VALLAL RCK versus M/S SIVA INDUSTRIES AND HOLDINGS LIMITED AND OTHERS on 3 June 2022

[2022] 7 S.C.R. 577

VALLAL RCK

v.

M/S SIVA INDUSTRIES AND HOLDINGSLIMITED AND OTHERS

(Civil Appeal Nos. 1811-1812 of 2022)

JUNE 03, 2022

[B. R. GAVAI AND HIMA KOHLI, JJ.]

Insolvency and Bankruptcy Code, 2016: s. 12A – Withdrawalof application admitted u/s. 7 – On facts, application u/s. 12A r/wRegulation 30A for withdrawal of application filed u/s. 7, in viewof settlement plan submitted by the promoter of the Corporate Debtor,being approved by 94.23% of the voting shares of the Committee ofCreditors – NCLT and NCLAT rejected the application – On appeal,held: When 90% and more of the creditors, in their wisdom afterdue deliberations, find that it would be in the interest of all thestake-holders to permit settlement and withdraw CIRP, theadjudicating authority or the appellate authority cannot sit in anappeal over the commercial wisdom of CoC – Interference wouldbe warranted only when the adjudicating authority or the appellateauthority finds the decision of the CoC to be wholly capricious,arbitrary, irrational and de hors the provisions of the statute or theRules – In the instant case, the decision of the COC was taken afterdue deliberations of pros and cons of the settlement plan and tookthe decision exercising their commercial wisdom – Thus, interferenceof the NCLT and the NCLAT not justified – Insolvency andBankruptcy Board of India (Insolvency Resolution Process forCorporate Persons) Regulations, 2016 – Regulation 30A.

Allowing the appeals, the Court

HELD: 1.1 Section 12A of the IBC was brought in thestatute book vide Insolvency and Bankruptcy Code (SecondAmendment) Act, 2018 (Act No. 26 of 2018). The Statement ofObjects and Reasons of the Act No. 26 of 2018 would reveal thatafter the IBC was enacted in 2016, it had emerged that furtherfine tuning of the IBC would be required. The Governmenttherefore constituted an Insolvency Law Committee to reviewthe functioning and implementation of the IBC. The SOR would

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Afurther reveal that the recommendations of the said Committeewere examined by the Government and it was accordingly decidedto amend the IBC. One of the amendments proposed was formaking a provision for withdrawal of application for initiation ofCIRP admitted by Adjudicating Authority. It was recommendedthat such an exit should be allowed provided the CoC approvesBsuch action by 90% voting share. [Para 12][584-C-F]

1.2 Section 12A of the IBC was brought in the statute bookon the basis of the said Committee’s Report. Though by theAmendment Act No. 26 of 2018, the voting share of 75% of CoCfor approval of the Resolution Plan was brought down to 66%,CSection 12A of the IBC which was brought in the statute book bythe same amendment, requires the voting share of 90% of CoCfor approval of withdrawal of CIRP. It could thus clearly be seenthat a more stringent provision has been made insofar aswithdrawal of CIRP is concerned. [Para 16][586-E-F]

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1.3 A perusal of the Regulation 30A would reveal that wherean application for withdrawal under Section 12A of the IBC ismade after the constitution of the Committee, the same has to bemade through the interim resolution professional or the resolutionprofessional, as the case may be. The application has to be madeEin Form-FA. It further provides that when an application is madeafter the issue of invitation for expression of interest underRegulation 36A, the applicant is required to state the reasonsjustifying withdrawal of the same. The RP is required to placesuch an application for consideration before the Committee. Onlyafter such an application is approved by the Committee with 90%Fvoting share, the RP shall submit the same along with the approvalof the Committee to the adjudicating authority. It could thus beseen that a detailed procedure is prescribed under Regulation30A of the 2016 Regulations as well. [Para 18][588-C-D]

1.4 If the CoC arbitrarily rejects a just settlement and/orGwithdrawal claim, the NCLT and thereafter the NCLAT can alwaysset aside such decision under the provisions of the IBC. [Para20][589-C]

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1.5 The commercial wisdom of the CoC has been givenparamount status without any judicial intervention for ensuringcompletion of the stated processes within the timelines prescribedby the IBC. There is an intrinsic assumption, that financialcreditors are fully informed about the viability of the corporatedebtor and feasibility of the proposed resolution plan. They acton the basis of thorough examination of the proposed resolutionplan and assessment made by their team of experts. [Para 21][589-D-E]

