Summary
Under the law governing the October 2017 votes, approval of a resolution plan required at least 75% of financial creditors’ voting share. NCLT and NCLAT could not override creditors’ commercial rejection by reassessing feasibility or fairness. The later reduction to 66% and requirement to record reasons did not reopen concluded votes. Since neither plan obtained the requisite approval and no alternative was approved within the statutory period, initiation of liquidation was upheld.
Issues
- Whether the 75% voting-share threshold was mandatory and could be calculated only among participating voters.
- Whether NCLT or NCLAT could review creditors’ commercial rejection of a plan.
- Whether the 2017–2018 amendments enabled revival or reconsideration of the rejected plans.
Provisions considered
- Section 30(4), as applicable in October 2017, Insolvency and Bankruptcy Code, 2016The 75% threshold was mandatory and measured financial creditors’ voting share, not merely members present and voting. The later 66% standard applied prospectively to CoC decisions on or after 6 June 2018. (¶¶ 21, 24–30, 50–58)
- Sections 30(2), 31 and 61(3), Insolvency and Bankruptcy Code, 2016Statutory scrutiny did not confer power to overturn commercial wisdom or substitute an assessment of business viability; the tribunals were confined to the prescribed grounds. (¶¶ 21, 33–45)
- Section 33(1), Insolvency and Bankruptcy Code, 2016Failure to obtain requisite approval, without an alternative approved plan within the statutory period, required initiation of liquidation. (¶¶ 25, 30–33, 45, 66)
- Regulations 25 and 39; Regulation 39(3) amendment effective 4 July 2018, IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016Voting procedure did not displace the statutory share threshold; the later reasons requirement did not invalidate or reopen the earlier CoC decisions. (¶¶ 28–29, 59–62)
Held
- The word may concerned the CoC’s choice whether to approve; it did not make the qualifying voting-share threshold directory. Excluding nonparticipating votes to calculate a majority among those voting was impermissible. Both plans failed the applicable 75% requirement. (¶ 24–30)
- Commercial assessment of feasibility, viability and the applicant’s capacity belonged to financial creditors. Neither tribunal had plenary or equitable jurisdiction to reverse that assessment; scrutiny remained confined to statutory grounds. No such ground was attracted on these facts. (¶ 33–45)
- Insertion of feasibility and viability language in Section 30(4) restated matters creditors should consider without creating review of their commercial decision. The Court expressly left open the retrospective or retroactive effect of the three provisos introduced by that amendment. (¶ 46–49)
- Reduction of the voting threshold from 75% to 66% introduced a new qualifying standard, not a merely procedural or clarificatory change. It did not undo October 2017 decisions notwithstanding pendency of appeals. (¶ 50–58)
- The later amendment requiring reasons did not retrospectively vitiate the votes. Even assuming applicability, non-recording would not itself nullify a collective commercial decision; statutory-compliance objections stood on a different footing. (¶ 59–63)
- A revised plan could not be entertained after the applicable 270-day period. Article 142 was not exercised to circumvent the governing provisions. With no duly approved alternative within that period, liquidation followed. (¶ 64–67)
Result
Appeals and companion applications dismissed; NCLAT’s conclusions requiring initiation of liquidation of both corporate debtors upheld. No order as to costs.