Imp.Rulings - Scope of Review & Recall of orders by NCLT.
Index;
NCLT All. (2026.07.27) in State of Chhattisgarh and Anr. vs. Truvisory Insolvency Professionals Pvt. Ltd. (Liquidator) [(2026) ibclaw.in 3006 NCLT, IA No. 742 (AHM) of 2026 in IA No. 1078 (AHM) of 2023 in CP (IB) No. 35 of]
NCLT Indore (2026.06.05) in Teena Saraswat Pandey (RP) Vs. Kishore Associates AOP [(2026) ibclaw.in 1976 NCLT, I.A. 502 of 2025 and I.A. 503 of 2025 in T.P. No. 123 of 2019]
SCI (2025.04.01) In Piramal Capital and Housing Finance Ltd. Vs 63 Moons Technologies Ltd. and Ors. [(2025) ibclaw.in 120 SC, 2025 INSC 421, Civil Appeal Nos. 1632-1634 of 2022 with Diary No. 6037 of 2022, and other appeals]
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1). NCLT All. (2026.07.27) in State of Chhattisgarh and Anr. vs. Truvisory Insolvency Professionals Pvt. Ltd. (Liquidator) [(2026) ibclaw.in 3006 NCLT, IA No. 742 (AHM) of 2026 in IA No. 1078 (AHM) of 2023 in CP (IB) No. 35 of]
# 13. One of the leading decisions explaining the scope of the power of recall is the judgment of the Hon’ble Supreme Court in Budhia Swain & Ors. v. Gopinath Deb & Ors., [(2017) ibclaw.in 282 SC] : (1999) 4 SCC 396. In the said decision, the Hon’ble Supreme Court considered the distinction between the power to recall an order and the power to review a decision and identified the circumstances in which a judicial authority may recall its own order. The relevant observations of the Hon’ble Supreme Court are reproduced hereinbelow:
“6. What is a power to recall? Inherent power to recall its own order vesting in tribunals or courts was noticed in Indian Bank Vs. M/s Satyam Fibres India Pvt. Ltd. 1996 (5) SCC 550. Vide para 23, this Court has held that the courts have inherent power to recall and set aside an order (i) obtained by fraud practised upon the Court, (ii) when the Court is misled by a party, or (iii) when the Court itself commits a mistake which prejudices a party. In A.R. Antulay Vs. R.S. Nayak & Anr. AIR 1988 SC 1531 (vide para 130), this Court has noticed motions to set aside judgments being permitted where (i) a judgment was rendered in ignorance of the fact that a necessary party had not been served at all and was shown as served or in ignorance of the fact that a necessary party had died and the estate was not represented, (ii) a judgment was obtained by fraud, (iii) a party has had no notice and a decree was made against him and such party approaches the Court for setting aside the decision ex debito justitiae on proof of the fact that there was no service.
7. In Corpus Juris Secundum (Vol. XIX) under the Chapter “Judgment- Opening and Vacating” (paras.265 to 284 at pages 487-510) the law on the subject has been stated. The grounds on which the courts may open or vacate their judgments are generally matters which render the judgment void or which are specified in statutes authorising such actions. Invalidity of the judgment of such nature as to render it void is a valid ground for vacating it at least if the invalidity is apparent on the face of the record. Fraud or collusion in obtaining a judgment is a sufficient ground for opening or vacating it. A judgment secured in violation of an agreement not to enter judgment may be vacated on that ground. However, in general, a judgment will not be opened or vacated on grounds which could have been pleaded in the original action. A motion to vacate will not be entered when the proper remedy is by some other proceedings, such as by appeal. The right to vacation of a judgment may be lost by waiver or estoppel. Where a party injured acquiesces in the rendition of the judgment or submits to it, waiver or estoppel results.
