Introduction
The Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC) is designed to ensure a fair and transparent resolution of corporate insolvency while maximizing value for stakeholders. The case of SREI Equipment Finance Limited Versus Varutha Developers Private Limited, adjudicated by the Hon’ble NCLT Kolkata, highlights critical aspects of this process, including the limited locus standi of unsuccessful resolution applicants and the sanctity of the Committee of Creditors’ (CoC) commercial wisdom. This decision reinforces the principle that CIRP must remain efficient and insulated from unwarranted challenges, ensuring the timely resolution of corporate insolvencies.
Facts
The applicant, a consortium, filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, challenging the actions of the Resolution Professional (RP) in the CIRP of the corporate debtor. The insolvency proceedings were initiated following a default on a loan agreement where INR. 300 crore was sanctioned.
The applicant submitted a resolution plan with a financial proposal of INR. 250 crores, including a bank guarantee of INR. 6 crores. It alleged that the RP failed to disclose vital information about the corporate debtor’s property, leading to uncertainty among PRAs and the CoC. Claims of collusion between the RP and another PRA, along with the participation of ineligible PRAs, were also made.
Observations of the Tribunal
The tribunal held that an unsuccessful resolution applicant does not have the locus standi to challenge the approval of a resolution plan by the CoC. It clarified that the CoC’s decisions, grounded in its commercial wisdom, are paramount and cannot be overturned unless there is evidence of significant irregularities or statutory violations under Section 30(2) of the I&B Code.
The tribunal emphasized that the RP’s role is confined to ensuring procedural compliance and does not extend to collecting or disclosing additional information beyond statutory requirements. Allegations of nondisclosure or bias must be supported by credible evidence, which was absent in this case.
Addressing the claims regarding ineligible PRAs, the tribunal noted that the applicant failed to substantiate its allegations with relevant documentation. It further observed that collaboration agreements or similar arrangements do not inherently transfer control unless explicitly stipulated.
Ultimately, the tribunal dismissed the application and approved the resolution plan endorsed by the CoC, reaffirming the principle that the CoC’s commercial decisions should remain undisturbed in the absence of material irregularities.
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