# K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS

- **Citation:** [2019] 3 S.C.R. 845
- **Court:** Supreme Court of India
- **Decided:** 2019-02-05
- **Case number:** Civil Appeal No.10673 of 2018
- **Bench:** A.M. Khanwilkar, Ajay Rastogi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/k-sashidhar-v-indian-overseas-bank-ors-33609
- **Pages:** 68

## Headnote

Insolvency and Bankruptcy Code, 2016:
s. 30(2) and (4), 31, 33 and 61(3) - Corporate Insolvency
Resolution Process (CIRP) - Resolution plan rejected by impugned
order on the ground that the plan did not garner support of not less
than 75% of voting share of financial creditors constituting
Committee of Creditors (COC) - On appeal, held: Upon receipt of
a "rejected" resolution plan, the adjudicating authority (NCLT) is
obligated to initiate liquidation process u/s. 33(1) - It does not have
authority to analyse or evaluate the commercial decision of the CoC
or to enquire into the justness of the rejection of the resolution plan
by the dissenting financial creditors - The legislature, consciously,
has not provided any ground to challenge the "commercial wisdom"
of the individual financial creditors or their collective decision
before the adjudicating authority - The discretion of the adjudicating
authority (NCLT) is circumscribed by Section 31 limited to scrutiny
of the resolution plan "as approved" by the requisite percent of
voting share of financial creditors - The provisions investing
jurisdiction and authority in the NCLT or NCLAT has not made the
commercial decision exercised by the CoC of not approving the
resolution plan or rejecting the same, justiciable - The matters or
grounds u/s. 30(2) or u/s. 61(3) are regarding testing the validity of
the "approved" resolution plan by the CoC and not for approving
the resolution plan which has been disapproved or deemed to have
been rejected by the CoC in exercise of its business decision -
Therefore, neither the adjudicating authority (NCLT) nor the
Appellate Authority (NCLAT) has been endowed with the jurisdiction
to reverse the commercial wisdom of the dissenting financial
creditors - Since none of the grounds available under Section 30(2)
or Section 61(3) of the I&B Code are attracted in the fact situation
of the present case, the Adjudicating Authority (NCLT) as well as
[2019] 3 S.C.R. 845
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the Appellate Authority (NCLAT) had no other option but to record
that the proposed resolution plan stood rejected - Introduction of
new norm and qualifying standard for approval of a resolution plan
in the amendment Act (reducing the threshold requirement of percent
of voting share of financial creditors to 66%) will have prospective
operation - NCLAT could not have examined the case on the basis
of the amended provision - Supreme Court in exercise of powers u/
Article 142 of the Constitution cannot set aside the order passed by
the Tribunal and relegate the parties in both the cases, before the
NCLT for considering the proceedings afresh in light of the amended
provision - NCLAT has justly concluded that the resolution plan
has not been approved by requisite percent of voting share of the
financial creditors and in absence of any alternative resolution plan
presented within the statutory period of 270 days, the inevitable
sequel is to initiate liquidation process u/s. 33 - Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 - Regs. 25 and 39 -
Insolvency and Bankruptcy Code (Amendment) Act, 2017 -
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 -
Constitution of India - Art. 142.
Dismissing the appeals, the Court
HELD: 1. The resolution plan concerning both the corporate
debtors, namely KS&PIPL and IIL was considered by the
concerned Committee of Creditors (CoC) in October 2017, and
was approved by less than 75% of voting share of the financial
creditors. The inevitable consequences thereof are to treat the
proposed resolution plan as disapproved or deemed to be
rejected by the dissenting financial creditors. The expression
'dissenting financial creditors', is defined in Regulation 2(1)(f) of
The Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016,
to mean the fin

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845
K. SASHIDHAR
v.
INDIAN OVERSEAS BANK & ORS.
(Civil Appeal No.10673 of 2018)
FEBRUARY 5, 2019
[A.M. KHANWILKAR AND AJAY RASTOGI, JJ.]
