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Company & Insolvency LawSupreme Court of India

K. Sashidhar v. Indian Overseas Bank & Ors.

Civil Appeal · 2019 INSC 148Decided 5 Feb 2019
Civil Appeal No. 10673 of 2018
Justice A.M. Khanwilkar · Justice Ajay Rastogi

Background

Two companies, Kamineni Steel & Power India Pvt. Ltd. and Innoventive Industries Ltd., went through the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. In both cases, the Committee of Creditors (CoC) did not approve the proposed resolution plans by the legally required 75% voting share, so the National Company Law Tribunal and then the National Company Law Appellate Tribunal (NCLAT) directed that the companies be put into liquidation. The promoters/resolution applicants appealed to the Supreme Court, arguing that the CoC's rejection was not properly reasoned and that the NCLAT should have let them revise their plans or invoked Article 142 to relax the voting threshold since they later came close to the amended lower threshold of 66%.

Decision Breakdown

The Supreme Court dismissed all the appeals, holding that the "commercial wisdom" of the Committee of Creditors in approving or rejecting a resolution plan is not subject to judicial review on merits, and the CoC is not required to record detailed reasons for its commercial/business decision under Section 30 of the Code. Since the plans failed to secure the then-applicable 75% voting threshold within the statutory 270-day period, liquidation was the only lawful consequence under Section 33, and no alternate plan had been approved in time. The Court also declined to use its Article 142 powers to retrospectively apply a later amendment reducing the voting threshold to 66%, since doing so would override the express statutory scheme as it stood when these cases were decided.

Lesson Learnt

Once a Committee of Creditors commercially rejects a resolution plan by the requisite vote, courts will not second-guess that business decision or extend statutory deadlines to rescue a failed plan: insolvency timelines and creditor voting outcomes are treated as largely final and non-justiciable on merits.

K. Sashidhar v. Indian Overseas Bank & Ors. – Legal Case Shots | LegalAware