Committee of Creditors of ABC Limited undergoing CIRP have approved a Resolution Plan with 75% vote. The Resolution Plan has been presented to NCLT for its approval thereof. However, an Operational Creditor (OC) raised o

Hon'ble Apex Court in the case of Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta & ors , while upholding the constitutional validity of the Code made, inter alia, important ruling with regard to the role of the Committee of Creditor in the CIR process. It had emphasized the primacy of the commercial wisdom of the committee of Creditors in the resolution process as to whether to rehabilitate the corporate debtor or not by accepting a particular resolution plan. It also states that prior to approving the resolution plan, the Committee is required to assess the "feasibility and viability" of the resolution plan, which takes into account" all the aspects of the resolution plan, including the manner of distribution of funds among various class of creditors." In this regard, the Committee is free to negotiate with the resolution applicant by suggesting modifications in the commercial proposal on a case-to-case basis. Further, in the case of Kalparaj Dharamshi and another vs Kotak Investment Advisors Ltd and another , the Supreme Court observed that the evaluation of proposals to keep the entity as a going concern, including decisions about the sale of business or units, restructuring of debt, etc., are required to be taken by the Committee of the Financial Creditors. The Apex Court further observed that it has been provided, that the choice of the solution to keep the entity as a going concern will be voted upon by the Committee and there are no constraints on the proposals that the resolution professional can present to the Committee. It was held that the NCLT or the NCLAT cannot interfere with the commercial wisdom of the Committee of Creditors, except within the limited scope under Sections 30 and 31 of the Code. It was further held that the commercial wisdom of the Committee has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the Code. The Court further held that 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. It was further held that the opinion expressed by the Committee after due deliberations in the meetings through voting, as per voting shares, is a collective business decision. In view of the above, NCLT cannot reject a Resolution Plan on the basis of viability thus questioning the commercial wisdom of the Committee of Creditors as long as the Resolution Plan is within the scope of section 30 and 31 of the Insolvency & Bankruptcy Code.