Insolvency and Bankruptcy Code, 2016:
s. 30(2) and (4), 31, 33 and 61(3) - Corporate Insolvency
Resolution Process (CIRP) - Resolution plan rejected by impugned
order on the ground that the plan did not garner support of not less
than 75% of voting share of financial creditors constituting
Committee of Creditors (COC) - On appeal, held: Upon receipt of
a "rejected" resolution plan, the adjudicating authority (NCLT) is
obligated to initiate liquidation process u/s. 33(1) - It does not have
authority to analyse or evaluate the commercial decision of the CoC
or to enquire into the justness of the rejection of the resolution plan
by the dissenting financial creditors - The legislature, consciously,
has not provided any ground to challenge the "commercial wisdom"
of the individual financial creditors or their collective decision
before the adjudicating authority - The discretion of the adjudicating
authority (NCLT) is circumscribed by Section 31 limited to scrutiny
of the resolution plan "as approved" by the requisite percent of
voting share of financial creditors - The provisions investing
jurisdiction and authority in the NCLT or NCLAT has not made the
commercial decision exercised by the CoC of not approving the
resolution plan or rejecting the same, justiciable - The matters or
grounds u/s. 30(2) or u/s. 61(3) are regarding testing the validity of
the "approved" resolution plan by the CoC and not for approving
the resolution plan which has been disapproved or deemed to have
been rejected by the CoC in exercise of its business decision -
Therefore, neither the adjudicating authority (NCLT) nor the
Appellate Authority (NCLAT) has been endowed with the jurisdiction
to reverse the commercial wisdom of the dissenting financial
creditors - Since none of the grounds available under Section 30(2)
or Section 61(3) of the I&B Code are attracted in the fact situation
of the present case, the Adjudicating Authority (NCLT) as well as
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the Appellate Authority (NCLAT) had no other option but to record
that the proposed resolution plan stood rejected - Introduction of
new norm and qualifying standard for approval of a resolution plan
in the amendment Act (reducing the threshold requirement of percent
of voting share of financial creditors to 66%) will have prospective
operation - NCLAT could not have examined the case on the basis
of the amended provision - Supreme Court in exercise of powers u/
Article 142 of the Constitution cannot set aside the order passed by
the Tribunal and relegate the parties in both the cases, before the
NCLT for considering the proceedings afresh in light of the amended
provision - NCLAT has justly concluded that the resolution plan
has not been approved by requisite percent of voting share of the
financial creditors and in absence of any alternative resolution plan
presented within the statutory period of 270 days, the inevitable
sequel is to initiate liquidation process u/s. 33 - Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 - Regs. 25 and 39 -
Insolvency and Bankruptcy Code (Amendment) Act, 2017 -
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 -
Constitution of India - Art. 142.
Dismissing the appeals, the Court
HELD: 1. The resolution plan concerning both the corporate
debtors, namely KS&PIPL and IIL was considered by the
concerned Committee of Creditors (CoC) in October 2017, and
was approved by less than 75% of voting share of the financial
creditors. The inevitable consequences thereof are to treat the
proposed resolution plan as disapproved or deemed to be
rejected by the dissenting financial creditors. The expression
'dissenting financial creditors', is defined in Regulation 2(1)(f) of
The Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016,
to mean the financial creditors who voted against the resolution
plan approved by the Committee. This definition came to be
amended subsequently w.e.f. 01.01.2018 to mean the financial
creditors who voted against the resolution plan or abstained from
voting for the resolution plan, approved by the Committee.
[Para 24][883-F-H]
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2. In the case of the corporate debtor KS&PIPL, the
resolution plan, when it was put to vote in the meeting of CoC
held on 27th October, 2017, could garner approval of only 55.73%
of voting share of the financial creditors and even if the
subsequent approval accorded by email (by 10.94%) is taken into
account, it did not fulfill the requisite vote of not less than 75%
of voting share of the financial creditors. On the other hand, the
resolution plan was expressly rejected by 15.15% in the CoC
meeting and later additionally by 11.82% by email. Thus, the
resolution plan was expressly rejected by not less than 25% of
voting share of the financial creditors. In such a case, the
resolution professional was under no obligation to submit the
resolution plan under Section 30(6) of the Insolvency and
Bankruptcy Code, 2016 (I&B Code) to the adjudicating authority.
Instead, it was a case to be proceeded by the adjudicating authority
under Section 33(1) of the I&B Code. Similarly, in the case of
corporate debtor IIL, the resolution plan received approval of
only 66.57% of voting share of the financial creditors and 33.43%
voted against the resolution plan. This being the indisputable
position, NCLAT opined that the resolution plan was deemed to
be rejected by the CoC and the concomitant is to initiate
liquidation process concerning the two corporate debtors.
[Para 25][883-A-D]
3. Regulations 25 and 39 must be read in the light of Section
30(4) of the I&B Code, concerning the process of approval of a
resolution plan. For that, the "percent of voting share of the
financial creditors" approving vis-à-vis dissenting - is required
to be reckoned. It is not on the basis of members present and
voting as such. At any rate, the approving votes must fulfill the
threshold percent of voting share of the financial creditors.
Keeping this clear distinction in mind, it must follow that the
resolution plan concerning the respective corporate debtors,
namely, KS&PIPL and IIL, is deemed to have been rejected as
it had failed to muster the approval of requisite threshold votes,
of not less than 75% of voting share of the financial creditors. It
is not possible to countenance any other construction or
interpretation, which may run contrary to what has been noted
herein before. [Para 29][886-G-H; 887-A, B]
K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS.
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4. Thus understood, no fault can be found with the NCLAT
for having recorded the fact that the proposed resolution plan in
respect of both the corporate debtors was approved by vote of
"less than 75%" of voting share of the financial creditors or
deemed to have been rejected. In that event, the inevitable
corollary is to initiate liquidation process relating to the
concerned corporate debtor, as per Section 33 of the I&B Code.