8. In our opinion a tribunal or a court may recall an order earlier made by it if (i) the proceedings culminating into an order suffer from the inherent lack of jurisdiction and such lack of jurisdiction is patent, (ii) there exists fraud or collusion in obtaining the judqment, (iii) there has been a mistake of the court prejudicing a party or fiv) a judqment was rendered in ignorance of the fact that a necessary party had not been served at all or had died and the estate was not represented. The power to recall a judgment will not be exercised when the ground for re-opening the proceedings or vacating the judgment was available to be pleaded in the original action but was not done or where a proper remedy in some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by waiver, estoppel or acquiescence.” (Emphasis Supplied)
# 14. The Hon’ble Supreme Court in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni & Ors., [(2024) ibclaw.in 53 SC] : 2024 SCC OnLine SC 122, it was held that: –
“49. In a recent decision (i.e., Union Bank of India vs. Dinakar T. Vekatasubramanian & Ors. [(2023) ibclaw.in 381 NCLAT]), a five-member Full Bench of NCLAT held that though the power to review is not conferred upon the Tribunal but power to recall its judgment is inherent in the Tribunal and is preserved by Rule 11 of the NCLT Rules, 2016. It was held that power of recall of a judgment can be exercised when any procedural error is committed in delivering the earlier judgment; for example, necessary party has not been served or necessary party was not before the Tribunal when judgment was delivered adverse to a party. It was observed that there may be other grounds for recall of a judgment one of them being where fraud is played on the Court in obtaining a judgment. This decision of NCLAT was upheld by a two-Judge Bench of this Court vide order dated 31.07.2023 in Civil Appeal No.4620 of 2023 (Union Bank of India vs. Financial Creditors of M/s Amtek Auto Ltd. & Ors. [(2023) ibclaw.in 85 SC]).
50. In light of the discussion above, what emerges is, a Court or a Tribunal, in absence of any provision to the contrary, has inherent power to recall an order to secure the ends of justice and/or to prevent abuse of the process of the Court. Neither the IBC nor the Regulations framed thereunder, in any way, prohibit, exercise of such inherent power. Rather, Section 60(5)(c) of the IBC, which opens with a non-obstante clause, empowers the NCLT (the Adjudicating Authority) to entertain or dispose of any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under the IBC. Further, Rule 11 of the NCLT Rules, 2016 preserves the inherent power of the Tribunal. Therefore, even in absence of a specific provision empowering the Tribunal to recall its order, the Tribunal has power to recall its order. However, such power is to be exercised sparingly, and not as a tool to re-hear the matter. Ordinarily, an application for recall of an order is maintainable on limited grounds, inter alia, where (a) the order is without jurisdiction; (b) the party aggrieved with the order is not served with notice of the proceedings in which the order under _recall has been passed; and (c) the order has been obtained by misrepresentation of facts or by playing fraud upon the Court/Tribunal resulting in gross failure of justice.” (Emphasis Supplied)
# 15. The aforesaid judgments make it clear that the power of recall is an exceptional jurisdiction, exercisable only where the order suffers from a fundamental jurisdictional or procedural defect, such as patent lack of jurisdiction, fraud, misrepresentation or violation of the principles of natural justice. It cannot be invoked to re-open or reconsider the merits of a decision merely because another view is possible.
# 16. Furthermore, Hon’ble NCLAT in Aircastle (Ireland) Ltd. & Ors. v. Mr. Ashish Chawchharia, The Resolution Professional Of Jet Airways (India) Limited & Ors. [(2024) ibclaw.in 637 NCLAT], Comp. App. (AT) (Ins) No. 1178 of 2024, has held that: –
“58. The power to recall a judgment will not be exercised when the ground for reopening the proceedings or vacating the judqment was available to be pleaded in the original action but was not done or where a proper remedy in some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by waiver, estoppel or acquiescence.
59. Generallų speaking, review can be permitted, if found in the statute by the competent judicial forum. Review can be filed, if there is discovery of New and Important matter or evidence, which, after the exercise of due diligence was not within the knowledge of the person seeking review or could not be produced by him at any time when the decree was passed or order made or some mistake or error apparent on the face of the record or any other sufficient reason.
60. We consciously note that the NCLT & NCLAT have inherent powers to recall order but have no power to review its order.
61. We further note that in the case of Action Barter Pvt. Ltd. Vs Srei Equipment Finance Ltd. [(2020) ibclaw.in 86 NCLAT], in IA Nos. 811/2020, 917/2020, 962/2020 & 1587/2020in Company Appeal (AT) (Ins.) No. 1434 of 2019, this Appellate Tribunal held that Rule 11 of the NCLAT Rules is merely declaratory in the sense that the NCLAT is armed with inherent powers to pass orders or give directions necessary for advancing the cause of justice or prevent abuse of the Appellate Tribunal’s process. This Appellate Tribunal further held that even in absence of Rule 11, the Appellate Tribunal being essentially a judicial forum determining and deciding rights of parties concerned and granting appropriate relief has no limitations in exercise of its powers to meet ends of justice or prevent abuse of its process. Such powers being inherent in the constitution of the Appellate Tribunal, Rule 11 can merely be said to be declaring the same to avoid ambiguity and confusion.
