Approval of a resolution plan falls exclusively in the domain of the commercial wisdom of CoC with limited scope of judicial review under Section 31, 32 read with Section 61 of the IBC

In the matter of India Resurgence Arc Private Limited v. M/s Amit Metaliks Limited & Anr. in Civil Appeal no. 1700 of 2021 decided on 13.05.2021 decided by the Supreme Court.

Facts:
The appellant challenged order of NCLAT whereby the appellate authority rejected its challenge to the order of NCLT Kolkata approving the resolution plan of the corporate debtor. The appellant was the assignee of the rights, title and interest of a secured financial creditor of the corporate debtor.
The appellant’s main ground of challenge to the resolution plan was that the CoC wrongly approved the resolution plan which failed to consider the priority and value of security interest of the creditors while deciding the manner of distribution to each creditor. In the present case, the total admitted claim of the appellant was over INR 13.38 crores, whereas the RP had offered the appellant an amount of about INR 2.026 crores while the valuation of the secured asset was more than INR 12 crores.

Held:
The Supreme court held that the process of consideration and approval of resolution plan is essentially within the commercial wisdom of Committee of Creditors and the scope of judicial review remains limited within the four-corners of Section 30(2) of the Code which would essentially be to examine that the resolution plan does not contravene any of the provisions of law for the time being in force, it conforms to such other requirements as may be specified by the Board, and it provides for: (a) payment of insolvency resolution process costs in priority; (b) payment of debts of operational creditors; (c) payment of debts of dissenting financial creditors; (d) for management of affairs of corporate debtor after approval of the resolution plan; and (e) implementation and supervision of the resolution plan.
Once it is found that all the mandatory requirements have been duly complied with and taken care of, the process of judicial review cannot be stretched to carry out quantitative analysis qua a particular creditor or any stakeholder, who may carry his own dissatisfaction. Every dissatisfaction does not partake the character of a legal grievance and cannot be taken up as a ground of appeal unless creditors belonging to a class being similarly situated are denied fair and equitable treatment.
Thus, what amount is to be paid to different classes or sub- classes of creditors in accordance with provisions of the Code and the related Regulations, is essentially the commercial wisdom of the Committee of Creditors; and a dissenting secured creditor like the appellant cannot suggest a higher amount to be paid to it with reference to the value of the security interest. It was further held that the fact that a dissenting financial creditor is having a security available with him, would not entitle him to enforce the entire of security interest or to receive the entire value of the security available with him.