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Document:
NCLAT upholds the COC's commercial wisdom over the NCLT Order
Facts and Background:
The Appellant filed this appeal in response to an order issued by the National Company Law Appellate Tribunal, Hyderabad bench, on February 24, 2021. The Appellant/Resolution Professional filed the order on February 24, 2021 (CP No. 153/7/HBD/2019) under Section 36 of the Insolvency and Bankruptcy Code 2016.
M/s KALS Group and Mr. Chava Suresh Babu had very similar resolution plans, according to the Tribunal's order dated February 24, 2021. According to the Tribunal, the Corporate Debtor may be able to get a better deal than the Resolution Applicants. The Tribunal also stated that, although the COC approved M/s KALS Group's resolution plan with a 100 percent vote in favor of it, there is very little difference between the two resolution proposals, implying that the resolution fees payable by the Resolution Applicants should be improved.
The legality and validity of the order issued on February 24, 2021, is questioned in this appeal.
Arguments:
The Appellant claimed that the Adjudicating Authority made a mistake because the Resolution proposal failed to meet the COC's 66 percent requirements and that the right to a second vote was refused by an order dated February 17, 2020.
The Appellant claimed that the "Sanctioned scheme" complied with all of the Insolvency and Bankruptcy Code 2016's rules and regulations. The Appellant also claimed that the Adjudicating Authority lacked the authority to intervene with the COC's "Commercial Wisdom." The Appellant went on to say that under Section 30 (2) of the Insolvency and Bankruptcy Code 2016, the Adjudicating Authority's power was restricted.
The Appellant claimed that the "Sanctioned scheme" complied with all of the Insolvency and Bankruptcy Code 2016's rules and regulations. The Appellant also claimed that the Adjudicating Authority lacked the authority to intervene with the COC's "Commercial Wisdom." The Appellant went on to say that under Section 30 (2) of the Insolvency and Bankruptcy Code 2016, the Adjudicating Authority's power was restricted.
The Appellant referred to the order entered by the Appellant on February 17, 2020 (CP (IB) 153/7/HDB/2019), which was filed under Section 60 (5) of the Insolvency and Bankruptcy Code 2016. There will be no conflict with the COC's decision, according to this order.
The Adjudicating Authority had contradicted its previous orders, according to the Respondent side. The Respondent side went on to say that in the order issued on February 24, 2020, Chava Babu received just 55.8% of the vote, while the Appellant received 100%.
Court's Observation:
The Tribunal based its decision on the Supreme Court case Kalpraj Dharamshi & Anr. V. Kotak Investment Advisors Ltd. & Anr., which held that the COC's commercial wisdom must be respected only to the extent permitted by Sections 30 and 31 of the Insolvency and Bankruptcy Code 2016.
Held:
On February 24th, 2021, the order was unsustainable. The Tribunal overturned the contested order. As a result, the appeal was successful, and the Adjudicating Authority approved M/s KALS Group's Resolution Plan, which was unanimously approved by the COC.
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