The Chandigarh Bench of the National Company Law Tribunal rules that an "Other Creditor" lacks the standing to contest the Resolution Plan approved by the Committee of Creditors.
In a significant ruling, the Chandigarh Bench of the National Company Law Tribunal (NCLT) has dismissed an application filed by Mr. Pradeep Kumar Goel, classified as an "Other Creditor" of Chandigarh Overseas Private Limited, challenging the Resolution Plan approved by the Committee of Creditors (CoC). The tribunal ruled that an "Other Creditor" does not possess the legal standing to maintain such a challenge unless their own legally enforceable rights are directly affected by the Resolution Plan.
The application, filed under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), 2016, sought the rejection of the Resolution Plan submitted by the Consortium of M/s Credo Assets Private Limited and Mr. Anil Parkash Aggarwal. The plan had already been approved by the CoC with an overwhelming 99.21% voting share.
Mr. Goel contended that despite being classified as an "Other Creditor," he remained a stakeholder with the right to question the legality of the Resolution Plan. He argued that the plan directly affected his rights and that he had no alternative statutory mechanism to raise objections as he was not represented through an Authorised Representative like other creditors in a class.
However, the tribunal, comprising Member (Judicial) Mr. Khetrabasi Biswal and Member (Technical) Mr. Shishir Agarwal, held that the applicant's classification as an "Other Creditor" does not grant an unrestricted right to challenge the Resolution Plan. The tribunal emphasized that the commercial decisions of the CoC are non-justiciable and cannot be interfered with by individual stakeholders who were not part of the committee.
The tribunal further noted that the application primarily sought to challenge the commercial decisions of the CoC, which fall within the exclusive domain of the committee's commercial wisdom and are beyond the scope of judicial review as per the IBC. The court cited previous judgments, including the Supreme Court's decision in K. Sashidhar v. Indian Overseas Bank, which underscores the non-justiciability of the CoC’s commercial wisdom.
The tribunal also observed that several of the issues raised by the applicant had either been previously adjudicated or were already under consideration in separate proceedings. It concluded that entertaining the application would amount to allowing a collateral challenge to the entire Corporate Insolvency Resolution Process, contrary to the statutory scheme of the IBC.
The ruling reinforces the principle that while stakeholders have rights under the IBC, these rights are not absolute and must align with the statutory provisions and framework of the Code. The decision to dismiss the application underscores the tribunal's commitment to maintaining the integrity and finality of the resolution process as envisaged by the IBC.
Bottom Line :
Insolvency and Bankruptcy Code, 2016 - "Other Creditor" does not have an unrestricted right to challenge a Resolution Plan unless their own legally enforceable rights are directly affected.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 29A, 30(2), 30(6), 60(5); National Company Law Tribunal Rules, 2016 Rule 11.
Pradeep Kumar Goel v. Mohit Chawla, (NCLT)(Chandigarh Bench) : Law Finder Doc id # 2966566
