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Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Professional of ACIL Limited & Anr.

Civil Appeal · 2023 INSC 1013Decided 21 Nov 2023
Civil Appeal No. 1527 of 2022
Vikram Nath · Ahsanuddin Amanullah

Background

ACIL Limited, an auto-components manufacturer, went through the Corporate Insolvency Resolution Process (CIRP) after a bank's application. Ramkrishna Forgings Limited (RFL) submitted a resolution plan that was progressively improved through negotiation and was ultimately approved by the Committee of Creditors (CoC) with an overwhelming 88.56% vote. However, the National Company Law Tribunal (NCLT) kept approval of the plan in abeyance and directed a fresh revaluation of ACIL's assets by the Official Liquidator, and the National Company Law Appellate Tribunal (NCLAT) upheld this order. RFL appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that an adjudicating authority's power to scrutinise a resolution plan under Sections 30(2) and 31 of the Code is limited and does not extend to second-guessing the commercial wisdom of the CoC. If the NCLT finds a genuine shortcoming, its remedy is to send the plan back to the CoC for resubmission, not to unilaterally order a revaluation and stall the process indefinitely. The Court found the NCLT's order directing revaluation was cryptic and gave no reasoned basis for departing from the ordinary process, which by itself made it legally unsustainable, since courts and tribunals have a duty to record cogent reasons for their orders. It set aside both the NCLT and NCLAT orders and directed the NCLT to pass a fresh, reasoned order on the pending resolution plan approval application within three weeks.

Lesson Learnt

Insolvency tribunals must give clear, reasoned orders and cannot override a creditors' committee's commercial decision on a resolution plan except on the narrow legal grounds the law actually provides: unexplained delay-causing orders in insolvency proceedings will not survive appellate scrutiny.

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

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