Mr. Ramesh Kesavan v. CA Jasin Jose, RP SD Pharmacy Pvt. Ltd. COMPANY APPEAL (AT) (CH) (INS.) No. 422 / 2023 (IA No. 1288 & 1289 / 2023)

Issues and court observations

Whether the approval of Resolution Plan providing payout that is discriminatory in nature amongst creditors who fall within the same class and does not provide the Operational Creditors minimum Liquidation Value is within the commercial wisdom of CoC?

The NCLAT relied on the judgement of the Supreme Court in Kalparaj Dharamshi & Anr. vs. Kotak Investment Advisors Ltd & Anr. 2021 that the commercial wisdom of the CoC must be adhered to unless the Adjudicating Authority is not satisfied that the requirement of sec 30(2) of the Code has been complied with and that the judicial review, which is available, can in no circumstances trespass upon a majority decision arrived at by the majority of CoC.

It is submitted that the CoC has approved the Resolution Plan with 100 % majority share. The Operational Creditor who had a claim of more than 10 % of the debt could participate in the CoC and had voluntarily agreed to accept an amount lower than the Liquidation value. The reliance placed on Regulation 6A of CIRP Regulations is without any basis as it came into force only on 16.09.2022

Whether a Promoter / Shareholder has locus to challenge the Resolution Plan after its approval?

The NCLAT relied on Ravi Shankar Vedam vs. Tiffins Barytes Asbestos and Paints Limited and others, 2023 that the promoter / shareholder of the Corporate Debtor Company has no locus to challenge the plan, after its approval and once the affairs of the Corporate Debtor are handed over to the IRP, any action taken by the shareholder, even if a majority shareholder, would not be maintainable.

The NCLAT further relying on Ravi Shankar Vedam (supra) observed that IBC is a distinct shift from “Debtor in Possession” to “Creditor in Control” Insolvency System, where the shareholders have a limited role and are only confined to co-operate with the Resolution Professional u/s 19 of the Code and are entitled to receive the Liquidation Value of its equity, if any, in accordance with sec 53 of the Code, and therefore the shareholders have no locus to challenge the Resolution Plan.

Order

The NCLAT did not find any considerable grounds to entertain the Appeal and hence the Appeal was dismissed without cost.