1.6 The provisions under Section 12A of the IBC have beenmade more stringent as compared to Section 30(4) of the IBC.Whereas under Section 30(4) of the IBC, the voting share ofCoC for approving the Resolution Plan is 66%, the requirementunder Section 12A of the IBC for withdrawal of CIRP is 90%.[Para 23][590-A]

1.7 When 90% and more of the creditors, in their wisdomafter due deliberations, find that it would be in the interest of allthe stake-holders to permit settlement and withdraw CIRP, theadjudicating authority or the appellate authority cannot sit in anappeal over the commercial wisdom of CoC. The interferencewould be warranted only when the adjudicating authority or theappellate authority finds the decision of the CoC to be whollycapricious, arbitrary, irrational and de hors the provisions of thestatute or the Rules. [Para 24][590-B-C]

1.8 In the instant case, the proceedings of the 13th, 14thand 15th meetings of CoC would clearly show that there werewide deliberations amongst the members of the CoC whileconsidering the Settlement Plan as submitted by the appellant.Not only that, the proceedings would also reveal that aftersuggestions were made by some of the members of the CoC,suitable amendments were carried out in the Settlement Plan bythe appellant. One of the members of the CoC having votingshare of 23.60%, though initially opposed the Settlement Plant,subsequently decided to support the same. Accordingly, the NCLTitself directed the RP to reconvene the CoC meeting. As per thedirections of the NCLT, the 17th meeting of the CoC wasreconvened, wherein the Settlement Plan was approved by94.23% votes. [Para 25][590-D-E]

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A1.9 The decision of the CoC was taken after the membersof the CoC, had due deliberation to consider the pros and cons ofthe Settlement Plan and took a decision exercising theircommercial wisdom. Therefore, neither the NCLT nor theNCLAT were justified in not giving due weightage to thecommercial wisdom of CoC. The impugned judgment deliveredBby the NCLAT and the orders passed by the NCLT are quashedand set aside; and the application filed by the ResolutionProfessional before the NCLT for withdrawal of CIRP is allowed.[Paras 26, 28][590-F; 591-D-E]

Swiss Ribbons Privated Limited and Another v. UnionCof India and Others (2019) 4 SCC 17 : [2019] 3 SCR535; K. Sashidhar v. Indian Overseas Bank and Others(2019) 12 SCC 150 : [2019] 3 SCR 845; Committee ofCreditors of Essar Steel India Limited throughAuthorised Signatory v. Satish Kumar Gupta and OthersD(2020) 8 SCC 531 : [2019] 16 SCR 275; MaharashtraSeamless Limited v. Padmanabhan Venkatesh and Others(2020) 11 SCC 467 : [2020] 2 SCR 1157; KalprajDharamshi and Another v. Kotak Investment AdvisorsLimited and Another (2021) 10 SCC 401; JaypeeKensington Boulevard Apartments Welfare AssociationEand Others v. NBCC (India) Limited and Others (2022)1 SCC 401; Arun Kumar Jagatramka v. Jindal Steeland Power Limited and Another (2021) 7 SCC 474 –referred to.

Case Law Reference

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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1811-1812 of 2022.

From the Judgment and Order dated 28.01.2022 of the NationalCompany Law Appellate Tribunal, Chennai Bench, Chennai in CompanyAppeal (AT) (CH) (Ins) Nos. 211 and 212 of 2021.

Dr. Abhishek Manu Singhvi, P. H. Arvind Pandian, Sr. Advs.,Ankur Kashyap, Ajith S. Ranganathan, Aavishkar Singhvi, Rohit Rajershi,Avinash Krishnan Ravi, Aman Bajaj, Aadarsh Prakash, Navid Ahmed,Advs. for the Appellant.

Anish R. Shah, K. R. Samratt, Abhishek Swaroop, ShashankManish, Palash Agarwal, Advs. for the Respondents.

