Commercial Wisdom of CoC – The Supreme Court reaffirmed the paramount status of the Committee of Creditors’ (CoC) commercial wisdom in approving resolution plans under IBC. The National Company Law Appellate Tribunal (NCLAT) erred in interfering with the Resolution Plan (RP) approved by the CoC and the National Company Law Tribunal (NCLT) (Para 34–45, 80–87).

Treatment of Recoveries from Avoidance Applications – Section 66 IBC (Fraudulent/Wrongful Trading): The Court held that recoveries from applications under Section 66 could be appropriated by the Successful Resolution Applicant (SRA), Piramal Capital, as the CoC had consciously assigned a nominal value (INR 1) to such speculative transactions (Para 53–61, 82–87). Sections 43–50 IBC (Avoidance Transactions): Recoveries from these applications must enure to the benefit of creditors (Para 71, 87).

Fixed Deposit (FD) Holders’ Claims – The Court dismissed appeals by FD Holders, ruling that neither the RBI Act nor the NHB Act mandates full repayment of deposits during insolvency. The distribution mechanism under the RP was upheld as it complied with IBC provisions (Para 90–99).

Rights of Ex-Promoters/Directors – The erstwhile directors of DHFL, whose board was superseded by RBI, had no right to participate in CoC meetings or access the RP during the Corporate Insolvency Resolution Process (CIRP). They were entitled only to a certified copy of the approved RP (Para 100–110).

Allowed: Appeals by Piramal Capital and Union Bank (Para 87). Dismissed: Appeals by FD Holders, NCD Holders, and ex-promoters (Para 99, 110). Clarification: NCLT to decide pending avoidance applications under relevant IBC provisions (Para 111).

Major Acts:

1. Insolvency and Bankruptcy Code, 2016 (IBC) – Sections 25(2)(j), 30, 31, 43–51, 60(5), 61, 66, 238.

2. Reserve Bank of India Act, 1934 (RBI Act) – Sections 45-IE, 45(QA).

3. National Housing Bank Act, 1987 (NHB Act) – Section 36(A).

Subjects:

• Commercial Wisdom of CoC – Primacy in decision-making (Para 34–45).

• Avoidance Applications – Distinction between Sections 43–50 and Section 66 IBC (Para 53–61).

• Maximization of Asset Value – CoC’s duty to balance stakeholder interests (Para 66–67).

• FD Holders – No statutory right to full repayment under NHB/RBI Acts (Para 90–99).

• Supersession vs. Suspension – Directors superseded under RBI Act lose rights under IBC (Para 103–110).

Facts:

1. Nature of Litigation – Multiple appeals arose from NCLAT’s order modifying the RP for Dewan Housing Finance Corporation Limited (DHFL), which permitted Piramal Capital to appropriate recoveries from Section 66 applications.

2. Remedy Sought –

   • Piramal Capital and Union Bank challenged NCLAT’s interference in the RP.

   • FD Holders/NCD Holders sought full repayment of deposits, alleging violation of RBI/NHB Acts.

   • Ex-promoters (Kapil Wadhawan and Dheeraj Wadhawan) contested exclusion from CoC meetings.

3. Background – DHFL’s board was superseded by RBI due to financial mismanagement. CIRP culminated in Piramal Capital’s RP approval by CoC (93.65% votes) and NCLT. NCLAT later partially set aside the RP, directing reconsideration of Section 66 recoveries.

Ratio:

• Judicial Restraint: NCLAT overstepped by tinkering with CoC’s commercial decisions (Para 80–87).

• Statutory Compliance: RP adhered to IBC requirements; no violation of RBI/NHB Acts (Para 95–99).

• Director Rights: Superseded directors have no participatory rights in CIRP (Para 103–110).