Introduction

The case of Swwapnil Bhingardevay v. Khandoba Prasanna Sakharkar Khana Limited And Others adjudicated by the National Company Law Appellate Tribunal (NCLAT) on June 2, 2020, serves as a pivotal reference in the interpretation and application of the Insolvency and Bankruptcy Code, 2016 (IBC). This commentary delves into the background, key issues, and implications of the Tribunal's decision, highlighting the paramount importance of procedural adherence and substantive feasibility in Corporate Insolvency Resolution Processes (CIRP).

Summary of the Judgment

The appellant, acting as the promoter and Director of the Corporate Debtor, challenged the approval of the Resolution Plan submitted by M/s. Sai Agro (India) Chemicals (Respondent No. 2 - SRA). The primary contention was that the Resolution Plan lacked feasibility and viability, citing material irregularities in the CIRP. The appellant argued that the Planning process ignored critical aspects, such as the ownership and operational dependence on an ethanol plant owned by a third party, Respondent No. 3. Additionally, procedural lapses like the non-publication of an Expression of Interest (EOI) invitation and unauthorized disclosure of liquidation value were highlighted. The NCLAT, after thorough examination, upheld the appellant's claims, setting aside the impugned order and remitting the matter back to the Adjudicating Authority for reconsideration.

Analysis

Precedents Cited

The Tribunal referred to notable precedents to substantiate its stance. Among them were:

• Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta (2019 SCC Online SC 1478): Emphasized the autonomy and commercial wisdom of the Committee of Creditors (CoC) in approving Resolution Plans.
• K. Sashidhar v. Indian Overseas Bank (2019 SCC Online SC 257): Reinforced the principles guiding CIRP under the IBC, particularly focusing on procedural compliance and fairness.

These precedents were instrumental in guiding the Tribunal's evaluation of the CIRP's procedural integrity and the Resolution Plan's substantive viability.

Legal Reasoning

The Tribunal's legal reasoning was anchored in strict adherence to the IBC's provisions, particularly Sections 30 and 36, and relevant regulations. Key points included:

• Material Irregularities: The Tribunal identified breaches in confidentiality regarding the liquidation value, a sensitive financial metric, which was publicly disclosed contrary to Regulation 35(2) of the IBC.
• Feasibility and Viability: The Resolution Plan's assumption that the ethanol plant machinery, owned by a third party, would remain available was deemed unrealistic, rendering the Plan unfeasible and non-viable.
• Procedural Lapses: The non-publication of a proper EOI invitation, essential for attracting genuine Resolution Applicants, was a significant deviation from IBC mandates.
• Resolution Professional's Role: The Tribunal questioned the Resolution Professional's (RP) diligence in examining the Resolution Plan, citing a lack of substantial evidence supporting compliance with Section 30(2) of the IBC.

These considerations collectively underscored the necessity for meticulous compliance with IBC procedures to ensure fair and effective insolvency resolution.

Impact

The Judgment reinforces the critical need for CIRP participants to adhere strictly to IBC provisions. It sets a precedent emphasizing that:

• Resolution Plans must be thoroughly examined for feasibility and viability, considering all operational dependencies.
• Material irregularities, especially concerning financial disclosures and procedural mandates, can lead to the invalidation of approved Plans.
• Tribunals retain the authority to scrutinize CIRP processes rigorously, ensuring that Resolution Plans are not only compliant on paper but also functionally sustainable.

Future cases will likely reference this Judgment to advocate for rigorous adherence to IBC protocols, thereby enhancing the integrity and effectiveness of insolvency resolutions.

Complex Concepts Simplified

The judgment involves several intricate legal concepts, which can be distilled as follows:

• Resolution Plan: A proposal submitted by a Resolution Applicant outlining how creditors will be repaid and the debtor's business will continue or be liquidated.
• Corporate Insolvency Resolution Process (CIRP): A legal framework under the IBC for restructuring insolvent companies, aiming to revive them and maximize returns to creditors.
• Committee of Creditors (CoC): A group comprising financial creditors that makes pivotal decisions during CIRP, including the approval of Resolution Plans.
• Material Irregularity: Significant deviations from prescribed legal procedures or requirements that can affect the outcome of a judicial decision.
• Liquidation Value: The estimated amount that a debtor could realize if its assets were sold off to pay creditors.

Understanding these terms is crucial for comprehending the Tribunal's decision and its implications on insolvency resolutions.

Conclusion

The Swwapnil Bhingardevay v. Khandoba Prasanna Sakharkar Khana Limited And Others Judgment serves as a seminal reference in the realm of corporate insolvency. It underscores the imperative for CIRP participants to rigorously comply with IBC provisions, ensuring that Resolution Plans are not only procedurally compliant but also substantively viable. By highlighting the consequences of material irregularities and the paramount importance of feasibility assessments, the Tribunal fortifies the IBC's framework, promoting fair and effective insolvency resolutions. This Judgment will undoubtedly guide future practitioners and stakeholders in navigating the complexities of insolvency law with enhanced diligence and integrity.