K. SASHIDHAR versus INDIAN OVERSEAS BANK & ORS.

Citation: [2019] 3 S.C.R. 845 · Decided: 05-02-2019 · Supreme Court of India · Bench: A.M. KHANWILKAR · Disposal: Dismissed

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Judgment (excerpt)

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845
K. SASHIDHAR
v.
INDIAN OVERSEAS BANK & ORS.
(Civil Appeal No.10673 of 2018)
FEBRUARY 5, 2019
[A.M. KHANWILKAR AND AJAY RASTOGI, JJ.]
Insolvency and Bankruptcy Code, 2016:
s. 30(2) and (4), 31, 33 and 61(3) – Corporate Insolvency
Resolution Process (CIRP) – Resolution plan rejected by impugned
order on the ground that the plan did not garner support of not less
than 75% of voting share of financial creditors constituting
Committee of Creditors (COC) – On appeal, held: Upon receipt of
a “rejected” resolution plan, the adjudicating authority (NCLT) is
obligated to initiate liquidation process u/s. 33(1) – It does not have
authority to analyse or evaluate the commercial decision of the CoC
or to enquire into the justness of the rejection of the resolution plan
by the dissenting financial creditors – The legislature, consciously,
has not provided any ground to challenge the “commercial wisdom”
of the individual financial creditors or their collective decision
before the adjudicating authority – The discretion of the adjudicating
authority (NCLT) is circumscribed by Section 31 limited to scrutiny
of the resolution plan “as approved” by the requisite percent of
voting share of financial creditors –  The provisions investing
jurisdiction and authority in the NCLT or NCLAT has not made the
commercial decision exercised by the CoC of not approving the
resolution plan or rejecting the same, justiciable –  The matters or
grounds u/s. 30(2) or u/s. 61(3) are regarding testing the validity of
the “approved” resolution plan by the CoC and not for approving
the resolution plan which has been disapproved or deemed to have
been rejected by the CoC in exercise of its business decision –
Therefore, neither the adjudicating authority (NCLT) nor the
Appellate Authority (NCLAT) has been endowed with the jurisdiction
to reverse the commercial wisdom of the dissenting financial
creditors  – Since none of the grounds available under Section 30(2)
or Section 61(3) of the I&B Code are attracted in the fact situation
of the present case, the Adjudicating Authority (NCLT) as well as
[2019] 3 S.C.R. 845
845
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the Appellate Authority (NCLAT) had no other option but to record
that the proposed resolution plan  stood rejected – Introduction of
new norm and qualifying standard for approval of a resolution plan
in the amendment Act (reducing the threshold requirement of percent
of voting share of financial creditors to 66%) will have prospective
operation – NCLAT could not have examined the case on the basis
of the amended provision – Supreme Court in exercise of powers u/
Article 142 of the Constitution cannot set aside the order passed by
the Tribunal and relegate the parties in both the cases, before the
NCLT for considering the proceedings afresh in light of the amended
provision – NCLAT has justly concluded that the resolution plan
has not been approved by requisite percent of voting share of the
financial creditors and in absence of any alternative resolution plan
presented within the statutory period of 270 days, the inevitable
sequel is to initiate liquidation process u/s. 33 – Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 – Regs. 25 and 39 –
Insolvency and Bankruptcy Code (Amendment) Act, 2017 –
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 –
Constitution of India – Art. 142.
Dismissing the appeals, the Court
HELD: 1. The resolution plan concerning both the corporate
debtors, namely KS&PIPL and IIL was considered by the
concerned Committee of Creditors (CoC) in October 2017, and
was approved by less than 75% of voting share of the financial
creditors. The inevitable consequences thereof are to treat the
proposed resolution plan as disapproved or deemed to be
rejected by the dissenting financial creditors. The expression
‘dissenting financial creditors’, is defined in Regulation 2(1)(f) of
The Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016,
to mean the financial creditors who voted against the resolution
plan approved by the Committee. This definition came to be
amended subsequently w.e.f. 01.01.2018  to mean the financial
creditors who voted against the resolution plan or abstained from
voting for the resolution plan, approved by the Committee.
[Para 24][883-F-H]
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2. In the ca

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