Abstract
This piece deals with the jurisprudence whether the Adjudicating Authority or the Appellate Authority has the authority to reject a resolution plan approved with requisite majority by the
Resolution Plan should typically mirror the Insolvency and Bankruptcy Code, 2016 (Code) objectives in maximizing the value. The Code, the way it is derafted, puts all its faith in the
The job of CoC is hard enough to select the suitable resolution plan amongst the available ones. The hardest part surfaces when a resolution plan lower than the liquidation value is received. No one would want to be in that position for taking a call either to approve or reject such a plan as it affects everyone and allegations are likely to fly thick and fast, if such a plan is approved.
Resolution Plan lower than Liquidation Value
One question that begs answers is whether the CoC can consider and approve a plan which is lower than the liquidation value? On the face of it, such an approval looks incongruous as it would seem as defeating the interest of stakeholders while upsetting the objectives of the Code. Practicalities apart, does the provisions of Code in any way bar the CoC to approve such a plan? The Apex Court had the occasion to examine this aspect in
The
In another judgment 2 rendered on 28th February, 2020, the Apex Court has relied upon the
Conclusion
There is no provision in the Code that justifies a view that resolution plans should carry a value higher than liquidation value. A closer look of the provisions tells us that the Resolution Applicant is not aware of the liquidation value as determined by the Registered Valuers though they may have their own assessment of value. In fact, CoC members also do not know the liquidation value unless the resolution plans are placed before them. Liquidation value, at the most, works as a guidance for the CoC; it cannot be considered as a benchmark and resolution plans offering lower value than liquidation value ought not to be rejected on this ground alone. Of course, the resolution plan must pass the test of feasibility, viability and must be implementable besides satisfying the legal provisions. New lessons are being learnt everyday.
Footnotes
1. Civil Appeal No. 4242 of 2019 decided on 22nd January, 2020.
2. State Bank of
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
AMC Law Firm
B-30 Lower Ground Floor,
Lajpat Nagar 3
110024
Fax: 1141 354 354
E-mail: ashish@amclawfirm.com
URL: www.amclawfirm.com
© Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source