The Judgment of the Court was delivered by

B. R. GAVAI, J.

1. These appeals challenge the common judgment dated28[th] January 2022 passed by the learned National Company LawAppellate Tribunal, Chennai Bench, Chennai (hereinafter referred to asthe “NCLAT”) in Company Appeal (AT)(CH)(Insolvency) Nos. 211and 212 of 2021, thereby dismissing the appeals filed by the presentappellant, which were in turn filed, challenging the two orders dated12[th] August 2021 passed by the learned National Company Law Tribunal,Division Bench-II, Chennai (hereinafter referred to as the “NCLT”),thereby rejecting the application filed by the Resolution Professional(“RP” for short) under Section 12A of the Insolvency and BankruptcyCode, 2016 (“IBC” for short) read with Regulation 30A of the Insolvencyand Bankruptcy Board of India (Insolvency Resolution Process forCorporate Persons) Regulations, 2016 (hereinafter referred to as the“2016 Regulations”), for withdrawal of the application filed under Section7 of the IBC in view of the Settlement Plan submitted by the appellant.The appellant has also challenged the order passed by the learned NCLATof the even date vide which the appeal filed by the present appellantagainst the order passed by the learned NCLT directing initiation ofliquidation proceedings in respect of M/s Siva Industries and HoldingsLimited-respondent No.1 herein (hereinafter referred to as the “CorporateDebtor”), was dismissed.

2. A short question that falls for consideration in the present appealis as to whether the adjudicating authority (NCLT) or the appellate A

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Aauthority (NCLAT) can sit in an appeal over the commercial wisdom ofthe Committee of Creditors (hereinafter referred to as the “CoC”) ornot.3. The facts in brief giving rise to the present appeals are asunder:

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IDBI Bank Limited had filed an application under Section 7 of theIBC for initiation of Corporate Insolvency Resolution Process (hereinafterreferred to as the “CIRP”) in respect of the Corporate Debtor. Thelearned NCLT, vide its order dated 4[th] July 2019, admitted the saidapplication. As a result of which, CIRP in respect of the CorporateCDebtor was initiated. The RP had presented a Resolution Plan beforethe CoC, submitted by one M/s Royal Partners Investment Fund Limited.However, since the said Plan received only 60.90% votes of the CoCand could not meet the requirement of receiving 66% votes, the saidPlan could not be approved.

D4. The RP, on 8[th] May 2020, filed an application being IA/837/IB/2020 under Section 33(1)(a) of the IBC seeking initiation of liquidationprocess of the Corporate Debtor. The appellant, who is the promoter ofthe Corporate Debtor, filed a settlement application being IA/647/IB/2020 before the NCLT under Section 60(5) of the IBC, showing hiswillingness to offer one-time settlement plan. The appellant soughtEnecessary directions to the CoC to consider the terms of SettlementPlan as proposed by him. From the month of October to December2020, the 13[th], 14[th] and 15[th] meetings of the CoC were held to considerthe Settlement Plan as submitted by the appellant. Deliberations tookplace in the said meetings with regard to the said Settlement Plan andFthe final settlement proposal which was submitted by the appellant cameto be considered by the CoC in its 16[th] meeting held on 18[th] January2021. Initially, the said Settlement Plan received only 70.63% votes.However subsequently, one of the Financial Creditors viz. InternationalAssets Reconstruction Co. Ltd. (hereinafter referred to as “IARCL”)having voting share of 23.60%, decided to approve the said SettlementGPlan and intimated the RP about the same.

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5. Since the said Settlement Plan stood approved by more than90% voting share, the RP filed an application before the learned NCLTseeking necessary directions based on the request of IARCL. Vide itsorder dated 29[th] March 2021, the learned NCLT ordered the RP to H

reconvene a meeting of CoC and place the e-mail of IARCL before it.Accordingly, the 17[th] CoC meeting was convened on 1[st] April 2021,wherein the said Settlement Plan was approved with a voting majorityof 94.23%. Accordingly, the RP filed an application being MA/43/CHE/2021 in IBA/453/2019 before the learned NCLT seeking withdrawal ofCIRP initiated against the Corporate Debtor in view of the approval ofthe said Settlement Plan by CoC.

6. The learned NCLT, vide its order dated 12[th] August 2021, whileholding that the said Settlement Plan was not a settlement simpliciterunder Section 12A of the IBC but a “Business Restructuring Plan”,rejected the application for withdrawal of CIRP and approval of theSettlement Plan. Vide another order of even date, the learned NCLTinitiated liquidation process of the Corporate Debtor in IA/837/IB/2020as well. Being aggrieved thereby, the appellant preferred two appealsbefore the learned NCLAT. Vide the common impugned judgment dated28[th] January 2022, the same came to be dismissed. Hence, the presentappeals.

