NCLAT Rules Committee Of Creditors Not Prohibited From Seeking Multiple Modifications Or Revisions Of Resolution Plans
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench comprising Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member), and Mr. Barun Mitra (Technical Member) has held that the Committee of Creditors (CoC) is empowered to seek multiple revisions or modifications in Resolution Plans submitted by Resolution Applicants. The tribunal clarified that while Regulation 39(1A) of the Corporate Insolvency Resolution Process (CIRP) Regulations, 2016, restricts the Resolution Professional (RP) from permitting modifications more than once, no such restriction is placed on the CoC.
Background of the Case
The matter arose in the Corporate Insolvency Resolution Process (CIRP) of Jabalpur MSW Pvt. Ltd. The CoC had considered ten resolution plans, including the one submitted by the Appellant. However, the plan submitted by the Successful Resolution Applicant (SRA) was ultimately approved with a 100% vote share.
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The Appellant filed two Interlocutory Applications seeking the rejection of the approved resolution plan and an inquiry against the Resolution Professional, arguing that the process was not conducted fairly. These applications were rejected by the Adjudicating Authority. Aggrieved by this, the Appellant filed the present appeals before the NCLAT, contesting the approval of the SRA’s resolution plan and alleging procedural irregularities.
Arguments Advanced
The Appellant contended that they were never formally informed about the rejection of their resolution plan or the approval of the SRA’s plan. It was argued that the CoC had extended the time for consideration of resolution plans but had not conducted a fair challenge process. The Appellant further claimed that the CoC’s repeated modifications to the resolution plan violated the principles of fairness and transparency.
On the other hand, the Respondents maintained that the Appellant was duly informed about the decision on June 15, 2024, and was also made aware of the email correspondence with the SRA. They contended that the CoC acted within its commercial wisdom and was not restricted from seeking modifications to resolution plans multiple times, provided such modifications were made in furtherance of value maximization.
Observations of the NCLAT
The NCLAT observed that the absence of a written communication regarding the rejection of the Appellant’s resolution plan did not affect the validity of the decision made by the CoC. The tribunal emphasized that the CoC, in its commercial wisdom, had duly considered all plans and approved the plan that best served the interests of stakeholders. The tribunal remarked: "The CoC had the authority to evaluate all resolution plans and take a decision in the best interest of stakeholders. The absence of written intimation to a resolution applicant does not vitiate the entire process."
The bench further clarified that while Regulation 39(1A) of the CIRP Regulations limits the RP from allowing modifications to a resolution plan more than once, no such restriction applies to the CoC. The tribunal explicitly stated: "Regulation 39(1A) prohibits the Resolution Professional from permitting more than one modification of a Resolution Plan but does not impose any such restriction on the CoC. The CoC is free to negotiate and seek multiple revisions to ensure value maximization."
Additionally, the tribunal emphasized that the challenge mechanism is merely an enabling tool and its absence does not automatically render the CoC’s approval process invalid. It held that the CoC is not obligated to resort to a challenge process unless deemed necessary for maximizing value.
Verdict
Based on these observations, the NCLAT upheld the decision of the Adjudicating Authority and dismissed the appeals filed by the Appellant. The tribunal found no merit in the argument that the absence of written communication regarding the rejection of the Appellant’s plan invalidated the CoC’s decision. It also reaffirmed that the CoC had the authority to seek multiple revisions to resolution plans as long as it was done in furtherance of value maximization. Thus, the appeals were dismissed, and the approval of the resolution plan submitted by the SRA remained undisturbed.
Appearances
For Appellant : Present but appearance not marked.
For Respondents : Mr. Vinod Chaurasia, Advocate
Cause Title: Sagar Stone Industries V. Sajjan Kumar Dokania (RP)
Case Number: Company Appeal (AT) (Insolvency) Nos. 524 & 525 of 2025
Coram: Justice Ashok Bhushan [Chairperson], Barun Mitra [Member (Technical)], Arun Baroka [Member (Technical)]
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