62. However, the Rule cannot be invoked to revisit the findings and it is not open to re-examine the findings. The mistake/error must be apparent on the face of the record and must have occurred due to oversight, inadvertence or human error. It would be open to correct the conclusion if the same is not compatible with the finding recorded on the issues raised.” (Emphasis Supplied)
# 17. The aforesaid decisions further clarify that Rule 11 cannot be invoked as a substitute for review or appeal. Where the grounds urged were available during the original proceedings and the statute provides an efficacious remedy of appeal, the power of recall cannot be exercised to reopen findings already rendered on merits.
[ Link Synopsis ]
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2). NCLT Indore (2026.06.05) in Teena Saraswat Pandey (RP) Vs. Kishore Associates AOP [(2026) ibclaw.in 1976 NCLT, I.A. 502 of 2025 and I.A. 503 of 2025 in T.P. No. 123 of 2019]
Analysis and Observation:
# 42. We have heard the learned counsel appearing on behalf of the Applicant and the respondent and have perused the relevant materials available on record. It is noted that:
XXXXX
9.3. . . . . . . .Talking about the commercial wisdom of the CoC having placed heavy reliance on the doctrine of commercial wisdom this Tribunal does not dispute the centrality of that doctrine to the IBC framework. However, as authoritatively held by the Hon’ble Supreme Court in K. Sashidhar v. Indian Overseas Bank and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, the deference accorded to commercial wisdom is premised on the CoC having exercised its wisdom fairly, in possession of complete information, and in conformity with the objectives of the Code. Where any of these conditions is absent, the decision cannot claim the protection of the commercial wisdom doctrine; accordingly, even where the CoC has approved liquidation, the court (or tribunal) retains jurisdiction to intervene to uphold justice and ensure compliance with the statutory safeguards and the Code’s purpose.
The Tribunal finds great persuasive force in the judgment of the Hon’ble NCLAT dated 06.02.2026 in Company Appeal (AT) (Ins.) Nos. 2330 & 2331 of 2024 (Pragiti Construction v. Committee of Creditors of the Corporate Debtor) The Appellate Tribunal held that the supremacy of commercial wisdom cannot be extended to shield a process that is fundamentally flawed on account of conflict of interest. It was authoritatively held that although the commercial wisdom of the CoC is paramount, such wisdom must be exercised in furtherance of the objectives of the IBC, particularly the maximization of the value of the assets of the Corporate Debtor. The Appellate Tribunal further observed that sectoral incompatibility by itself cannot override the statutory objective of value maximization without a proper assessment of feasibility and viability. It was also held that delay cannot be cited as a ground when the consideration of the plan itself had been directed by the Adjudicating Authority.
Also Referring to the judgement of Pradeep Kumar Goenka RP, (2022) ibclaw.in 141 NCLT
32. We find that the CoC /FC has lost the sight of the prime objectives of the IBC. It does not show the Doctrine of Prudence to advance argument for Liquidation instead of Resolution of the Stressed Assets that it is a Commercial Wisdom/Commercial Decision to reject the amount offered to them in terms of the Resolution Plan is more than the twenty times of the Liquidation Value. Issues like a Suit filed by the CD, a Writ pending before the Hon’ble High Court, FIR filed with an Investigating Agency, report submitted to the RBI for declaring the CD, Suspended Directors as Wilful Defaulters are apparently not related matter at this stage to be considered for rejection of the the Resolution Plan and rescue of the Stressed Assets with its employees from the Liquidation. The objectives of the IBC are very clear and liquidation of a MSME Unit is the last resort.
The Hon’ble Supreme Court of India in Civil Appeal No. 1792 of 2021- K.N Rajakumar vs. V. Nagarajan & Ors with Civil Appeal No. 2901 OF 2021 has held that
“It could thus be seen that one of the principal objects of the IBC is providing for revival of the Corporate Debtor and to make it a going concern. Every attempt has to be first made to revive the concern and make it a going concern, liquidation being the last resort.”
