A bench of B R Gavai and Hima Kohli said NCLT and NCLAT must give due weightage to the commercial wisdom of CoC and should interfere only when the decision taken by the committee was arbitrary. “When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC.
The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the statute or the rules,” the bench said.
Under section 12 A of Insolvency and Bankruptcy Code (IBC), the adjudicating authority may allow the withdrawal of application with the approval of 90% voting share of the committee of creditors. The bench said the provisions under section 12A of the IBC have been made more stringent as compared to section 30(4) of the IBC as under section 30(4), the voting share of CoC for approving the resolution plan is 66%, the requirement under section 12A of the IBC for withdrawal of CIRP is 90%.
“This court has consistently held that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescri- bed by the IBC. It has been held that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts,” it said.
The court passed the order, while setting aside the order of NCLT and NCLAT by which they rejected the settlement plan of an insolvent company despite it was approved by more than 90%of the creditors. “It is thus clear that the decision of the CoC was taken after the members of the CoC, had due deliberation to consider the pros and cons of the settlement plan and took a decision exercising their commercial wisdom.
We are therefore of the considered view that neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of CoC,” it said.