Case Note & Summary
The present appeals arise from a Corporate Insolvency Resolution Process (CIRP) concerning M/s. Oracle Home Textiles Limited, initiated on 9th August 2018. The appellant, Sanjay Dave, was the Promoter/Director of the Corporate Debtor and submitted a Resolution Plan with the permission of the NCLT. On 10th May 2021, the appellant was informed that his plan was approved by the Committee of Creditors (CoC) with a 99.90% voting majority. However, certain third parties had moved the Adjudicating Authority as prospective resolution applicants seeking permission to file plans, and those applications were pending. On 23rd May 2021, the Resolution Professional issued a Letter of Intent (LoI) to the appellant, which the appellant characterized as conditional because it stated that the approval was subject to the order reserved by the NCLT in a hearing held on 21st January 2021. The RP refused to treat it as conditional. The appellant filed an IA seeking re-issuance of an unconditional LoI. Meanwhile, a second LoI was issued on 23rd June 2021. The NCLT approved the resolution plan under Section 31 of the IBC, but the NCLAT set aside the approval, holding that the LoI was conditional and that the pending applications of third parties should have been considered. The Supreme Court allowed the appeals, holding that the LoI was not conditional as the reference to the pending NCLT order was merely informational and did not impose a condition. The Court further held that the commercial wisdom of the CoC, which approved the plan with an overwhelming majority, is paramount and cannot be interfered with by the NCLAT. The pending applications of third parties did not affect the already approved plan. The Court restored the NCLT's order approving the resolution plan.
Headnote
A) Insolvency and Bankruptcy Code - Resolution Plan Approval - Commercial Wisdom of CoC - Section 30, 31 IBC, 2016 - The Committee of Creditors approved the appellant's resolution plan with 99.90% voting majority. The Court held that the commercial wisdom of the CoC is paramount and cannot be interfered with by the Adjudicating Authority or Appellate Tribunal, especially when the plan has been approved by an overwhelming majority. (Paras 2-10) B) Insolvency and Bankruptcy Code - Letter of Intent - Conditional or Unconditional - Section 30 IBC, 2016 - The Letter of Intent dated 23.05.2021 stated that the approval was subject to the order reserved by NCLT. The Court held that this was merely a reference to pending proceedings and did not make the LoI conditional, as the RP did not treat it as conditional and the appellant had knowledge of the pending matter. (Paras 4-6) C) Insolvency and Bankruptcy Code - Third-Party Resolution Applicants - Pending Applications - Section 30, 31 IBC, 2016 - Third parties had filed applications as prospective resolution applicants seeking permission to submit plans. The Court held that these pending applications did not bar the approval of the appellant's already approved plan, as the CoC had already exercised its commercial wisdom. (Paras 3, 7-9)
Issue of Consideration
Whether the Letter of Intent issued by the Resolution Professional was conditional and whether the Adjudicating Authority could approve the resolution plan despite pending applications from third-party prospective resolution applicants.
Final Decision
The Supreme Court allowed the appeals, set aside the NCLAT judgment, and restored the NCLT order approving the resolution plan submitted by the appellant.
Law Points
- Resolution Plan approval by CoC with 99.90% majority is binding
- Letter of Intent subject to pending NCLT order is not conditional
- Promoter as resolution applicant is permissible under IBC
- Third-party applications for resolution plan do not affect already approved plan
- NCLAT's interference with commercial wisdom of CoC is impermissible