33. In our considered opinion, it is neither Commercial Wisdom nor a Commercial Decision of the CoC /FC to reject a Resolution Plan which offer to them an amount of Twenty times more than the Liquidation Value. In view of this the prayer made by the Applicant for liquidation of the CD needs to be rejected in achieving the Objectives of the IBC and the interest of all Stakeholders including the sole FC and the stalled MSME Unit.
34. Hence this IA No. 10/2021 in CP (IB) No. 37/GB/2021 filed for Liquidation is hereby rejected with the observations mentioned above and the Directions given below for Compliance.
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3). SCI (2025.04.01) In Piramal Capital and Housing Finance Ltd. Vs 63 Moons Technologies Ltd. and Ors. [(2025) ibclaw.in 120 SC, 2025 INSC 421, Civil Appeal Nos. 1632-1634 of 2022 with Diary No. 6037 of 2022, and other appeals] held that;
(V) SCOPE OF JUDICIAL REVIEW: –
# 29. Before adverting to the issues involved in these Appeals, let us examine the scope of judicial review by the NCLT under Section 31 and the scope of judicial review by NCLAT under Section 61 of IBC.
# 30. From the bare perusal of the Statement of Objects and Reasons, it is discernible that one of the prime objects of IBC is to provide for implementation of the Insolvency Resolution Process in a time bound manner for maximization of value of assets in order to balance the interests of the stakeholders. The Legislature in order to fill up critical gaps in the corporate insolvency framework, had made amendments in certain provisions by Act of 26 of 2019, making the RP approved by the Adjudicating Authority binding on the Central Government, any State Government or local authority to whom a debt is owned in respect of payment of dues arising under any law for the time being in force.
# 31. If one glances through the scheme of the IBC, its purpose is also explicitly spelt out from the various provisions of the Act itself. The role and importance of the CoC have been stated in Section 21, the duties of the Resolution Professional in Section 25, the approval of RP by the Adjudicating Authority in Section 31. Certain mandates have been given in Section 31 for the effective implementation of the RP, as approved by the CoC. The said requirements are (i) the RP must be approved by the CoC by a vote of not less than 66% of voting share of the financial creditors, as contemplated in sub-section (4) of Section 30. (ii) the RP submitted by the Resolution Professional must confirm the requirements of sub-section (2) of Section 30. The mandatory contents of the RP have also been stated in Regulation 38 of the Regulations, 2016. Thus, having regard to Section 31, it is clear that the Adjudicating Authority i.e. NCLT, if it is satisfied that the RP as approved by the CoC under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by an order approve the RP, which shall be binding on all the stakeholders. The Adjudicating Authority can reject the RP under sub-section (2) of Section 31, where it is satisfied that the RP does not confirm to the requirements referred to in sub-section (1) thereof.
# 32. At this juncture, it is also necessary to refer to Section 61 which deals with the grounds on which Appeals could be preferred before the Appellate Authority i.e. NCLAT against the order approving the RP under Section 31 by the NCLT. As per sub-section (3) of Section 61, an appeal against an order of approving the RP under Section 31 could be filed on one of the five grounds mentioned therein. One of the grounds on which an Appeal could be filed is, when the approval of RP by the NCLT is in contravention of the provisions of any law for the time being in force. Another ground is, when there has been material irregularity in exercise of the powers by the Resolution Professional during the Corporate Insolvency Resolution period. There are other three grounds with which we are not concerned in the present set of Appeals. Suffice it to say that there are specific grounds mentioned in the sub-section (3) for preferring of an Appeal before the NCLAT under Section 61 of the Code. Thus, the powers to be exercised by the NCLAT under Section 61, have also been specifically confined to the grounds mentioned therein.
# 33. The reasons for circumscribing the powers of NCLT under Section 31 in approving/rejecting the RP approved by the CoC and of the NCLAT under Section 61 in entertaining the Appeals arising out of the orders passed by the NCLT approving the RP on limited grounds are not far to be culled out. The very prominent purpose of the IBC has been spelt out in the long title of the Act itself, which is to promote entrepreneurship, availability of credit and balance the interest of all the stakeholders in the CIRP proceedings in a time bound manner. This Court in catena of decisions has dealt with the dominant purpose and objectives of enacting the IBC, while examining the scope of judicial review by the NCLT and the NCLAT over the commercial wisdom exercised by the CoC.
