Case Note & Summary
The Supreme Court disposed of a batch of appeals arising from the insolvency resolution of Dewan Housing Finance Corporation Limited (DHFL) under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeals were categorized into three groups: (i) appeals concerning the treatment of recoveries from avoidance applications under the resolution plan approved by the Committee of Creditors (CoC) and the National Company Law Tribunal (NCLT); (ii) appeals by fixed deposit holders challenging the extinguishment of their claims without full payment; and (iii) appeals by erstwhile directors and others regarding participation in the CoC and confidentiality of the resolution plan. The factual background involves DHFL being admitted into Corporate Insolvency Resolution Process (CIRP) on 20.11.2019, with Piramal Capital and Housing Finance Limited emerging as the Successful Resolution Applicant (SRA). The resolution plan was approved by the NCLT on 07.06.2021. The National Company Law Appellate Tribunal (NCLAT) modified the plan by setting aside the provision allowing the SRA to appropriate recoveries from avoidance applications and sent the plan back to the CoC for reconsideration. The NCLAT also held that IBC overrides the RBI Act and NHB Act, and that fixed deposit holders' claims could be extinguished. Additionally, the NCLAT held that the resolution plan loses confidentiality after approval and that certified copies could be obtained by all. The Supreme Court allowed the appeals by Piramal Capital and Union Bank of India, setting aside the NCLAT's modification regarding avoidance applications, holding that the commercial wisdom of the CoC is not subject to judicial review except under Section 30(2) IBC. The Court also held that the NCLAT erred in directing that the plan be sent back to the CoC. On the second category, the Court upheld the NCLAT's finding that IBC overrides the RBI Act and NHB Act, and that fixed deposit holders' claims can be extinguished under the plan. On the third category, the Court set aside the NCLAT's direction that certified copies of the resolution plan could be obtained by all and sundry, holding that confidentiality is maintained even after approval. The appeals by the erstwhile directors were dismissed, affirming that they could not participate in the CoC. The Court also dismissed the appeals by fixed deposit holders challenging the extinguishment of their claims.
Headnote
A) Insolvency Law - Avoidance Applications - Proceeds from avoidance applications belong to resolution applicant - The NCLAT erred in setting aside the provision in the resolution plan allowing the SRA to appropriate recoveries from avoidance applications under Section 66 IBC and sending the plan back to CoC for reconsideration - Held that the commercial wisdom of the CoC in approving such a term is not subject to judicial review except under Section 30(2) IBC (Paras 83-121)
B) Insolvency Law - Judicial Review - Scope of NCLAT's power under Section 61 IBC - The NCLAT cannot tinker with the resolution plan approved by the CoC and NCLT on merits unless it violates Section 30(2) IBC - Held that the NCLAT exceeded its jurisdiction by modifying the plan on avoidance applications (Paras 101-121)
C) Insolvency Law - Overriding Effect - Section 238 IBC overrides RBI Act, 1934 and NHB Act, 1987 - The resolution plan approved under IBC can extinguish claims of fixed deposit holders without full payment - Held that the NCLAT correctly held that IBC prevails over other statutes (Paras 126-132)
D) Insolvency Law - Confidentiality - Resolution plan loses confidentiality after approval by Adjudicating Authority - Certified copies can be obtained under rules - Held that the NCLAT's direction to provide certified copies to all sundry was erroneous (Paras 133-142)
E) Insolvency Law - Participation in CoC - Erstwhile directors superseded by RBI under Section 45-IE(4)(a) of RBI Act cannot participate in CoC - Held that such directors are not entitled to attend CoC meetings (Paras 10, 1707-1712)
F) Insolvency Law - Fixed Deposit Holders - Claims of fixed deposit holders can be extinguished under resolution plan - No right to full payment under IBC - Held that the NCLAT correctly dismissed appeals of FD holders (Paras 7, 2402, 6286, 2396)
Issue of Consideration
Whether the NCLAT could modify the resolution plan approved by the CoC and NCLT regarding avoidance applications; whether the resolution plan violated RBI Act or NHB Act; whether fixed deposit holders' claims must be paid in full; whether the resolution plan remains confidential after approval; whether erstwhile directors can participate in CoC
Final Decision
The Supreme Court allowed the appeals by Piramal Capital and Union Bank of India, setting aside the NCLAT's modification regarding avoidance applications and restoring the resolution plan as approved by the CoC and NCLT. The Court dismissed the appeals by 63 Moons Technologies, fixed deposit holders, and erstwhile directors. The Court also set aside the NCLAT's direction on confidentiality of the resolution plan, holding that confidentiality is maintained even after approval.