7. Notice was issued by this Court in the present appeals on 11[th]March 2022. While issuing notice, this Court also granted stay of theimpugned judgment. Insofar as the respondent No.1 is concerned, noone appeared. Shri Abhishek Swaroop, learned counsel appearing onbehalf of the respondent No.2 also does not wish to contest the matter.As such, we could have very well allowed the appeals as beinguncontested. However, since an important question with regard tointerpretation of Section 12A of the IBC arises, we are inclined to considerthe matter for deciding the said issue.

8. We have heard Dr. Abhishek Manu Singhvi, learned SeniorCounsel appearing on behalf of the appellant.

9. Dr. Singhvi submits that it is more than well-settled that theadjudicating authority or the appellate authority cannot sit in an appealover the commercial wisdom of CoC. He submitted that the CoC, havingaccepted the Settlement Plan with the voting majority of 94.23%, thelearned NCLT and the learned NCLAT have grossly erred in rejectingthe Settlement Plan and withdrawal of CIRP.

10. Dr. Singhvi submitted that one of the main objects of the IBCis permitting the Corporate Debtor to continue as an on-going concernand at the same time, paying the dues of the creditors to the maximum.

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AHe submits that the impugned judgment dated 28[th] January 2022 passedby the learned NCLAT and the orders dated 12[th] August 2021 passed bythe learned NCLT are totally contrary to the spirit behind the IBC.

11. For considering these submissions, it will be apposite to referto Section 12A of the IBC, which reads thus:

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“12-A. Withdrawal of application admitted under Section 7,9 or 10.—The Adjudicating Authority may allow the withdrawalof application admitted under Section 7 or Section 9 or Section 10,on an application made by the applicant with the approval of ninetyper cent. voting share of the committee of creditors, in such mannerCas may be specified.”

12. It is relevant to note that Section 12A of the IBC was broughtin the statute book vide Insolvency and Bankruptcy Code (SecondAmendment) Act, 2018 (Act No. 26 of 2018). The Statement of Objectsand Reasons (for short “SOR”) of the Act No. 26 of 2018 would revealDthat after the IBC was enacted in 2016, it had emerged that further finetuning of the IBC would be required. The Government thereforeconstituted an Insolvency Law Committee (hereinafter referred to asthe “said Committee”) to review the functioning and implementation ofthe IBC. The SOR would further reveal that the recommendations ofthe said Committee were examined by the Government and it wasEaccordingly decided to amend the IBC. One of the amendments proposedwas for making a provision for withdrawal of application for initiation ofCIRP admitted by Adjudicating Authority. It was recommended that suchan exit should be allowed provided the CoC approves such action by90% voting share.

F13. It will be relevant to refer to Clause (vii) of the keyrecommendations in the Report of the said Committee dated 26[th] March2018, which reads thus:

“(vii) in order to cater to exceptional circumstances warrantingwithdrawal of an application for CIRP post-admission, it has beenGrecommended to allow such exit provided the CoC approves suchaction by ninety per cent of voting share;”

14. It will also be relevant to refer to paragraph (29) of the Reportof the said Committee, which reads thus:

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“29. WITHDRAWAL OF CIRP PROCEEDINGSPURSUANT TO SETTLEMENT

29.1 Under rule 8 of the CIRP Rules, the NCLT may permitwithdrawal of the application on a request by the applicant beforeits admission. However, there is no provision in the Code or theCIRP Rules in relation to permissibility of withdrawal postadmission of a CIRP application. It was observed by theCommittee that there have been instances where on account ofsettlement between the applicant creditor and the corporate debtor,judicial permission for withdrawal of CIRP was granted. Thispractice was deliberated in light of the objective of the Code asencapsulated in the BLRC Report, that the design of the Code isbased on ensuring that “all key stakeholders will participate tocollectively assess viability. The law must ensure that allcreditors who have the capability and the willingness torestructure their liabilities must be part of the negotiationprocess. The liabilities of all creditors who are not part of thenegotiation process must also be met in any negotiatedsolution.” Thus, it was agreed that once the CIRP is initiated, it isno longer a proceeding only between the applicant creditor andthe corporate debtor but is envisaged to be a proceeding involvingall creditors of the debtor. The intent of the Code is to discourageindividual actions for enforcement and settlement to the exclusionof the general benefit of all creditors.

