It seems that even the adjudicating authorities that are borne out of the IBC are not able to fully comprehend the intricacies of the IBC. This became evident when on 7th February 2019; the court said that under no circumstances the NCLT is allowed to question the collective decision of the CoC or company of creditors.
The Supreme Court has said that in case there is complete autonomy in the decision of Committee of Creditors i.e. if there is a more than 75% vote adhering to one decision of insolvency resolution, then regardless of how NCLT might “feel” about this matter, it has to endorse the collective decision of the CoC.
K Sashidhar vs. Indian Overseas Bank
The first time that this particular discussion took light is when considering a batch of appeal in the case- K.Sashidhar vs. Indian Overseas bank. At that particular time, Justice AM Khanwilkar asserted that there is absolutely no provision in the IBC that empowers either the IP, or the Adjudicating authorities to valuate or “reverse” the CoC’s commercial decision.
The law vs. the justness
According to the law, in light of a failed insolvency resolution process, the next mandatory step is the initiation of the liquidation process.
Even if the period is extended to 270 days, and the CoC decision is still to liquidate, the National Company Law Tribunal (NCLT) sill won’t have any right to evaluate the justness of a commercial decision-said the apex court. Furthermore, even if the reasons of rejection or approving the resolution plan are not recorded, even then, the NCLT won’t be able to render the collective CoC decision to be void.
Our opinion
Regardless of the order from the Supreme Court, the unquestioned collective decision of the CoC, that can actually be the result of forced voting as well, is something that needs to be noticed. Furthermore, even the NCLAT won’t be able to question the decision of CoC, which presents a major paradox as well.
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