# 34. In Arcelormittal India Private Limited vs. Satish Kumar Gupta and Others,7 this Court had elaborately adverted to the legislative history and delineated the broad contours of the provisions of the IBC, from which it could be seen that the commercial wisdom of CoC has been given prominent status without any judicial intervention, for ensuring the completion of Resolution Process within the timelines prescribed by the IBC. It is also required to be noted that there is a mandate of completing the Resolution Process within 270 days (outer limit), failing which an initiation of Liquidation process has been made inevitable. This Court in the said judgment after discussing the scheme of the Act, and also the earlier judgments, emphasized on the prescription of time-limit for the completion of Insolvency process. Paragraph 75 of the said judgment being relevant is reproduced hereunder: –
“75. In fact, even the literal language of Section 12(1) makes it clear that the provision must read as being mandatory. The expression “shall be completed” is used. Further, sub-section (3) makes it clear that the duration of 180 days may be extended further “but not exceeding 90 days”, making it clear that a maximum of 270 days is laid down statutorily. Also, the proviso to Section 12 makes it clear that the extension “shall not be granted more than once.”
# 35. In K. Sashidhar vs. Indian Overseas Bank and Others (supra), this Court dealt with the discretion of the Adjudicating Authority (NCLT) and the jurisdiction of the NCLAT as an Appellate Authority and held as under: –
58. Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with Section 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (Nclat) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters “other than” enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers.”
# 36. In Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Others (supra), a Three-Judge Bench discussed in detail the issues pertaining to the role of Resolution Professionals, CoCs, and the jurisdiction of NCLT and NCLAT and observed as under: –
“64. Thus, what is left to the majority decision of the Committee of Creditors is the “feasibility and viability” of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors. What is important is that it is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place.”37. On the issue of jurisdiction of the Adjudicating Authority i.e. NCLT and the Appellate Tribunal i.e. NCLAT, it was held in Essar Steel (supra) as under:-
“Jurisdiction of the Adjudicating Authority and the Appellate Tribunal
65. As has already been seen hereinabove, it is the Adjudicating Authority which first admits an application by a financial or operational creditor, or by the corporate debtor itself under Sections 7, 9 and 10 of the Code. Once this is done, within the parameters fixed by the Code, and as expounded upon by our judgments in Innoventive Industries Ltd. v. Icici Bank [Innoventive Industries Ltd. v. Icici Bank, (2018) 1 SCC 407 : (2018) 1 SCC (Civ) 356] and Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. [Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., (2018) 2 SCC 674 : (2018) 2 SCC (Civ) 288] , the Adjudicating Authority then appoints an interim resolution professional who takes administrative decisions as to the day to day running of the corporate debtor; collation of claims and their admissions; and the calling for resolution plans in the manner stated above. After a resolution plan is approved by the requisite majority of the Committee of Creditors, the aforesaid plan must then pass muster of the Adjudicating Authority under Section 31(1) of the Code. The Adjudicating Authority’s jurisdiction is circumscribed by Section 30(2) of the Code. In this context, the decision of this Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150: (2019) 4 SCC (Civ) 222] is of great relevance.
66. …………….
67. …..Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar.
68. ……….
69. It will be noticed that the non obstante clause of Section 60(5) speaks of any other law for the time being in force, which obviously cannot include the provisions of the Code itself. Secondly, Section 60(5)(c) is in the nature of a residuary jurisdiction vested in NCLT so that NCLT may decide all questions of law or fact arising out of or in relation to insolvency resolution or liquidation under the Code. Such residual jurisdiction does not in any manner impact Section 30(2) of the Code which circumscribes the jurisdiction of the Adjudicating Authority when it comes to the confirmation of a resolution plan, as has been mandated by Section 31(1) of the Code. A harmonious reading, therefore, of Section 31(1) and Section 60(5) of the Code would lead to the result that the residual jurisdiction of NCLT under Section 60(5)(c) cannot, in any manner, whittle down Section 31(1) of the Code, by the investment of some discretionary or equity jurisdiction in the Adjudicating Authority outside Section 30(2) of the Code, when it comes to a resolution plan being adjudicated upon by the Adjudicating Authority. This argument also must needs be rejected.”