29.2 On a review of the multiple NCLT and NCLAT judgmentsin this regard, the consistent pattern that emerged was that asettlement may be reached amongst all creditors and the debtor,for the purpose of a withdrawal to be granted, and not only theapplicant creditor and the debtor. On this basis read with the intentof the Code, the Committee unanimously agreed that therelevant rules may be amended to provide for withdrawalpost admission if the CoC approves of such action by avoting share of ninety per cent. It was specifically discussedthat rule 11 of the National Company Law Tribunal Rules, 2016may not be adopted for this aspect of CIRP at this stage (asobserved by the Hon’ble Supreme Court in the case of UttaraFoods and Feeds Private Limited v. Mona Pharmacem) andeven otherwise, as the issue can be specifically addressed byamending rule 8 of the CIRP Rules.”

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A15. It could thus be seen from the Report of the said Committeethat, the said Committee had observed that there have been instanceswhere on account of settlement between the applicant creditor and thecorporate debtor, judicial permission for withdrawal of CIRP was granted.The Report would further reveal that it refers to Banking Law ReformsCommittee Report which emphasizes that the law must ensure that allBcreditors who have the capability and the willingness to restructure theirliabilities must be part of the negotiation process. It also emphasizes thatthe liabilities of all creditors who are not part of the negotiation processmust also be met in any negotiated solution. The said Committee statesthat once the CIRP is initiated, it is no longer a proceeding only betweenCthe applicant creditor and the corporate debtor but is envisaged to be aproceeding involving all creditors of the debtor. The intent of the IBC isto discourage individual actions for enforcement and settlement to theexclusion of the general benefit of all creditors. The Report would furtherreveal that a settlement may be reached amongst all creditors and thedebtor, for the purpose of a withdrawal to be granted, and not only theDapplicant creditor and the debtor. The said Committee thereforerecommended that the relevant rules may be amended to provide forwithdrawal post admission if the CoC approves of such action by avoting share of ninety per cent.

16. It could thus be seen that Section 12A of the IBC was broughtEin the statute book on the basis of the said Committee’s Report. It couldbe noticed that though by the Amendment Act No. 26 of 2018, the votingshare of 75% of CoC for approval of the Resolution Plan was broughtdown to 66%, Section 12A of the IBC which was brought in the statutebook by the same amendment, requires the voting share of 90% of CoCFfor approval of withdrawal of CIRP. It could thus clearly be seen that amore stringent provision has been made insofar as withdrawal of CIRPis concerned.

17. It is further to be noted that after Section 12A of the IBC wasbrought in the statute book, Regulation 30A of the 2016 RegulationsGcame to be inserted vide notification dated 3[rd] July 2018. The samecame to be substituted vide notification dated 25[th] July 2019. Regulation30A of the 2016 Regulations reads thus:

“30-A. Withdrawal of application.—(1) An application forwithdrawal under Section 12-A may be made to the AdjudicatingHAuthority—

(a) before the constitution of the committee, by the applicantthrough the interim resolution professional; (b) after the constitution of the committee, by the applicantthrough the interim resolution professional or the resolutionprofessional, as the case may be:

Provided that where the application is made under clause (b) afterthe issue of invitation for expression of interest under Regulation36-A, the applicant shall state the reasons justifying withdrawalafter issue of such invitation.

(2) The application under sub-regulation (1) shall be made in FormFA of the Schedule accompanied by a bank guarantee—

(a) towards estimated expenses incurred on or by the interimresolution professional for purposes of Regulation 33, till thedate of filing of the application under clause (a) of sub-regulation(1); or (b) towards estimated expenses incurred for purposes ofclauses (aa), (ab), (c) and (d) of Regulation 31, till the date offiling of the application under clause (b) of sub-regulation (1).

(3) Where an application for withdrawal is under clause (a) ofsub-regulation (1), the interim resolution professional shall submitthe application to the Adjudicating Authority on behalf of theapplicant, within three days of its receipt.

