Supreme Court: Approval of resolution plan under IBC depends on the commercial wisdom of Committee of Creditors, scope of judicial review remains limited

The SC on May 13, 2021 {INDIA RESURGENCE ARC PRIVATE LIMITED  vs. M/S. AMIT METALIKS LIMITED & ANR.} held that as regards the process of consideration and approval of resolution plan, it is now beyond a shadow of doubt that the matter is essentially that of 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 Insolvency and Bankruptcy Code, 2016 for the Adjudicating Authority; and Section 30(2) read with Section 61(3) for the Appellate Authority. 

It was also held by the Bench, comprising of Justice VINEET SARAN and Justice DINESH MAHESHWARI that financial proposal in the resolution plan forms the core of the business decision of Committee of Creditors. It was held that 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. In other words, it was held that in the scheme of IBC, every dissatisfaction does not partake the character of a legal grievance and cannot be taken up as a ground of appeal.

The assail in present appeal before the SC was approval of the resolution plan in the corporate insolvency resolution process concerning the corporate debtor VSP Udyog Private Limited (respondent No. 2 herein), as submitted by the resolution applicant Amit Metaliks Limited (respondent No. 1 herein).

It was held that what amount is to be paid to different classes or subclasses 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 concluded that it needs hardly any emphasis that if the propositions suggested on behalf of the appellant were to be accepted, the result would be that rather than insolvency resolution and maximisation of the value of assets of the corporate debtor, the processes would lead to more liquidations, with every secured financial creditor opting to stand on dissent. Such a result would be defeating the very purpose envisaged by the Code; and cannot be countenanced. Accordingly, the present appeal stood dismissed by the SC.