In its order dated February 17, 2022 ("Order") in the case of Anand Kariwala v. Partha Pratim Ghosh and Others [I.A. (IB) No. 20/KB/2021 in CP (IB) No. 533/KB/2018], the National Company Law Tribunal, Kolkata ("NCLT") held that a resolution plan cannot be rejected on the basis of a perceived grievance by a member of the suspended board who had not taken any proactive steps to participate in the meetings of the Committee of Creditors (“CoC”).
In the instant case titled Anand Kariwala v. Partha Pratim Ghosh and Others, the issue raised for clarification before the NCLT was:
Whether the applicant has the legal right to protest the Resolution Plan's acceptance?
With regard to this issue, The NCLT noted that the board of directors of the Corporate Debtor is suspended and its authority is transferred to the IRP as provided for in Section 17(1)(b) of the IBC once the Corporate Debtor has been admitted into CIRP. The suspended board of directors' only responsibility is to work with the IRP/Resolution Professional to efficiently resolve the corporate debtor. However, if the Resolution Professional's actions harm the Corporate Debtor or violate any laws or procedural rules, the suspended board of directors is not prohibited from objecting to them.
The NCLT reaffirmed that the adjudicating body should refrain from interfering with the CoC's business judgement, citing a number of decisions by the Hon. Supreme Court. The adjudicating authority is required to operate in accordance with the parameters of IBC Section 30(2). The NCLT approved the Resolution Plan because, in its opinion, it complied with Section 30(2) of the IBC and was therefore presented by the Resolution Applicant.
The NCLT noted that the Applicant had neglected to take into account that the primary objective of the IBC is not only to maximise the assets of the Corporate Debtor but also to give the Corporate Debtor a new lease on life in response to the Applicant's objection that the Resolution Plan does not maximise the assets of the Corporate Debtor, thereby violating the object of the IBC.
The NCLT also noted that the Hon'ble Supreme Court had ruled in Ebix Singapore (P) Ltd. v. Committee of Creditors of Educomp Solutions Limited [2021 SCC OnLine SC 707] that excessive delays harm the corporate debtor's value, create commercial uncertainty, and make the insolvency process ineffective and costly.
In light of the aforementioned considerations, the NCLT rejected the applicant's I.A. and determined that the Resolution Plan had been prepared in accordance with Section 30(2) of the IBC and was intended to revive the Corporate Debtor as a going concern. Therefore, a Resolution Plan cannot be rejected on the basis of a perceived grievance by a member of the Corporate Debtor's suspended board who hasn't actively participated in CoC meetings.
The NCLT categorically stated that,
"Hence, when a Resolution Plan has been submitted to revive the Corporate Debtor as a going concern and is in compliance with the Code, there is no reason to reject the same, and certainly it cannot be done on the basis of a perceived grievance by a member of the Suspended Board who has not taken any positive step to participate in the meetings of the CoC."