(4) Where an application for withdrawal is under clause (b) ofsub-regulation (1), the committee shall consider the application,within seven days of its receipt.

(5) Where the application referred to in sub-regulation (4) isapproved by the committee with ninety percent voting share, theresolution professional shall submit such application along withthe approval of the committee, to the Adjudicating Authority onbehalf of the applicant, within three days of such approval.

(6) The Adjudicating Authority may, by order, approve theapplication submitted under sub-regulation (3) or (5).

(7) Where the application is approved under sub-regulation (6),the applicant shall deposit an amount, towards the actual expensesincurred for the purposes referred to in clause (a) or clause (b) of A

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Asub-regulation (2) till the date of approval by the AdjudicatingAuthority, as determined by the interim resolution professional orresolution professional, as the case may be, within three days ofsuch approval, in the bank account of the corporate debtor, failingwhich the bank guarantee received under sub-regulation (2) shallbe invoked, without prejudice to any other action permissibleBagainst the applicant under the Code.”

18. A perusal of the said Regulation would reveal that where anapplication for withdrawal under Section 12A of the IBC is made afterthe constitution of the Committee, the same has to be made through theinterim resolution professional or the resolution professional, as the caseCmay be. The application has to be made in Form-FA. It further providesthat when an application is made after the issue of invitation forexpression of interest under Regulation 36A, the applicant is required tostate the reasons justifying withdrawal of the same. The RP is requiredto place such an application for consideration before the Committee.DOnly after such an application is approved by the Committee with 90%voting share, the RP shall submit the same along with the approval of theCommittee to the adjudicating authority. It could thus be seen that adetailed procedure is prescribed under Regulation 30A of the 2016Regulations as well.

E19. In the case of Swiss Ribbons Privated Limited and Anotherv. Union of India and Others[1], one of the challenges made was withregard to validity of Section 12A of the IBC. It was argued that thefigure of 90% voting share was arbitrary. It was the contention thatthough the withdrawal was just and proper, the CoC could exercise thepower arbitrarily to reject such a settlement. While rejecting the saidFcontention, this Court observed thus:

“83. The main thrust against the provision of Section 12-A is thefact that ninety per cent of the Committee of Creditors has toallow withdrawal. This high threshold has been explained in theILC Report as all financial creditors have to put their headsGtogether to allow such withdrawal as, ordinarily, an omnibussettlement involving all creditors ought, ideally, to be entered into.This explains why ninety per cent, which is substantially all thefinancial creditors, have to grant their approval to an individual VALLAL RCK v. M/S SIVA INDUSTRIES AND HOLDINGSLIMITED AND OTHERS [B. R. GAVAI, J.]

withdrawal or settlement. In any case, the figure of ninety percent, in the absence of anything further to show that it is arbitrary,must pertain to the domain of legislative policy, which has beenexplained by the Report (supra). Also, it is clear, that under Section60 of the Code, the Committee of Creditors do not have the lastword on the subject. If the Committee of Creditors arbitrarilyrejects a just settlement and/or withdrawal claim, NCLT, andthereafter, NCLAT can always set aside such decision underSection 60 of the Code. For all these reasons, we are of the viewthat Section 12-A also passes constitutional muster.”

20. It could thus be seen that this Court has found that if the CoCarbitrarily rejects a just settlement and/or withdrawal claim, the learnedNCLT and thereafter the learned NCLAT can always set aside suchdecision under the provisions of the IBC.

21. This Court has consistently held that the commercial wisdomof the CoC has been given paramount status without any judicialintervention for ensuring completion of the stated processes within thetimelines prescribed by the IBC. It has been held that there is an intrinsicassumption, that financial creditors are fully informed about the viabilityof the corporate debtor and feasibility of the proposed resolution plan.They act on the basis of thorough examination of the proposed resolutionplan and assessment made by their team of experts. A reference in thisrespect could be made to the judgments of this Court in the cases ofK. Sashidhar v. Indian Overseas Bank and Others[2], Committee ofCreditors of Essar Steel India Limited through Authorised Signatoryv. Satish Kumar Gupta and Others[3], Maharashtra Seamless Limitedv. Padmanabhan Venkatesh and Others[4], Kalpraj Dharamshi andAnother v. Kotak Investment Advisors Limited and Another[5], andJaypee Kensington Boulevard Apartments Welfare Association andOthers v. NBCC (India) Limited and Others[6].