# 38. The Court also considered the amendment to Section 30(4) i.e. fourth proviso which was added to sub-section (4) which came into force from 23.11.2017, and observed as under: –
“68. Suffice it to observe that the amended provision merely restates as to what the financial creditors are expected to bear in mind whilst expressing their choice during consideration of the proposal for approval of a resolution plan. No more and no less. Indubitably, the legislature has consciously not provided for a ground to challenge the justness of the “commercial decision” expressed by the financial creditors—be it to approve or reject the resolution plan. The opinion so expressed by voting is non-justiciable. Further, in the present cases, there is nothing to indicate as to which other requirements specified by the Board at the relevant time have not been fulfilled by the dissenting financial creditors. As noted earlier, the Board established under Section 188 of the I&B Code can perform powers and functions specified in Section 196 of the I&B Code. That does not empower the Board to specify requirements for exercising commercial decisions by the financial creditors in the matters of approval of the resolution plan or liquidation process. Viewed thus, the amendment under consideration does not take the matter any further.”
# 39. Again, a Three-Judge bench in Ghanashyam Mishra and Sons Private Limited through the Authorised Signatory vs. Edelweiss Asset Reconstruction Company Limited through the Director and Others,8 examined the legislative intent of making the RP binding on all the Stakeholders after it gets seal of approval from the Adjudicating Authority, and observed as under: –
“64. It could thus be seen, that the legislature has given paramount importance to the commercial wisdom of CoC and the scope of judicial review by adjudicating authority is limited to the extent provided under Section 31 of the I&B Code and of the appellate authority is limited to the extent provided under sub-section (3) of Section 61 of the I&B Code, is no more res integra.
65. Bare reading of Section 31 of the I&B Code would also make it abundantly clear that once the resolution plan is approved by the adjudicating authority, after it is satisfied, that the resolution plan as approved by CoC meets the requirements as referred to in sub-section (2) of Section 30, it shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I&B Code is revival of the corporate debtor and to make it a running concern.”
# 40. Recently, this Court in Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited and Another,9 reiterating that the Adjudicating Authority is prohibited from second-guessing the commercial wisdom of the parties or directing unilateral modification to the RPs, as held in Essar Steel (supra) and K. Sashidhar (supra), further held as under-
“157. These are binding precedents. Absent a clear legislative provision, this Court will not, by a process of interpretation, confer on the adjudicating authority a power to direct an unwilling CoC to renegotiate a submitted resolution plan or agree to its withdrawal, at the behest of the resolution applicant. The adjudicating authority can only direct the CoC to re-consider certain elements of the resolution plan to ensure compliance under Section 30(2) IBC, before exercising its powers of approval or rejection, as the case may be, under Section 31 [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531, para 73 : (2021) 2 SCC (Civ) 443] . In State of A.P. v. P. Laxmi Devi [State of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720], while determining the constitutionality of a statute, this Court observed that it should be wary of transgressing into the domain of the legislature, especially in matters relating to economic and regulatory legislation. This Court observed : (P. Laxmi Devi case [State of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720]
“80. … As regards economic and other regulatory legislation judicial restraint must be observed by the court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialisation when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions.”
158. Judicial restraint must not only be exercised while adjudicating upon the constitutionality of the statute relating to economic policy but also in matters of interpretation of economic statutes, where the interpretative manoeuvres of the Court have an effect of transgressing into the law-making power of the legislature and disturbing the delicate balance of separation of powers between the legislature and the judiciary. Judicial restraint must be exercised in such cases as a matter of prudence, since the court neither has the necessary expertise nor the power to hold consultations with stakeholders or experts to decide the direction of economic policy. A court may be inept in laying down a detailed procedure for exercise of the power of withdrawal or modification by a successful resolution applicant without impacting the other procedural steps and the timelines under IBC which are sacrosanct. Thus, judicial restraint must be exercised while intervening in a law governing substantive outcomes through procedure, such as IBC. In this case, if resolution applicants are permitted to seek modifications after subsequent negotiations or a withdrawal after a submission of a resolution plan to the adjudicating authority as a matter of law, it would dictate the commercial wisdom and bargaining strategies of all prospective resolution applicants who are seeking to participate in the process and the successful resolution applicants who may wish to negotiate a better deal, owing to myriad factors that are peculiar to their own case. The broader legitimacy of this course of action can be decided by the legislature alone, since any other course of action would result in a flurry of litigation which would cause the delay that IBC seeks to disavow.”
