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Kalpraj Dharamshi & Anr. v. Kotak Investment Advisors Ltd. & Anr.

Civil Appeal · 2021 INSC 173Decided 10 Mar 2021
Civil Appeal Nos. 2943-2944 of 2020
Justice A.M. Khanwilkar · Justice B.R. Gavai · Justice Krishna Murari

Background

During the corporate insolvency resolution of Ricoh India Limited, the Committee of Creditors (CoC) rejected a resolution plan submitted by Kotak Investment Advisors Ltd. (KIAL) and instead approved, by an overwhelming 84.36% majority, a plan submitted by a consortium led by Kalpraj Dharamshi, even though Kalpraj's plan was technically received after the last deadline set by the Resolution Professional's final "Form G" notice, but still within the statutory time limit for completing the whole process. The National Company Law Tribunal (NCLT) approved Kalpraj's plan and rejected KIAL's objections, but the National Company Law Appellate Tribunal (NCLAT) reversed this, holding that accepting a late-submitted plan was a material irregularity, and set aside the approval of Kalpraj's plan.

Decision Breakdown

The Supreme Court held that NCLAT had exceeded its limited jurisdiction under the Insolvency and Bankruptcy Code by second-guessing the CoC's "commercial wisdom": the choice of which resolution plan to accept is a business decision for the creditors by majority vote, and NCLT/NCLAT can only review a plan on the narrow statutory grounds listed in Sections 30 and 31 of the Code (such as illegality or non-compliance with mandatory requirements), not substitute their own commercial judgment. Since the Resolution Professional's acceptance of Kalpraj's slightly delayed submission had itself been consciously approved by the CoC and did not breach the overall statutory timeline, it did not amount to the kind of "material irregularity" that would justify appellate interference. The Court therefore restored the NCLT's approval of Kalpraj's resolution plan and quashed NCLAT's order, while directing a separate pending appeal by another party to be decided expeditiously.

Lesson Learnt

Once a creditors' committee makes a considered commercial decision on which rescue plan to accept for a failing company, courts and tribunals will not readily substitute their own judgment for that decision: judicial review in insolvency proceedings is narrow and procedural, not a re-evaluation of business choices made by a clear creditor majority.

Official source (sci.gov.in)View Judgment (PDF)

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