Kiran Raj

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, dismissed an appeal challenging the approval of a resolution plan by the National Company Law Tribunal (NCLT), Ahmedabad Bench-II. The appellate tribunal, comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Member – Technical), and Arun Baroka (Member – Technical), upheld the resolution plan for Shree Rajeshwaranand Paper Mills Limited. The appeal was filed by an operational creditor, contesting the adjudicating authority’s decision to approve the plan despite alleged procedural irregularities and violations of statutory provisions under the Insolvency and Bankruptcy Code, 2016 (IBC).

The NCLAT found no material irregularity in the approval process and ruled that the commercial wisdom of the Committee of Creditors (CoC) prevailed in matters of resolution. It dismissed the contention that the resolution plan should be set aside due to extensions beyond the 330-day statutory limit. The tribunal observed that the plan had been approved with a 97.36% voting share and recorded that "so long as all the mandatory requirements have been duly complied with and taken care of, judicial review cannot be extended to analyse and look into the dissatisfaction evinced by any particular creditor or stakeholder."

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The matter arose from the corporate insolvency resolution process (CIRP) of Shree Rajeshwaranand Paper Mills Limited, initiated on December 7, 2022. An interim resolution professional (IRP) was appointed, and the CoC was constituted with secured and unsecured financial creditors. The first meeting of the CoC was held on January 13, 2023, and Form-G was published on March 10, 2023, inviting expressions of interest (EOIs) from prospective resolution applicants.

The CIRP period initially expired on June 5, 2023, following the statutory 180-day timeline. However, the resolution professional (RP) sought an extension of 90 days, which was granted on June 19, 2023. Subsequent meetings of the CoC resulted in further extensions. The CIRP period was eventually extended beyond 330 days, culminating in the approval of the resolution plan submitted by Mercury Terra Firma on January 29, 2024, with a voting share of 97.36%. The NCLT approved the resolution plan on November 27, 2024, prompting the present appeal.

The appellant, an operational creditor, challenged the approval of the resolution plan on multiple grounds. It contended that the NCLT violated Section 12 of the IBC by allowing repeated extensions beyond the statutory 330-day limit without justification. It further argued that Form-G was republished only in newspapers and not on the website of the Insolvency and Bankruptcy Board of India (IBBI) or the corporate debtor, contravening Regulation 36-A(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Additionally, the appellant claimed that the RP failed to circulate the full valuation report of the corporate debtor to all CoC members, only providing summary figures of the fair value and liquidation value. It asserted that the lack of a detailed valuation report deprived CoC members of critical information necessary to exercise their commercial wisdom. The appellant further contended that the resolution plan was unfair to operational creditors, as the successful resolution applicant had allocated only Rs. 60 lakhs to operational creditors despite their total claims amounting to Rs. 18.34 crore. The appellant argued that this allocation contravened Section 30(2)(b) of the IBC, which mandates that operational creditors receive at least the liquidation value of their claims.

The respondent, representing the resolution professional, refuted these claims. It argued that the appellant failed to establish grounds for setting aside the resolution plan under Section 61(3) of the IBC. The respondent asserted that the CoC had exercised its commercial judgment in approving the plan, and judicial intervention was unwarranted. It also defended the decision to share only the fair and liquidation values, citing the minutes of the 17th CoC meeting, which recorded that "as per Regulation 35(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, members of the CoC were provided with fair and liquidation values after submitting confidentiality undertakings."

Regarding the extension of the CIRP period, the respondent maintained that the Supreme Court’s judgment in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531 allows for CIRP extensions beyond 330 days in exceptional circumstances. It pointed out that the CoC had approved these extensions based on commercial considerations, and the appellant, having participated in CoC meetings, had not raised objections at the time.

The NCLAT examined the submissions and observed that the appellant had participated in the CoC meetings without objecting to the extensions or other procedural issues. It noted that "records show their regular participation in such meetings; they had full knowledge of the CIRP proceedings and were equally aware of the extensions of CIRP time-lines approved by the CoC, but these were not questioned at the appropriate time."

Addressing the appellant’s contention regarding the liquidation value, the NCLAT recorded that the corporate debtor’s fair value was Rs. 45.85 crore, and the liquidation value was Rs. 33.16 crore, with no specified allocation for operational creditors. The tribunal found that "since the liquidation value in the present case is nil, the operational creditors, including the appellant, cannot have any grievance against the amount being paid to them, as the amount provided under the plan is clearly more than the liquidation value."

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The tribunal further held that the adjudicating authority had correctly approved the resolution plan after ensuring compliance with Sections 30 and 31 of the IBC, as well as CIRP Regulations 38 and 39. It cited previous Supreme Court judgments affirming the supremacy of the CoC’s commercial wisdom, including K. Sashidhar v. Indian Overseas Bank (2019) 12 SCC 150, Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531, and Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021) 9 SCC 657. The NCLAT recorded that "so long as the statutory provisions of the IBC and CIRP Regulations are complied with, the commercial wisdom of the requisite majority of the CoC is paramount."

Dismissing the appeal, the NCLAT concluded that the resolution plan was duly approved, and there were no grounds for interference. It recorded that "there is neither any material irregularity nor contravention of any provisions of law by the CoC which has been justifiably substantiated by the appellant." The tribunal found no merit in the appellant’s arguments and upheld the NCLT’s approval of the resolution plan.

Advocates Representing the Parties

For the Appellant:

• Mr. Romy Chako, Senior Advocate

• Mr. Ajay Kumar Tiwari, Advocate

For the Respondent:

• Ms. Honey Satpal, Advocate

• Mr. Yash Dhyani, Advocate

• Ms. Pooja Singh, Advocate

• Mr. Akash Agarwalla, Advocate

Case Title: J.K. Paper Fibre Resources v. Sunit Jagdishchandra Shah, Resolution Professional of Shree Rajeshwaranand Paper Mills Limited
Case Number: Company Appeal (AT) (Insolvency) No. 76 of 2025
Bench: Justice Ashok Bhushan Chairperson), Barun Mitra (Member Technical), Arun Baroka (Member Technical)

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