National Company Law Appellate Tribunal, New Delhi: In an appeal against the approval of Resolution Plan including the provisions for the use of shared utilities and services, a division bench comprising of Ashok Bhushan,* J., (Chairperson) and Mr. Barun Mitra (Technical Member), upheld the approval of the Resolution Plan and all reliefs and concessions granted to facilitate the smooth and successful implementation of the Resolution Plan. The NCLAT emphasised that the same does not restrict the parties’ rights to settle their disputes regarding shared utilities and equipment through appropriate legal channels. The NCLAT stated that
“…grant of said reliefs and concessions cannot fetter the right of Appellant to enter into a fresh arrangement with SRA with regard to use of shared utilities, nor it can fetter the rights of the Appellant to seek appropriate relief in a competent Court with regard to shared utilities.”
Brief Facts
In the instant matter, the appellant, the holding company of Corporate Debtor, SARGA Hotel (P) Ltd., leased a parcel of land for a five-star hotel, Westin Hotel, to the Corporate Debtor. A Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor on Section 7 application under the Insolvency and Bankruptcy Code, 2016 (IBC), filed by Yes Bank Ltd. Several interim orders and extensions were granted during the CIRP. The Resolution Plan submitted by respondent 3 was approved by 100% vote share of the Committee of Creditors (CoC). Various applications were filed by the parties, including one by the appellant seeking dismissal of the Resolution Plan. The Adjudicating Authority passed an order dated 04-01-2024 approving the Resolution Plan submitted by respondent 3. Aggrieved by the impugned order passed by the Adjudicating Authority, the appellant, the shareholder of the Corporate Debtor, preferred the present appeal challenging the same. The Resolution Plan included provisions for shared utilities and services, which the appellant contested.
Moot Point
Whether the reliefs and concessions granted by the Adjudicating Authority, including access to shared utilities and services situated on land owned by the appellant, were valid?
Parties’ Contentions
The appellant contended that the reliefs and concessions granted exceed the scope of the Resolution Plan and adversely affect its rights. It was also argued that the appellant has the right to challenge the Resolution Plan. The Resolution Professional argued that the reliefs and concessions were necessary for the smooth functioning of the Corporate Debtor and were not conditional to the Resolution Plan. The Resolution Professional also disputed the appellant’s standing to challenge the Plan. The CoC supported the Resolution Professional’s arguments and emphasised on the commercial wisdom of the CoC in approving the Plan. The Successful Resolution Applicant stressed that shared services were utilized by both the Corporate Debtor and the appellant, and that the Plan was necessary for the Corporate Debtor’s continuation as a going concern.
NCLAT’s Decision
The NCLAT referred to K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531, where the Supreme Court emphasised the primacy of the CoC’s commercial wisdom in approving Resolution Plans. The Supreme Court held that “the Adjudicating Authority and the Appellate Tribunal are not to sit in appeal over the commercial wisdom of the CoC, which is paramount and non-justiciable and under the scheme of the Code, every dissatisfaction does not partake the character of a legal grievance.” The NCLAT emphasised on the necessity of granting reliefs and concessions for the successful implementation of the plan and noted that the said approval did not violate any provisions of Section 30(2) of the IBC.
The NCLAT upheld the order of the Adjudicating Authority approving the Resolution Plan including provisions for shared utilities and services, citing the commercial wisdom of the CoC. However, the NCLAT clarified that the approval of the Resolution Plan does not restrict the parties from entering fresh arrangements regarding shared utilities and equipment, nor does it prevent them from settling their rights and obligations in a competent court. The appeal was disposed of accordingly, with each party bearing its own costs.
[Shristi Infrastructure Development Corpn. Ltd. v. Avishek Gupta, 2024 SCC OnLine NCLAT 451, order dated 04-04-2024]
*Judgment by Justice Ashok Bhushan
Advocates who appeared in this case :
Mr. Dhruv Mehta, Sr. Advocate with Mr. Shyam Aggarwal, Ms. Sugandh Kochhor, Ms. Srishti, Counsel for the Appellant
Mr. Ramji Srinivasan, Sr. Advocate with Ms. Pooja Mahajan, Ms. Mahima Singh, Ms. Advocates. Shreya Mahalwan, Ms. Namrata Saraogi, Ms. Shruti Pandey, Counsel for the R1.
Mr. Abhinav Vasisht, Sr. Advocate with Mr. Raunak Dhillon, Ms. Madhavi Khanna, Mr. Nihaad Dewan, Ms. P. Singh, Counsel for the R2.
Mr. Joy Saha & Mr. Abhijeet Sinha, Sr. Advocates, Mr. Sidhartha Sharma, Ms. Namrata Basu, Mr. Arjun Asthana, Ms. Shalini Basu, Ms. Trisha Dhera, Counsel for the SRA.