22. No doubt that the aforesaid observations have been made bythis Court while considering the powers of the CoC while granting itsapproval to the Resolution Plan.

2 (2019) 12 SCC 1503 (2020) 8 SCC 5314 (2020) 11 SCC 4675 (2021) 10 SCC 4016 (2022) 1 SCC 401

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A23. As already stated hereinabove, the provisions under Section12A of the IBC have been made more stringent as compared to Section30(4) of the IBC. Whereas under Section 30(4) of the IBC, the votingshare of CoC for approving the Resolution Plan is 66%, the requirementunder Section 12A of the IBC for withdrawal of CIRP is 90%.B24. When 90% and more of the creditors, in their wisdom afterdue deliberations, find that it will be in the interest of all the stake-holdersto permit settlement and withdraw CIRP, in our view, the adjudicatingauthority or the appellate authority cannot sit in an appeal over thecommercial wisdom of CoC. The interference would be warranted onlywhen the adjudicating authority or the appellate authority finds the decisionCof the CoC to be wholly capricious, arbitrary, irrational and de hors theprovisions of the statute or the Rules.

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25. In the present case, the proceedings of the 13[th], 14[th] and 15[th]meetings of CoC would clearly show that there were wide deliberationsamongst the members of the CoC while considering the Settlement PlanDas submitted by the appellant. Not only that, the proceedings would alsoreveal that after suggestions were made by some of the members of theCoC, suitable amendments were carried out in the Settlement Plan bythe appellant. One of the members of the CoC having voting share of23.60%, though initially opposed the Settlement Plant, subsequentlydecided to support the same. Accordingly, the NCLT itself, vide orderEdated 29[th] March 2021, directed the RP to reconvene the CoC meeting.As per the directions of the NCLT, on 1[st] April 2021, the 17[th] meeting ofthe CoC was reconvened, wherein the Settlement Plan was approvedby 94.23% votes.

26. It is thus clear that the decision of the CoC was taken afterFthe members of the CoC, had due deliberation to consider the pros andcons of the Settlement Plan and took a decision exercising theircommercial wisdom. We are therefore of the considered view that neitherthe learned NCLT nor the learned NCLAT were justified in not givingdue weightage to the commercial wisdom of CoC.

G27.This Court has, time and again, emphasized the need for minimaljudicial interference by the NCLAT and NCLT in the framework ofIBC. We may refer to the recent observation of this Court made in thecase of Arun Kumar Jagatramka v. Jindal Steel and Power Limitedand Another[7]:

H7 (2021) 7 SCC 474

VALLAL RCK v. M/S SIVA INDUSTRIES AND HOLDINGSLIMITED AND OTHERS [B. R. GAVAI, J.]

“95. ….However, we do take this opportunity to offer a note ofcaution for NCLT and NCLAT, functioning as the adjudicatoryauthority and appellate authority under the IBC respectively, fromjudicially interfering in the framework envisaged under the IBC.As we have noted earlier in the judgment, the IBC was introducedin order to overhaul the insolvency and bankruptcy regime in India.As such, it is a carefully considered and well thought out piece oflegislation which sought to shed away the practices of the past.The legislature has also been working hard to ensure that theefficacy of this legislation remains robust by constantly amendingit based on its experience. Consequently, the need for judicialintervention or innovation from NCLT and NCLAT should be keptat its bare minimum and should not disturb the foundationalprinciples of the IBC…..”

28. In the result, we pass the following order:

(i) The appeals are allowed;

(ii) The impugned judgment dated 28[th] January 2022 deliveredby the learned NCLAT in Company Appeal (AT) (CH)(Insolvency) Nos. 211 and 212 of 2021 and the orders dated12[th] August 2021 passed by the learned NCLT in MA/43/CHE/2021 in IBA/453/2019 and in IA/837/IB/2020 in IBA/453/2019 are quashed and set aside; and

(iii) The application bearing No. MA/43/CHE/2021 in IBA/453/2019 filed by the Resolution Professional before the learnedNCLT for withdrawal of CIRP is allowed.

29. Pending application(s), if any, shall stand disposed of in theabove terms. No order as to costs.

Nidhi Jain

Appeals allowed.

(Assisted by : Shashwat Jain, LCRA)

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