State Bank of India), Union Bank of India, and Bank of India, for a loan facility. The loan was granted after thorough due diligence and title verification of the property. It was further argued that since 2014, the Girgaon property has remained mortgaged with the consortium, and regular title searches have been conducted by them. Even at the time of approval of the Resolution Plan, the property continued to be mortgaged with Respondent No. 2 Bank. It was also contended that on 25.10.2023, upon discovering the fraud, the Appellants immediately filed a criminal complaint against the vendors, Mr. Shyam Sundar Vyas, and the alleged proposed vendee, Mr. Gajraj Rathod. Lastly, it was submitted that on 12.12.2023, Appellant No. 3 filed Suit No. 139/2024 against the vendors, challenging the alleged fraudulent sale deed dated 21.10.2020. Respondent No. 2 is also a party to this suit and is fully aware of the Appellants' bona fide actions. Observations: The Tribunal further observed that the decision of Respondent No. 2 defies commercial logic, and likely for this reason, no other financial creditor supported its position regarding the withdrawal of consent. The resolution plan offered a resolution value of Rs. 77.98 crore, whereas the liquidation value of the Corporate Debtor was only Rs. 23.45 crore, as per the valuation report. It further opined that the subject Girgaon property is valued at only Rs. 90 lakh, which accounts for merely 1.5% of the resolution value. The Appellants had already offered to replace this property and provide a fixed deposit receipt of Rs. 1 crore to demonstrate their ability to honor the resolution value. Therefore, proceeding with the resolution plan makes far more commercial sense than liquidating the Corporate Debtor. The Tribunal further said that impugned Order is a non-speaking order and even against principles of natural justice, as the aggrieved party, viz the Resolution Applicants, whose plan was rejected on account of an alleged fraud, was never given an opportunity to explain its position. Further the impugned order does not give any reason for rejecting the Appellants' resolution plan, once duly approved by the Committee of Creditors with an overwhelming majority of 98.15%. Accordingly, the impugned order was set aside and the matter was remanded back to the Adjudicating Authority for fresh consideration. Case Title: M/s Essar (India) Ltd Vs Prabhat Technologies (India) Ltd and Ors. Case Title: COMPANY APPEAL (AT)(INS) NO.183 OF 2024 & IA No.2699 of 2024 Judgment Date: 06/05/2025 Click Here To Read/Download The Order

Application For Approval Of Resolution Plan Can't Be Rejected Solely Based On Withdrawal Of Consent By One Of Coc Members: NCLAT

Mohd Malik Chauhan

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