Law Points
- Commercial wisdom of CoC
- judicial review limited to Section 30(2) IBC
- avoidance applications proceeds belong to resolution applicant
- confidentiality of resolution plan after approval
- overriding effect of IBC over RBI Act and NHB Act
- fixed deposit holders' claims can be extinguished under resolution plan
Case Details
2025 LawText (SC) (04) 433
Civil Appeal Nos. 1632-1634 of 2022, 1707-1712 of 2022, Diary No. 6037 of 2022, 2989-2991 of 2022, 2402 of 2022, 2413-2415 of 2022, 2567 of 2022, 2987-2988 of 2022, 8123-8125 of 2022, 3694-3695 of 2022, 6286 of 2022, 2396 of 2022
Piramal Capital and Housing Finance Limited (Formerly known as Dewan Housing Finance Corporation Limited), Union Bank of India, 63 Moons Technologies Limited, Vinay Kumar Mittal and Others, Raghu K.S. and Others, Uttar Pradesh State Power Corporation Contributory Provident Fund Trust, Senbagha Vivek A and Another, THDC India Limited Employee Provident Fund, Uttar Pradesh State Power Sector Employees Trust, Kapil Wadhawan, Dheeraj Wadhawan, Piramal Capital and Housing Finance Limited (in C.A. Nos. 2987-2988 of 2022)
63 Moons Technologies Limited & Others, Piramal Capital and Housing Finance Limited (Formerly known as Dewan Housing Finance Corporation Limited) & Others, Union Bank of India & Others, Dewan Housing Finance Corporation Limited & Others, Piramal Capital and Housing Finance Limited & Others, 63 Moons Technologies Limited & Others
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Nature of Litigation
Civil appeals arising from the insolvency resolution of Dewan Housing Finance Corporation Limited (DHFL) under the Insolvency and Bankruptcy Code, 2016, challenging the NCLAT's modification of the resolution plan approved by the CoC and NCLT.
Remedy Sought
Piramal Capital and Union Bank sought to set aside the NCLAT's order modifying the resolution plan regarding avoidance applications; fixed deposit holders sought full repayment of their claims; erstwhile directors sought participation in CoC; Piramal Capital also challenged the NCLAT's direction on confidentiality of the resolution plan.
Filing Reason
The NCLAT modified the resolution plan by setting aside the provision allowing the SRA to appropriate recoveries from avoidance applications and sent the plan back to the CoC for reconsideration, which was challenged by the SRA and Union Bank. Fixed deposit holders challenged the extinguishment of their claims without full payment. Erstwhile directors challenged their exclusion from CoC.
Previous Decisions
The NCLT approved the resolution plan on 07.06.2021. The NCLAT, by judgment dated 27.01.2022, modified the plan on avoidance applications, upheld the overriding effect of IBC over RBI Act and NHB Act, and held that the resolution plan loses confidentiality after approval.
Issues
Whether the NCLAT could modify the resolution plan approved by the CoC and NCLT regarding the treatment of recoveries from avoidance applications?
Whether the resolution plan violated the provisions of the RBI Act or NHB Act?
Whether fixed deposit holders' claims must be paid in full under the resolution plan?
Whether the resolution plan remains confidential after approval by the Adjudicating Authority?
Whether erstwhile directors superseded by RBI can participate in the CoC?
Submissions/Arguments
Piramal Capital and Union Bank argued that the NCLAT exceeded its jurisdiction by modifying the resolution plan on avoidance applications, as the commercial wisdom of the CoC is not subject to judicial review except under Section 30(2) IBC.
63 Moons Technologies argued that the provision allowing the SRA to appropriate recoveries from avoidance applications was illegal and should be set aside.
Fixed deposit holders argued that their claims should be paid in full and that the resolution plan violated the RBI Act and NHB Act.
Erstwhile directors argued that they were entitled to participate in the CoC as they were not suspended but superseded.
Ratio Decidendi
The commercial wisdom of the Committee of Creditors in approving a resolution plan is not subject to judicial review except under Section 30(2) of the IBC. The NCLAT cannot modify a resolution plan on merits unless it violates the mandatory requirements of Section 30(2). The proceeds from avoidance applications can be allocated to the resolution applicant as part of the plan. Section 238 of IBC overrides the RBI Act and NHB Act, allowing extinguishment of claims of fixed deposit holders without full payment. The resolution plan loses confidentiality after approval by the Adjudicating Authority, but certified copies cannot be provided to all and sundry without restriction.
Judgment Excerpts
The NCLAT exceeded its jurisdiction by modifying the resolution plan on avoidance applications and sending it back to the CoC for reconsideration.
The commercial wisdom of the CoC is not subject to judicial review except under Section 30(2) IBC.
Section 238 of IBC overrides the RBI Act and NHB Act, and the resolution plan can extinguish claims of fixed deposit holders without full payment.
The resolution plan loses confidentiality after approval by the Adjudicating Authority, but certified copies cannot be provided to all and sundry.
Procedural History
DHFL was admitted into CIRP on 20.11.2019. Piramal Capital was selected as SRA. The NCLT approved the resolution plan on 07.06.2021. Appeals were filed before the NCLAT, which passed the impugned judgment on 27.01.2022, modifying the plan on avoidance applications and upholding the overriding effect of IBC. Further appeals were filed before the Supreme Court, which heard them after categorizing into three groups and disposed of by this judgment.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: 30(2), 61, 66, 238
- Reserve Bank of India Act, 1934: 45-IE(4)(a)
- National Housing Bank Act, 1987:
