The Supreme Court has urged the National Company Law Tribunal (NCLT) not to routinely issue directions for a re-valuation of the assets of a corporate debtor, underlining that the tribunal has limited powers to issue such directions only under exceptional circumstances.
A bench of justices Vikram Nath and Ahsanuddin Amanullah added that the NCLT ought to remain cognisant that any order of re-valuation would impede the course of quick resolution and therefore, such orders could be passed only when there are cogent reasons to justify embarking on the extraordinary course.
“It is now well-settled that it is well within the CoC’s (committee of creditor’s) domain as to how to deal with the entire debt of the corporate debtor. In this background, if after repeated negotiations, a resolution plan (RP) is submitted, and has been approved by the CoC with a majority vote, such commercial wisdom was not required to be called into question or casually interfered with,” held the court in its judgment on Tuesday.
Citing the relevant provisions of the court order came while setting aside an order of re-valuation, passed by NCLT in September 2021 and affirmed by NCLAT in January 2022(IBC), the bench highlighted that the adjudicating authority (NCLT) has jurisdiction only under Section 31(2) of the IBC, which gives power not to approve only when the resolution plan does not meet the requirement laid down under Section 31(1) of the Code, for which a reasoned order is required to be passed. The IBC, under sections 30 and 31, requires a resolution professional to ascertain measures of due diligence and care before approving it.
{{/usCountry}}Citing the relevant provisions of the court order came while setting aside an order of re-valuation, passed by NCLT in September 2021 and affirmed by NCLAT in January 2022(IBC), the bench highlighted that the adjudicating authority (NCLT) has jurisdiction only under Section 31(2) of the IBC, which gives power not to approve only when the resolution plan does not meet the requirement laid down under Section 31(1) of the Code, for which a reasoned order is required to be passed. The IBC, under sections 30 and 31, requires a resolution professional to ascertain measures of due diligence and care before approving it.
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“We may state that the NCLT’s jurisdiction and powers as the Adjudicating Authority under the Code, flow only from the Code and the Regulations thereunder...If a matter where the facts are stark comes to light, the same would have to necessarily be dealt with by the NCLT within the four corners 43 of the Code itself, having due regard to the extant circumstances. It is for the NCLT to exercise power strictly within the domain permitted by the Code,” it noted.
The court order came while setting aside an order of re-valuation, passed by NCLT in September 2021 and affirmed by NCLAT in January 2022. The tribunals’ orders kept a resolution plan for ACIL Limited in abeyance while directing the official liquidator to carry out a re-valuation of the assets of the corporate debtor.
In its judgment, the top court noted that there was no justification for the NCLT to order a re-valuation when no objection was raised by any quarter with regard to any irregularity, either by the RP or the or the CoC, in finally approving the resolution plan, which was sent to the NCLT for approval.
“Thus, if the CoC, including the financial creditors to whom money is due from the corporate debtor, had undertaken repeated negotiations with the appellant with regard to the resolution plan and thereafter, with a majority of 88.56% votes, approved the final negotiated resolution plan of the appellant, which the RP, in turn, presented to the NCLT for approval, unless the same was failing the tests of the provisions of the Code, especially Sections 30 & 31, no interference was warranted,” it held.
Taking note of the fact that the resolution plan has been in a stalemate since the NCLT order in 2021, the court directed the tribunal to pass an order on the approval application within three weeks.