[Para 30][887-C]
5. Upon receipt of a "rejected" resolution plan the
adjudicating authority (NCLT) is not expected to do anything
more; but is obligated to initiate liquidation process under
Section 33(1) of the I&B Code. The legislature has not endowed
the adjudicating authority (NCLT) with the jurisdiction or
authority to analyse or evaluate the commercial decision
of the CoC muchless to enquire into the justness of the rejection
of the resolution plan by the dissenting financial creditors.
[Para 33][889-D, E]
6. From the legislative history and the background in which
the I&B Code has been enacted, it is noticed that a completely
new approach has been adopted for speeding up the recovery of
the debt due from the defaulting companies. In the new approach,
there is a calm period followed by a swift resolution process to
be completed within 270 days (outer limit) failing which, initiation
of liquidation process has been made inevitable and mandatory.
In the earlier regime, the corporate debtor could indefinitely
continue to enjoy the protection given under Section 22 of Sick
Industrial Companies Act, 1985 or under other such enactments
which has now been forsaken. Besides, the commercial wisdom
of the CoC has been given paramount status without any judicial
intervention, for ensuring completion of the stated processes
within the timelines prescribed by the I&B Code. There is an
intrinsic assumption that financial creditors are fully informed
about the viability of the corporate debtor and feasibility of the
proposed resolution plan. They act on the basis of thorough
examination of the proposed resolution plan and assessment made
by their team of experts. The opinion on the subject matter
expressed by them after due deliberations in the CoC meetings
through voting, as per voting shares, is a collective business
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decision. The legislature, consciously, has not provided any
ground to challenge the "commercial wisdom" of the
individual financial creditors or their collective decision
before the adjudicating authority. That is made non-justiciable.
[Para 33][889-E-H; 890-A, B]
7. In the report of the Bankruptcy Law Reforms Committee
of November 2015, primacy has been given to the CoC to evaluate
the various possibilities and make a decision.The report also
highlights that having timelines is the essence of the
resolution process. It then refers to the principles driving the
design of the new insolvency bankruptcy resolution frame work.
[Para 34][890-B, G]
8. The discretion of the adjudicating authority (NCLT) is
circumscribed by Section 31 limited to scrutiny of the resolution
plan "as approved" by the requisite percent of voting share of
financial creditors. Even in that enquiry, the grounds on which
the adjudicating authority can reject the resolution plan is in
reference to matters specified in Section 30(2), when the
resolution plan does not conform to the stated requirements.
Reverting to Section 30(2), the enquiry to be done is in respect
of whether the resolution plan provides : (i) the payment of
insolvency resolution process costs in a specified manner in
priority to the repayment of other debts of the corporate debtor,
(ii) the repayment of the debts of operational creditors in
prescribed manner, (iii) the management of the affairs of the
corporate debtor, (iv) the implementation and supervision of the
resolution plan, (v) does not contravene any of the provisions of
the law for the time being in force, (vi) conforms to such other
requirements as may be specified by the Board. The Board
referred to is established under Section 188 of the I&B Code.
The powers and functions of the Board have been delineated in
Section 196 of the I&B Code. None of the specified functions of
the Board, directly or indirectly, pertain to regulating the manner
in which the financial creditors ought to or ought not to exercise
their commercial wisdom during the voting on the resolution plan
under Section 30(4) of the I&B Code. The subjective satisfaction
of the financial creditors at the time of voting is bound to be a
mixed baggage of variety of factors. To wit, the feasibility and
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viability of the proposed resolution plan and including their
perceptions about the general capability of the resolution applicant
to translate the projected plan into a reality. The resolution
applicant may have given projections backed by normative data
but still in the opinion of the dissenting financial creditors, it would
not be free from being speculative. These aspects are completely
within the domain of the financial creditors who are called upon
to vote on the resolution plan under Section 30(4) of the I&B
Code. [Para 35][892-D-H; 893-A, B]
9. The remedy of appeal including the width of jurisdiction
of the appellate authority and the grounds of appeal, is a creature
of statute. The provisions investing jurisdiction and authority in
the NCLT or NCLAT has not made the commercial decision
exercised by the CoC of not approving the resolution plan or
rejecting the same, justiciable. This position is reinforced from
the limited grounds specified for instituting an appeal that too
against an order "approving a resolution plan" under Section 31.
First, that the approved resolution plan is in contravention of the
provisions of any law for the time being in force. Second, there
has been material irregularity in exercise of powers "by the
resolution professional" during the corporate insolvency
resolution period. Third, the debts owed to operational creditors
have not been provided for in the resolution plan in the prescribed
manner. Fourth, the insolvency resolution plan costs have not
been provided for repayment in priority to all other debts. Fifth,
the resolution plan does not comply with any other criteria
specified by the Board. Significantly, the matters or grounds - be
it under Section 30(2) or under Section 61(3) of the I&B Code -
are regarding testing the validity of the "approved" resolution
plan by the CoC; and not for approving the resolution plan which
has been disapproved or deemed to have been rejected by the
CoC in exercise of its business decision. [Para 37][894-A-E]
10. The inquiry in such an appeal would be limited to the
power exercisable by the resolution professional under Section
30(2) of the I&B Code or, at best, by the adjudicating authority
(NCLT) under Section 31(2) read with 31(1) of the I&B Code.
No other inquiry would be permissible. Further, the jurisdiction
bestowed upon the appellate authority (NCLAT) is also expressly
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circumscribed. It can examine the challenge only in relation to
the grounds specified in Section 61(3) of the I&B Code, which is
limited to matters "other than" enquiry into the autonomy or
commercial wisdom of the dissenting financial creditors. Thus,
the prescribed authorities (NCLT/NCLAT) have been endowed
with limited jurisdiction as specified in the I&B Code and
not to act as a court of equity or exercise plenary powers.
[Para 38][894-F-H]
11. Therefore, neither the adjudicating authority (NCLT)
nor the appellate authority (NCLAT) has been endowed with the
jurisdiction to reverse the commercial wisdom of the dissenting
financial creditors and that too on the specious ground that it is
only an opinion of the minority financial creditors. The fact that
substantial or majority percent of financial creditors have accorded
approval to the resolution plan would be of no avail, unless the
approval is by a vote of not less than 75% (after amendment of
2018 w.e.f. 06.06.2018, 66%) of voting share of the financial
creditors. The action of liquidation process postulated in ChapterIII of the I&B Code, is avoidable, only if approval of the resolution
plan is by a vote of not less than 75% (as in October, 2017) of
voting share of the financial creditors. Conversely, the legislative
intent is to uphold the opinion or hypothesis of the minority
dissenting financial creditors. That must prevail, if it is not less
than the specified percent (25% in October, 2017; and now after
the amendment w.e.f. 06.06.2018, 44%). The inevitable outcome
of voting by not less than requisite percent of voting share of
financial creditors to disapprove the proposed resolution plan,
de jure, entails in its deemed rejection. [Para 39][895-A-D]
12. Concededly, the process of resolution plan is
necessitated in respect of corporate debtors in whom their
financial creditors have lost hope of recovery and who have turned
into non-performer or a chronic defaulter. The fact that the
concerned corporate debtor was still able to carry on its business
activities does not obligate the financial creditors to postpone
the recovery of the debt due or to prolong their losses indefinitely.
Be that as it may, the scope of enquiry and the grounds on which
the decision of "approval" of the resolution plan by the CoC can
be interfered with by the adjudicating authority (NCLT), has been
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set out in Section 31(1) read with Section 30(2) and by the appellate
tribunal (NCLAT) under Section 32 read with Section 61(3) of
the I&B Code. No corresponding provision has been envisaged
by the legislature to empower the resolution professional, the
adjudicating authority (NCLT) or for that matter the appellate
authority (NCLAT), to reverse the "commercial decision" of the
CoC muchless of the dissenting financial creditors for not
supporting the proposed resolution plan. Whereas, from the
legislative history there is contra indication that the commercial
or business decisions of the financial creditors are not open to
any judicial review by the adjudicating authority or the appellate
authority. [Para 42][896-B-E]
13. In the I&B Code and the regulations framed thereunder
as applicable in October 2017, there was no need for the
dissenting financial creditors to record reasons for disapproving
or rejecting a resolution plan. Further, there is no provision in
the I&B Code which empowers the adjudicating authority (NCLT)
to oversee the justness of the approach of the dissenting financial
creditors in rejecting the proposed resolution plan or to engage
in judicial review thereof. Concededly, the inquiry by the
resolution professional precedes the consideration of the
resolution plan by the CoC. The resolution professional is not
required to express his opinion on matters within the domain of
the financial creditor(s), to approve or reject the resolution plan,
under Section 30(4) of the I&B Code. At best, the Adjudicating
Authority (NCLT) may cause an enquiry into the "approved"
resolution plan on limited grounds referred to in Section 30(2)
read with Section 31(1) of the I&B Code. It cannot make any
other inquiry nor is competent to issue any direction in relation
to the exercise of commercial wisdom of the financial creditors -
be it for approving, rejecting or abstaining, as the case may be.
Even the inquiry before the Appellate Authority (NCLAT) is
limited to the grounds under Section 61(3) of the I&B Code. It
does not postulate jurisdiction to undertake scrutiny of the
justness of the opinion expressed by financial creditors at the
time of voting. To take any other view would enable even the
minority dissenting financial creditors to question the logic or
justness of the commercial opinion expressed by the majority of
the financial creditors albeit by requisite percent of voting share
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to approve the resolution plan; and in the process authorize the
adjudicating authority to reject the approved resolution plan upon
accepting such a challenge. That is not the scope of
jurisdiction vested in the adjudicating authority under Section 31
of the I&B Code dealing with approval of the resolution plan.
[Para 44][896-H; 897-A-E]
14. Since none of the grounds available under Section 30(2)
or Section 61(3) of the I&B Code are attracted in the fact situation
of the present case, the Adjudicating Authority (NCLT) as well
as the Appellate Authority (NCLAT) had no other option but to
record that the proposed resolution plan concerning the
respective corporate debtor (KS&PIPL and IIL) stood rejected.
Further, as no alternative resolution plan was approved by the
requisite percent of voting share of the financial creditors before
the expiry of the statutory period of 270 days, the inevitable
sequel is to pass an order directing initiation of liquidation
process against the concerned corporate debtor in the manner
specified in Chapter III of the I&B Code. [Para 45][897-F, G]
15.1 Insolvency and Bankruptcy Code (Amendment) Act,
2017 (No.8 of 2018) is deemed to have come into force on the
23rd day of November, 2017. Section 6 of this Act purports to
substitute Section 30(4) of the principal Act. The change brought
about by this amendment is insertion of words "after considering
its feasibility and viability, and such other requirements as may
be specified by the Board". In addition, three provisos have been
added to sub-section (4). The amendment is only to declare that
the financial creditors ought to consider the feasibility and viability
and such other requirements as may be specified by the Board,
while exercising their option on the resolution plan - to approve
or not to approve the same. It is rudimentary that the financial
creditors (in most cases are national Bankers), who are called
upon to consider the proposed resolution plan would take into
account all the relevant materials, including the feasibility and
viability and such other requirements as may be specified by the
Board. Additionally, the financial creditors are also required to
bear in mind that the legislative intent is to bring about resolution
and revival of the corporate debtors so as to benefit not only the
corporate debtor but also other stake-holders in equal measure.
[Para 46, 47][898-C, H; 899-A-D]
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15.2 The amended provision merely restates as to what
the financial creditors are expected to bear in mind whilst
expressing their choice during consideration of the proposal for
approval of a resolution plan. No more and no less. Indubitably,
the legislature has consciously not provided for a ground to
challenge the justness of the "commercial decision" expressed
by the financial creditors - be it to approve or reject the resolution
plan. The opinion so expressed by voting is non-justiciable.
Further, in the present cases, there is nothing to indicate as to
which other requirements specified by the Board at the relevant
time have not been fulfilled by the dissenting financial creditors.
The Board established under Section 188 of the I&B Code can
perform powers and functions specified in Section 196 of the I&B
Code. That does not empower the Board to specify requirements
for exercising commercial decisions by the financial creditors in
the matters of approval of the resolution plan or liquidation
process. Viewed thus, the amendment under consideration does
not take the matter any further. [Para 48][899-D-G]
 16.1 By the amendment to Section 30(4) which has come
into force w.e.f. 6th day of June, 2018 vide the Insolvency and
Bankruptcy Code (Second Amendment) Act, 2018 (No.8 of 2018).
A new norm and qualifying standard for approval of a resolution
plan has been introduced. That cannot be treated as a declaratory/
clarificatory or stricto sensu procedural matter as such. Whereas,
the stated Amendment Act makes it expressly clear that it shall
be deemed to have come into force on the 6th day of June, 2018.
Thus, by mere use of expression "substituted" in Section 23(iii)(a)
of the Amendment Act of 2018, it would not make the provision
retrospective in operation or having retroactive effect. This
interpretation is reinforced by the fact that there is no indication
in the Amendment Act of 2018 that the legislature intended to
undo and/or govern the decisions already taken by the
CoC of the concerned corporate debtors prior to 6-06-2018.
[Para 50, 51][900-B, D-F]
 16.2 Even the report of the Insolvency Law Committee of
March, 2018 report does not mention about introducing the
amendment to Section 30(4), regarding the threshold
requirement with retrospective or retroactive effect. Indeed, the
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report has noted about the necessity to alter the low threshold
level of 25% of voting share for rejection of the resolution plan
which, it felt, should be increased to 44%. [Para 52][901-G, H]
16.3 The Amendment Act of 2018 having come into force
w.e.f. 6th day of June, 2018, therefore, will have prospective
application and apply only to the decisions of CoC taken on or
after that date concerning the approval of resolution plan.
[Para 53][903-F]
16.4 In the present case, however, the amendment under
consideration pertaining to Section 30(4), is to modify the voting
share threshold for decisions of the CoC and cannot be treated
as clarificatory in nature. It changes the qualifying standards for
reckoning the decision of the CoC concerning the process of
approval of a resolution plan. The rights/obligations crystallized
between the parties and, in particular, the dissenting financial
creditors in October 2017, in terms of the governing provisions
can be divested or undone only by a law made in that behalf by
the legislature. There is no indication either in the report of the
Committee or in the Amendment Act of 2018 that the legislature
intended to undo the decisions of the CoC already taken prior to
6th day of June, 2018. It is not possible to fathom how the
provisions of the amendment Act 2018, reducing the threshold
percent of voting share can be perceived as declaratory or
clarificatory in nature. In such a situation, the NCLAT could not
have examined the case on the basis of the amended provision.
For the same reason, the NCLT could not have adopted a different
approach in these matters. Hence, no fault can be found with the
impugned decision of the NCLAT. [Para 58][907-D-F]
16.5 Prior to the amendment of Regulation 39 which has
come into force with effect from 4th July, 2018, Regulation 39(3)
merely provided that the Committee may approve any resolution
plan with such modifications as it deems fit. In the first place,
amendment to regulation cannot have retrospective effect so as
to impact the decision of the CoC of the concerned corporate
debtor - taken before the amendment of the said regulation.
There is no indication in the Code as amended or the regulations
to suggest that as a consequence of this amendment the decisions
aleady taken by the concerned CoC prior to 3rd July, 2018 be
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treated as deemed to have been vitiated or for that matter,
necessitating reversion of the proposal to CoC for recording
reasons, that too beyond the statutory period of 270 days. A new
life cannot be infused in the resolution plan which did not
fructify within the statutory period, by such circuitous route.
[Para 59 and 60][907-H; 908-C, D]
16.6 Assuming that this provision was applicable to the
present cases, non-recording of reasons for approving or
rejecting the resolution plan by the concerned financial creditor
during the voting in the meeting of CoC, would not render the
final collective decision of CoC nullity per se. Concededly, if the
objection to the resolution plan is on account of infraction of
ground(s) specified in Sections 30(2) and 61(3), that must be
specifically and expressly raised at the relevant time. For, the
approval of the resolution plan by the CoC can be challenged on
those grounds. However, if the opposition to the proposed
resolution plan is purely a commercial or business decision, the
same, being non-justiciable, is not open to challenge before the
Adjudicating Authority (NCLT) or for that matter the Appellate
Authority (NCLAT). If so, non-recording of any reason for taking
such commercial decision will be of no avail. In the present case,
admittedly, the dissenting financial creditors have rejected the
resolution plan in
exercise of
business/commercial
decision and not because of non-compliance of the grounds
specified in Section 30(2) or Section 61(3), as such. Resultantly,
the amended regulation pressed into service, will be of no avail.
[Para 61][908-E-H]
16.7 In the present case, in terms of Section 30 of the I&B
Code, the decision is taken collectively after due negotiations
between the financial creditors who are constituents of the CoC
and they express their opinion on the proposed resolution plan
in the form of votes, as per their voting share. In the meeting of
CoC, the proposed resolution plan is placed for discussion and
after full interaction in the presence of all concerned and the
resolution professional, the constituents of the CoC finally
proceed to exercise their option (business/commercial decision)
to approve or not to approve the proposed resolution plan. In
such a case, non-recording of reasons would not per se vitiate the
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collective decision of the financial creditors. The legislature has
not envisaged challenge to the "commercial/business decision"
of the financial creditors taken collectively or for that matter
their individual opinion, as the case may be, on this count.
[Para 62][910-F-H; 911-A]
16.8 It is enough for the dissenting financial creditors to
disapprove the proposed resolution plan by voting as per its
voting share, based on commercial decision. Indeed, if the
opposition of the dissenting financial creditors is in regard to
matter(s) within the jurisdiction of the Tribunal ascribable to
Sections 30(2) or 61(3), then the situation may be somewhat
different. But that is not in issue in these cases. Therefore, it
cannot be said NCLAT committed manifest error in not calling
upon the dissenting financial creditors to respond to the
applications filed in the concerned appeals pending before it.
[Para 63][911-B-C]
16.9 It is not open to the Adjudicating Authority to entertain
a revised resolution plan after the expiry of the statutory period
of 270 days. Accordingly, no fault can be found with the NCLAT
for not entertaining such application. [Para 64][911-D]
16.10 In both the cases, the vote of approval exceeded more
than 66% of the voting share of the financial creditors and yet
the benefit of the amended provision could not be availed, as it
came only during the pendency of the appeal before the NCLAT.
This Court in exercise of powers u/Article 142 of the Constitution
cannot set aside the order passed by the Tribunal and relegate
the parties in both the cases, before the NCLT for considering
the proceedings afresh in light of the amended provision reducing
the threshold requirement of percent of voting share of
financial creditors to 66%. This will result in issuing directions
in the teeth of the provisions as applicable to the present cases.
[Para 65][911-F-H]
17. The NCLAT has justly concluded in the impugned
decision that the resolution plan of the concerned corporate
debtor(s) has not been approved by requisite percent of voting
share of the financial creditors; and in absence of any alternative
resolution plan presented within the statutory period of 270 days,
K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS.
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858 SUPREME COURT REPORTS [2019] 3 S.C.R.
the inevitable sequel is to initiate liquidation process under
Section 33 of the Code. [Para 66][912-A, B]
Thirumalai Chemicals Limited v. Union of India and Ors.
(2011) 6 SCC 739 : [2011] 4 SCR 838 ; Purbanchal
Cables & Conductors (P) Ltd. v. Assam SEB and Anr.
(2012) 7 SCC 462 : [2012] 6 SCR 905 ; CIT v. Vatika
Township (P) Ltd. (2015) 1 SCC 1 : [2014] 12 SCR
1037 ; Vijayalakshmi Rice Mills, New Contractors Co.
and Ors. v. State of Andhra Pradesh (1976) 3 SCC
37 : [1976] 3 SCR 775 - relied on
Mardia Chemicals limited and Others v. Union of India
and Others (2004) 4 SCC 311 : [2004] 3 SCR 982 -
distinguished
Gottumukkala Venkata Krishamraju v. Union of India
(2018) SCC Online SC 1386 ; Government of India v.
India Tobacco Association (2005) 7 SCC 396 : [2005]
2 Suppl. SCR 859 ; Zile Singh v. State of Haryana (2004)
8 SCC 1 : [2004] 3 Suppl. SCR 400 ; Mithilesh Kumari
& Another v. Prem Behari Khare [1989] 2 SCC 95 :
[1989] 1 SCR 621 ; Dahiben (Widow of Ranchnodji
Jivanji) & Ors. v. Vasanji Kevalbhai (dead) & Others
(1995) Supp. 2 SCC 295 ; B.K. Educational Services
Private Ltd. v. Parag Gupta & Associates (2018) SCC
Online SC 1921 ; State Bank of India v. Ramakrishnan
(2018) SCC Online SC 963 ; Rustom & Hornby (I) Ltd.
v. T.B. Kadom (1976) 3 SCC 71 : [1976] 1 SCR 119 ;
Bharat Singh v. Management of New Delhi Tuberculosis
Centre, New Delhi (1986) 2 SCC 614 : [1986] 2 SCR
169 ; Padfield and Others v. Minister of Agriculture,
Fisheries and Food (1968) 2 WLR 924 ; Dhampur
Sugar Mills Ltd. v. State of U.P. and Others (2007) 8
SCC 338 : [2007] 10 SCR 245 ; Tata Cellular v. Union
of India (1996) 6 SCC 651 : [1987] 2 SCR 841 ; Union
of India and Another v. Cynamide India Ltd. and
Another (1987) 2 SCC 720 : [1987] 2 SCR 841 ; Shri
Sitaram Sugar Company Limited and Another v. Union
of India and Others (1990) 3 SCC 223 : [1990] 1 SCR
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859
909 ; United Bank of India, Calcutta v. Abhijit Tea Co.
Pvt. Ltd. and Others (2000) 7 SCC 357 : [ 2000] 3 Suppl.
SCR 153 ; Karan Singh and Others v. Bhagwan Singh
(Dead) By Lrs. And Others (1996) 7 SCC 559 : [1996]
1 SCR 924 ; Arcelormittal India Private Limited v.
Satish Kumar Gupta and Others (2018) SCC Online
1733 ; Karnataka State Industrial Investment &
Development Corpn. Ltd. v. Cavalet India Ltd. and
Others (2005) 4 SCC 456 : [ 2005] 2 SCR 1183 ; S.L.
Srinivasa Jute Twine Mills (P) Ltd. v. Union of India
and Another (2006) 2 SCC 740 : [2006] 2 SCR 235 ;
Rajeev Chaudhary v. State (NCT) of Delhi (2001) 5 SCC
34 : [2001] 3 SCR 508 ; Hitendra Vishnu Thakur and
Others v. State of Maharashtra and Others (1994) 4
SCC 602 : [1994] 1 Suppl. SCR 360 ; Innoventive
Industries Limited v. ICICI Bank and Another [2018] 1
SCC 407 : [2017] 8 SCR 33 - referred to
Case Law Reference
(2018) SCC Online SC 1386 referred to
Para 10
[2005] 2 Suppl. SCR 859
referred to
Para 10
[2004] 3 Suppl. SCR 400
referred to
Para 10
[1989] 1 SCR 621
referred to
Para 10
(1995) Supp. 2 SCC 295
referred to
Para 10
(2018) SCC Online SC 1921 referred to
Para 10
(2018) SCC Online SC 963
referred to
Para 10
[1976] 1 SCR 119
referred to
Para 10
[1986] 2 SCR 169
referred to
Para 10
[2004] 3 SCR 982
distinguished
Para 11
(1968) 2 WLR 924
referred to
Para 11
[2007] 10 SCR 245
referred to
Para 11
[1987] 2 SCR 841
referred to
Para 11
[1987] 2 SCR 841
referred to
Para 11
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860 SUPREME COURT REPORTS [2019] 3 S.C.R.
[1990] 1 SCR 909
referred to
Para 11
[2000] 3 Suppl. SCR 153
referred to
Para 12
[1996] 1 SCR 924
referred to
Para 12
(2018) SCC Online 1733
referred to
Para 14
[2005] 2 SCR 1183
referred to
Para 14
[2006] 2 SCR 235
referred to
Para 15
[2001] 3 SCR 508
referred to
Para 15
[1994] 1 Suppl. SCR 360
referred to
Para 15
[2017] 8 SCR 33
referred to
Para 19
[2011] 4 SCR 838
relied on
Para 55
[2012] 6 SCR 905
relied on
Para 55
[2014] 12 SCR 1037
relied on
Para 55
[1976] 3 SCR 775
relied on
Para 55
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 10673
of 2018.
From the Judgment and Order dated 06.09.2018 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Insolvency) No.335 of 2017.
WITH
Civil Appeal Nos. 10719, 10971 of 2018 and 1531 of 2019.
 C. U. Singh, Dr. A.M. Singhvi, Colin Gonsalves, Shyam Divan,
Sr. Advs., G. Ramakrishna Prasad, Suyodhan Byrapaneni,
Ms. Filza Moonis, Mohd. Wasay Khan, John Mathew, Karthik S. D.,
Bharat J. Joshi, Shikhil Suri, Shiv Kumar Suri, Kamal Deep Dayal, Ms.
Shilpa Saini, Ms. Vinishma Kaul, Ms. Saakshi Mago, Ram Lal Roy, Ms.
Gauri Rasgotra, Animesh Bisht, Karan Khanna, Siddhant Sharma (For
M/S. Cyril Amarchand Mangaldas), Kunal Tandon, Ms. Pragya Baghel,
Ms. Niti Jain, Ms. Richa, Ms. Mahima Singh, Ritesh Kumar, Pranab
Kumar Mullick, Ms. Soma Mullick, Sebat Kumar Deuria,
Ms. Prabha Swami, Ms. Divya Swami, Soumik Ghosal, V.K. Sajith, T.N.
Durga Prasad, Advs. for the appearing parties.
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The Judgment of the Court was delivered by
A. M. KHANWILKAR, J.
1. Leave granted in SLP (C) No.29181 of 2018.
2. All appeals were taken up for hearing at the notice stage with
the consent of the contesting respondents.
3. These appeals have arisen from the common judgment and
order of the National Company Law Appellate Tribunal (for short
"NCLAT"), New Delhi, dated 6th September, 2018, rendered in appeals
filed in relation to the insolvency resolution process under the provisions
of the Insolvency and Bankruptcy Code, 2016 (for short "I&B Code")
concerning Kamineni Steel & Power India Pvt. Ltd. (for short
"KS&PIPL"), having its registered office at Hyderabad, Telangana
and Innoventive Industries Ltd. (for short "IIL") having its registered
office at Pune, Maharashtra.
4. The NCLAT affirmed the order passed by the National
Company Law Tribunal, Mumbai Bench (for short "NCLT Mumbai")
recording rejection of the resolution plan concerning IIL and directing
initiation of liquidation process under Chapter III of Part II of the I&B
Code. As regards KS&PIPL, the NCLAT reversed the decision of the
National Company Law Tribunal, Hyderabad (for short "NCLT
Hyderabad") which had approved its resolution plan and instead
remanded the proceedings to NCLT Hyderabad for initiation of liquidation
process in terms of Section 33 and 34 of the I&B Code.
5. The NCLAT held that as, in both the cases, the resolution plan
did not garner support of not less than 75% of voting share of the financial
creditors constituting the Committee of Creditors (for short "CoC") the
same stood rejected and thereby warranted initiation of liquidation process
of the concerned corporate debtor, namely, KS&PIPL and IIL.
6. For considering the grounds of challenge in the respective
appeals, we deem it appropriate to advert to the relevant facts concerning
the respective corporate debtor.
7. KS&PIPL was incorporated as a private limited company on
20th October, 2008. Its steel division commenced operation on 30th March,
2013. The company was functional till the Financial Year 2014-15.
However, it could not continue beyond this period due to deficient working
capital and various other factors including financial crisis, leading to heavy
K. SASHIDHAR v. INDIAN OVERSEAS BANK & ORS.
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862 SUPREME COURT REPORTS [2019] 3 S.C.R.
operational losses and consequent erosion of the entire net worth.
Attempts were made to revive the company by forming a joint lenders
forum by the consortium of banks. As that attempt did not fructify, the
company filed an application with BIFR under Section 15(1) of Sick
Industrial Companies (Special Provisions) Act, 1985 on 15th November,
2016. The said proceedings abated due to a notification dated 25th
November, 2016, as to the repeal of the Act. Eventually, the company
filed a petition under Section 10 of the I&B Code read with Rule 7 of the
Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,
2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP)
concerning the said company. That petition was admitted on 10th February,
2017, by the NCLT Hyderabad and an Interim Resolution Professional
(for short "IRP") came to be appointed with directions to constitute a
CoC. The CoC was constituted and the first meeting was held on 8th
March, 2017 to confirm the appointment of IRP and authorise the lead
bank, namely the Indian Bank to inform the approved valuers that they
should proceed with their valuation. The second meeting of CoC was
held on 6th April, 2017, for taking on record the predicated expenses and
essential costs and factory maintenance costs and to confirm about the
operation of the bank account with lead Bankers, Indian Bank by IRP
and Chief Financial Officer. In the third meeting of CoC, convened on
12th May, 2017, the corporate debtor made a presentation for a resolution
plan, giving three options.