Ex-Director of the Corporate Debtor does not enjoy the power to challenge the commercial wisdom of the Committee of Creditors: NCLAT

In the present matter the National Company Appellate Tribunal (“NCLAT”) heard the Appellant’s grievance with respect to Resolution Applicant’s certificate to prove networth criteria. 

The Appellant being a member of the suspended Board of Directors of the Corporate Debtor approached the NCLAT against the order passed by National Company Law Tribunal, Chandigarh (“NCLT”). The Appellant’s ground for challenge being that the Successful Resolution Applicant had produced a fraudulent and sham certificate in order to prove the networth criteria to approve the Resolution Plan as per the provisions of the Insolvency and Bankruptcy Code, 2016 (“Code”).

The Appellant contended that the said Resolution Plan was approved by the Committee of Creditors (“CoC”) and the Resolution Professional irrespective of the fact the Successful Resolution Applicant had failed to comply with the networth eligibility and violated the provisions of Section 25 (2) (h) of the Code.

Decision

The NCLAT observed that the said Resolution Plan was approved by the CoC with 93% of voting shares. Further, the Appellant had abstained from raising this issue of networth eligibility while attending the CoC meeting during the Corporate Insolvency Resolution Process. The NCLAT then emphasised on the commercial wisdom of the CoC and how judicial intervention is restricted, especially when the CoC has approved the Resolution Plan and steps are being taken to complete the same within stipulated guidelines.

The NCLAT held that the Appellant being an Ex-Director of the Corporate Debtor had no right or power to challenge the CoC’s commercial wisdom with respect to an approved Resolution Plan which is already being implemented. On lack of merits and substantial grounds the appeal was dismissed.

Read Judgment here.

-        By Rozat Akolawala