NCLAT refuses to interfere with decision of NCLT

NCLAT refuses to interfere with decision of NCLT

The Appellate Tribunal held that NCLT or NCLAT lacked jurisdiction and authority to review the commercial decision of CoC

The National Company Law Appellate Tribunal (NCLAT) upheld the order passed by the National Company Law Tribunal (NCLT) Delhi Bench, which had dismissed an application of the Appellant to direct the Liquidator to consider the proposals of the Appellant under Section 230 of the Companies Act.

The Principal Bench of NCLAT comprising of Justice Jarat Kumar Jain and Dr Ashok Kumar Mishra dealt with this matter titled Mr Manoj Kunwar v Punjab National Bank And Anr.

The facts of the case are that the Appellant is the Ex-Director of the M/s SSMP Industries Ltd – Corporate Debtor whose Corporate Insolvency Resolution Process (CIRP) was initiated on 27 August 2018 through the order of the NCLT.

The liquidation of the Corporate Debtor was further ordered on 31 July 2019 and the Appellant – Ex-Director filed an appeal against this liquidation order wherein the NCLAT directed the liquidator to take steps in terms of Section 230 of the Companies Act, 2013 before taking steps to sell the assets of the Corporate Debtor.

Thereafter, the Appellant submitted two One Time Settlement (OTS) cum Compromise proposals under Section 230 of the Companies Act dated 9 November 2020 and 22 January 2021, which were both rejected by the Respondent – Punjab National Bank as well as Kotak Prime Bank, who are the only two Financial Creditors, by 100 per cent voting on the ground of non-viability of a lower offer. Therefore, this appeal was filed since the application filed by the Appellant to consider the proposal of the Appellant under Section 230 of the Act was rejected by the NCLT.

The Appellant contended that the OTS proposals were rejected by the Respondent – Bank without assigning any valid reason and without any suitable opportunity to the Appellant to discuss the same with Respondent. On the other hand, the Respondent submitted that the acceptance or rejection of OTS depends solely upon the Committee of Creditors (CoC) and that the CoC found the OTS Proposals to be on the lower side.

The bench noticed that the Appellant did not point out any irregularity in the exercise of the powers committed by the NCLT. It stated that the CoC had taken the commercial decision of rejecting the OTS proposals and reiterated the following settled law:

"It is settled law that the statute has not invested jurisdiction and authority either with NCLT or NCLAT to review the commercial decision exercised by the CoC of approving the resolution plan or rejecting the same."

The bench further observed that the Appellant's objection with regards to the OTS proposals being rejected without valid reason and without the suitable opportunity to discuss the same with Respondent was not raised by the Appellant before the NCLT. Nor was any prayer for replacement of liquidator made before NCLT, which the Appellant has made in this appeal. The bench concluded that such prayer could not be considered at this stage, particularly when there was no allegation in the application.

NCLAT dismissed the appeal as there was no ground to interfere with the order of the NCLT.