CoC can approve Resolution Plan subject to subsequent approval by CCI, NCLAT

The National Company Law Appellate Tribunal (NCLAT) has held that proviso to Section 31(4) of the Insolvency and Bankruptcy Code, 2016 which calls for obtaining the prior approval from the Competition Commission of India (CCI) before a Resolution Plan is approved by the Committee of Creditors is directory in nature and not mandatory.

The NCLAT has thus clarified that the Committee of Creditors (COC) can approve a Resolution Plan subject to subsequent approval by the CCI.

The Judgment was passed by a three-member Bench of Chairperson, Justice SJ Mukhopadhaya, Member (Judicial) Justice AIS Cheema and Member (Technical) Kanthi Narahari in an appeal preferred by ArcelorMittal India Pvt Ltd (Appellant) against an order passed by National Company Law Tribunal (NCLT).

The Appellant was one of the Resolution Applicants for EPC Constructions India Ltd. & Ors (corporate debtor) but its Plan was not preferred by the COC. The COC, by a majority vote of 73.14%, had approved the Resolution Plan submitted by Royale Partners Investment Fund Limited.

The Appellant challenged the COC decision before the NCLT. After it was rejected by the NCLT, the Appellant moved the NCLAT in appeal.

It was the Appellant’s case that the approval to Royale Partners Investment Fund Limited’s plan was in contravention of the mandatory requirement under the proviso to Section 31(4) IBC.

The Appellant also claimed that that COC did not appreciate the fact that its Plan was “ex facie better” as it fulfilled the twin objects of IBC and that the COC decision was vitiated due to procedural irregularities.

The Resolution Professional, on the other hand, maintained that the Appellant was an unsuccessful Resolution Applicant and could not challenge the Resolution Plan which had been duly approved by the COC. It was submitted that after due consideration, the Appellant’s plan was rejected as it received only 17.67% of the total voting share. Lastly, it was also informed that the CCI had given its approval to the plan, subsequently.

After hearing the parties, the NCLAT iterated that based on the Supreme Court’s decision in ArcelorMittal India Private Limited v. Satish Kumar Gupta & Ors, the Appellant had no vested right to challenge the COC decision rejecting its Resolution Plan and approving the Plan of another when it is under consideration by the Adjudicating Authority/NCLT.

The NCLAT then perused Section 5, Section 54 of the Competition Act, 2002 to arrive at a conclusion and stated,

“We have noticed and hold that proviso to sub-section (4) of Section 31 of the ‘I&B Code’ which relates to obtaining the approval from the ‘Competition Commission of India’ under the Competition Act, 2002 prior to the approval of such ‘Resolution Plan’ by the ‘Committee of Creditors’, is directory and not mandatory.”

Iterating that it was always open to the COC to approve a Resolution Plan, the NCLAT clarified that such approval would be subject to the approval granted by the Competition Commission.

“It is always open to the ‘Committee of Creditors’, which looks into viability, feasibility and commercial aspect of  a ‘Resolution Plan’ to approve the ‘Resolution Plan’ subject to such approval by Commission, which may be obtained prior to approval of the plan by the Adjudicating Authority under Section 31 of the ‘I&B Code’.”

In the present case, since the Competition Commission had already given its approval to the successful Resolution Applicant’s Plan and the Appellant had no vested right to challenge the COC decision, the appeal was dismissed.

The Appellant was represented by Senior Advocates Amit Sibal, Arun Kathpalia with Advocates Raghav Shankar, Sevanshu Saylav, Sudip Mahapatra, Shahezad Kazi, Misha Chandra, Adity Agarwal, Arshiya Sharda, Saksham Dhingra, Sohan Kumar, Eklavya Dwivedi and Aubert Sebastian. 

The Respondents were represented by Senior Advocate Abhinav Vashisht with Advocates Sumesh Dhawan, Nakul Sachdeva, Aakarshan Sahay and Senior Advocate Sudipto Sarkar with Advocates Dinakar Maheshwari, Rajeev Vidhani, Himanshu Vidhani, Pratiksha Mishra.

Read the Judgement: