A bench comprising Justices Vikram Nath and Ahsanuddin Amanullah emphasized that the tribunal has limited powers for such directions and should exercise them only in exceptional circumstances.

The bench highlighted that NCLT must be cognizant that revaluation orders can hinder swift resolution, and thus, such orders should be issued only when there are compelling reasons to justify taking such an extraordinary step.

“It is now well settled that it is well within the CoC’s (committee of creditors) domain as to how to deal with the entire debt of the corporate debtor. In this background, if after repeated negotiations, a resolution plan is submitted, and has been approved by the CoC with majority vote, such commercial wisdom isn’t required to be called into question or casually interfered with,” the court said on Tuesday.

Citing relevant provisions of Insolvency and Bankruptcy Code, the bench said that the adjudicating authority (NCLT) has jurisdiction under Section 31(2) of IBC, which gives power not to approve only when the resolution plan does not meet requirements laid down under Section 31(1) of IBC, for which a reasoned order is required to be passed. IBC, under sections 30 and 31, requires a resolution professional to ascertain measures of due diligence and care before approving it.

“We may state that NCLT’s jurisdiction and powers as the adjudicating authority under the code, flow only from the code and regulations thereunder… If a matter where facts are stark comes to light, same would have to necessarily be dealt with by NCLT within the four corners [of Section] 43 of the code, having due regard to the extant circumstances. It is for NCLT to exercise power strictly within the domain permitted by the code,” it added.

The bench ordered, while setting aside an order of revaluation, passed by the NCLT in September 2021 and affirmed by the National Company Law Appellate Tribunal (NCLAT) in January 2022.

The tribunal’s orders had suspended the implementation of ACIL Ltd’s resolution plan and instructed the official liquidator to conduct revaluation of the corporate debtor’s assets.

In its judgment, the top court said there was no justification for NCLT to order a revaluation when no objection was raised by any quarter with regard to any irregularity, either by the RP or the CoC, in approving the resolution plan sent to the NCLT for approval.

“Thus, if the CoC, including financial creditors to whom the money is due from the corporate debtor, had undertaken repeated negotiations with the appellant with regard to the resolution plan and thereafter, with majority of 88.56% votes, approved the final negotiated resolution plan of the appellant, which the RP, in turn, presented to the NCLT for approval, unless the same was failing tests of the provisions of the Code, especially Sections 30 and 31, no interference was warranted,” it observed.

Acknowledging the deadlock in resolution plan since the 2021 NCLT order, the SC asked the tribunal to decide on the application within three weeks.

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Updated: 22 Nov 2023, 11:31 PM IST