NCLT Alone Can Decide Whether CoC Has Performed Its Fiduciary Duty While Accepting Resolution Plan: Delhi HC
|The Delhi High Court observed that the resolution plan decided by the Committee of Creditors shall be put up for consideration before NCLT and it is the only forum that could decide whether CoC performed its fiduciary duty as per Insolvency and Bankruptcy Code.
The Court said that the Adjudicating Authority maintains a supervisory role over the entire CIRP proceedings and is empowered under Section 60 of the IBC to take action on any issue relating to the insolvency proceedings.
The Court was hearing a Writ Petition filed seeking directions to develop a framework under the Banking Regulation Act, 1949, ensuring that financial institutions, including Banks and Asset Reconstruction Companies, act fairly, transparently, and reasonably when approving resolution plans to protect public interest and maximise recovery. Additionally, the petitioner sought direction to the Respondents to initiate fresh voting on its Resolution Plan.
The bench of Justice Dharmesh Sharma observed, “the resolution plan decided by the CoC shall be put up for consideration before the Adjudicating Authority, which forum alone shall finally decide whether the CoC has performed its fiduciary duty as per the legislative mandate of the IBC.”
Senior Advocate Rajiv Nayar appeared for the Appellant and Senior Advocate Jayant Mehta appeared for the Respondent.
Brief Facts-
In the present case, the Petitioner claimed that it was the highest bidder in the CIRP in respect of the Corporate Debtor both in terms of monetary value and net present value and yet its bid has not been accepted by the CoC comprising of respondents in the meeting throwing all commercial norms & financial prudence to the wind.
The Court observed, “…it is well ordained in law that the Adjudicating Authority alone has the jurisdiction to regulate the conduct of the CoC and finally adjudicate upon the resolution plan through the powers of judicial review and thereby ensure that the CoC functions as per the role and responsibilities delineated under the IBC.”
Accordingly, the Court said that it Court is not enjoined to exercise its power of judicial review and thereby usurp the powers of the NCLT to inquire into the commercial wisdom of the CoC.
Finally, the Court disposed of the Petition.