# 41. What is “commercial wisdom” of CoC has been very aptly put by this Court in a latest decision in M.K. Rajagopalan vs. Dr. Periasamy Palani Gounder and Another (supra), which is worth reproducing: –
“160. As noticed hereinbefore, commercial wisdom of CoC is given such a status of primacy that the same is considered rather a matter non-justiciable in any adjudicatory process, be it by the adjudicating authority or even by this Court. However, the commercial wisdom of CoC means a considered decision taken by CoC with reference to the commercial interests and the interest of revival of the corporate debtor and maximisation of value of its assets. This wisdom is not a matter of rhetoric but is denoting a well-considered decision by the protagonist of CIRP i.e. CoC. As observed by this Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] , the financial creditors forming CoC “act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision.” This Court also observed in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] that “[t]here is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan.”
161. These observations read with the observations in Essar Steel [Essar Steel India Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] with reference to the reasons stated in the Report of Bankruptcy Law Reforms Committee of November 2015, make it clear that commercial wisdom of CoC is assigned primacy in CIRP for it represents collective business decision, which is arrived at after thorough examination of the proposed resolution plan and assessment made with involvement of experts by the body of persons who are most vitally interested in rapid and efficient decision making. It follows as a necessary corollary that to be worth its name, the commercial wisdom of CoC would come into existence and operation only when all the relevant information is available before it and is duly deliberated upon by all its members, who have direct and substantial interest in the survival of corporate debtor and in the entire CIRP.
162. In light of the aforesaid position of law and its operation in relation to the decision-making process of CoC, it needs hardly any emphasis that each and every aspect relating to the resolution plan, and more particularly its financial layout, has to be before the CoC before it could be said to have arrived at a considered decision in its commercial wisdom.”
# 42. In view of the above legal position settled by this Court in the fleet of judgments, it is no more res integra that the legislature has given paramount importance to the “commercial wisdom” of CoC, and that the scope of the judicial review by the Adjudicating Authority (NCLT) is limited to the extent provided under Section 31, and that of the Appellate Authority (NCLAT) is limited to the extent provided under sub-section (3) of Section 61 of the IBC. After a RP is approved by the requisite majority of the CoC, it must pass the muster of Adjudicating Authority under Section 31(1) of the IBC. Section 31 also makes it abundantly clear that once the RP is approved by the Adjudicating Authority, after it is satisfied that the RP as approved by the CoC meets the requirements as referred to in sub-section (2) of Section 30, it shall be binding on the CD and its employees, members, creditors, guarantors and stakeholders. The legislature has consciously not provided for a ground to challenge the justness of the “commercial decision” taken by the Financial Creditors, because one of the dominant purposes of the IBC is revival of the CD and to make it a running concern.
# 43. While considering the feasibility and viability of the Prospective Resolution Plans, the CoC can always suggest a modification therein and exercise its commercial wisdom. However, once the RP is approved by the requisite majority of CoC, and when such RP is placed before the Adjudicating Authority for its approval under Section 31, the Adjudicating Authority has to only see whether such RP as approved by the CoC meets the requirements as referred to in Section 30(2). It is only where the Adjudicating Authority is satisfied that the RP does not confirm to the requirements of sub-section (1) of Section 31, it may by an order reject the RP. It is true that the NCLT has to decide all the questions on law or fact arising out of or in relation to the insolvency resolution or liquidation under the residuary jurisdiction vested in NCLT under Section 60(5), however as held in Essar Steel (supra), such residual jurisdiction does not in any manner impact Section 30(2) of the Code, which circumscribes the jurisdiction of the Adjudicating Authority, when it comes to the confirmation of RP, as has been mandated by Section 31(1) of the Code.
# 44. Similarly, the scope of interference by the Appellate Authority i.e., NCLAT under Section 61 in the Appeals arising out of the order approving a RP under Section 31, is also very limited and restricted to the specific grounds mentioned in sub-section (3) of Section 61. The grounds for filing Appeal under Section 61 have to be confined to sub-section (3) thereof.
# 45. Keeping in view the above settled legal position, let us deal with the three categories of Appeals separately.
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