Case Note & Summary
The case involves an appeal by Noida Special Economic Zone Authority (NSEZ Authority), an operational creditor, against the approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC) for Shree Bhoomika International Limited (Corporate Debtor). The Corporate Debtor had been sub-leased a plot by NSEZ Authority since 1995, but defaulted on lease payments from 1999 and ceased operations by 2003-2004. Corporate Insolvency Resolution Process (CIRP) was initiated by NSEZ Authority before the National Company Law Tribunal (NCLT) on 11.07.2019. The Committee of Creditors (CoC) comprised solely of Stressed Assets Stabilization Fund – IDBI Bank Limited as the financial creditor. NSEZ Authority filed a claim of INR 6,29,18,121/-, which was admitted in full by the Resolution Professional (RP). The liquidation value of the Corporate Debtor was fixed at INR 04.25 Crores based on two valuations. A resolution plan submitted by M/s Commodities Trading was approved by the CoC on 06.01.2020 and by NCLT on 05.10.2020, granting only INR 50 Lakhs to NSEZ Authority against its admitted claim. NSEZ Authority challenged the approval before NCLT and then NCLAT, but both were dismissed. The Supreme Court considered three main issues: (1) whether the valuation was proper, (2) whether the resolution plan violated SEZ Act rules, and (3) whether the operational creditor should have been paid in full. The Court held that valuation is a question of fact not interfered with if based on relevant material, that IBC 2016 overrides the SEZ Act 2005 under Section 238, and that the commercial wisdom of the CoC is non-justiciable. The Court also noted that the resolution plan had already been implemented. Consequently, the appeals were dismissed.
Headnote
A) Insolvency and Bankruptcy Code - Resolution Plan - Commercial Wisdom of Committee of Creditors - Sections 30, 31 IBC 2016 - The court held that the commercial wisdom of the Committee of Creditors in approving a resolution plan is non-justiciable except as provided under Section 30(2) IBC 2016. The NCLAT correctly applied the ratio of Maharashtra Seamless Limited, Ghanashyam Mishra, and K. Sashidhar. (Paras 15-16) B) Insolvency and Bankruptcy Code - Overriding Effect - IBC vs. SEZ Act - Section 238 IBC 2016 - The court held that Section 238 IBC 2016 gives overriding effect to IBC over other laws, including the SEZ Act 2005. Therefore, Clause 10.9 of the Resolution Plan granting exemptions from NSEZ payments prevails over SEZ rules. (Para 17) C) Insolvency and Bankruptcy Code - Valuation - Question of Fact - Section 35C IBC 2016 - The court held that valuation is a question of fact and does not call for interference if based on relevant material. The average of two closest estimates by valuers was found just and reasonable. (Para 14) D) Insolvency and Bankruptcy Code - Extinguishment of Dues - Approved Resolution Plan - Sections 30, 31 IBC 2016 - All dues, including statutory dues not part of the approved resolution plan, stand extinguished and no proceedings can be continued for the period prior to the approval date. (Para 15)
Issue of Consideration
Whether the Resolution Plan approved by the Committee of Creditors and NCLT should be set aside on grounds of inadequate payment to the operational creditor, improper valuation, and violation of SEZ rules.
Final Decision
The Supreme Court dismissed the appeals, upholding the NCLAT judgment and the approval of the resolution plan. The Court held that the valuation was based on relevant material, the commercial wisdom of the CoC is non-justiciable, and IBC 2016 overrides the SEZ Act 2005. The resolution plan, already implemented, stands.
Law Points
- Commercial wisdom of Committee of Creditors is non-justiciable
- IBC 2016 overrides other laws including SEZ Act 2005
- valuation is a question of fact not interfered with if based on relevant material
- all dues not part of approved resolution plan stand extinguished
