RAMKRISHNA FORGINGS LIMITED versus RAVINDRA LOONKAR, RESOLUTION PROFESSION OF ACIL LIMITED & ANR.

Heard learned counsel for the parties.

p. 674

The present appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code”) is directed against the Judgment dated 19.01.2022 (hereinafter referred to as the “Impugned Judgment”) passed by the National Company Law Appellate Tribunal (hereinafter referred to as the “NCLAT”) in Company Appeal (AT) (Ins) No.845 of 2021 which has upheld the order passed by the Adjudicating Authority (National Company Law Tribunal ) [hereinafter referred to as the “Adjudicating Authority-NCLT” or “Adjudicating Authority” or “NCLT”], Principal Bench dated 01.09.2021 by which the application seeking approval of a Resolution Plan for ACIL Limited (hereinafter referred to as either “ACIL” or the “Corporate Debtor”) being I.A. No.1636 of 2019 in CP(IB) No.170(PB)/2018 (hereinafter referred to as the “Approval Application”) was kept in abeyance while directing the Offi cial Liquidator (hereinafter referred to as the “OL”) to carry out a re-valuation of the assets of the Corporate Debtor and to provide exact fi gures/value of the assets and exact valuation details. BRIEF FACTS:

p. 675

ACIL is a manufacturer of precision engineering and automobile components, namely crankshafts for tractors, HCVs, LCVs as well as twowheelers, as also connecting rods, steering knuckles and hubs. It was the subject-matter of a Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) which was initiated on an application fi led by IDBI Bank Ltd. Mr. Ravindra Loonkar was appointed as the Interim Resolution Professional and subsequently confi rmed as the Resolution Professional (hereinafter referred to as the “RP”) by the NCLT under order dated 16.10.2018. Against the total claim fi led for about Rupees one thousand eight hundred and thirty crores, the amount of admitted claim in the CIRP was Rupees one thousand seven hundred and eighty-two crores.

pp. 675–676

The RP published Expression of Interest on 15.10.2018 which was subsequently revised on 31.10.2018, 28.01.2019 and 13.02.2019. The appellant-Resolution Applicant (hereinafter referred to as the “appellant”) submitted its fi rst Resolution Plan on 11.04.2019 providing to pay Rupees seventy-four crores to all the stakeholders including Rupees sixty-three and a half crores to Financial Creditors (hereinafter referred to as the “FC(s)”). After a series of negotiations, the appellant submitted an Addendum to its Resolution Plan on 21.05.2019 by raising the payment to FC(s) to Rupees seventy-three crores and eighteen lacs. On and at the request of the Committee of Creditors (hereinafter referred to as the “CoC”), once again, the appellant submitted a Revised Plan on 27.05.2019 wherein the total payout was Rupees eighty crores and fi fty-fi ve lacs and the FC(s) were to be paid Rupees seventy fi ve crores and forty-two lacs. The fi nal Resolution Plan was submitted on 05.08.2019, in which the fi nancial proposal/total pay-out was increased to Rupees one hundred twenty-nine and a half crores and FC(s) were to get upfront payment of Rupees eighty crores and forty-four lacs. This Resolution Plan further provided that proceeds from the monetization of the land situated at Manesar will go to the FC(s).

p. 676

This fi nal Resolution Plan submitted by the Appellant-Resolution Applicant on 05.08.2019 was fi nally approved by the CoC on 14.08.2019 by a majority of 88.56% votes. In terms of such approval of the Resolution Plan by the CoC, the RP moved Approval Application under Sections 30(6) and 31 of the Code seeking approval of the Resolution plan before the Adjudicating Authority-NCLT on 16.08.2019. In terms of the Resolution Plan, for which approval was being sought, ACIL would be allowed the benefi t of carrying forward its losses in terms of Section 79 of the Income Tax Act, 1961.

pp. 676–677

This ultimately resulted in the order dated 01.09.2021, by which the approval of the Resolution Plan was kept in abeyance and the OL was directed to provide exact fi gures/value of assets. The same was carried in appeal under Section 61 of the Code by the present appellant before the NCLAT which passed the Impugned Judgment on 19.01.2022, dismissing the appeal, thereby upholding the order of the NCLT, which is impugned herein. SUBMISSIONS ON BEHALF OF THE APPELLANT:

pp. 678–679

Mr. Shyam Divan, learned senior counsel for the appellant submitted that the Resolution Plan initially submitted by the appellant was negotiated further on various dates and, ultimately the fi nal outcome was the Resolution Plan submitted on 05.08.2019. This was fi nally approved by the CoC through a majority of 88.56% votes on 14.08.2019, after extensive consideration. It was submitted that there were 11 revisions in respect of the Resolution Plan made by the appellant before the fi nal version was approved by the CoC. It was indicated that the fi nal Resolution Plan was approximately 48% higher as compared to the pay-out under the initial Resolution Plan submitted by the appellant. At this juncture, it was also pointed out that the RP had also got two reports prepared by two approved/registered valuers: (a) BDO India LLP’s Report dated 11.02.2019 with regard to assets of ACIL which indicated fair market value to be Rupees one hundred thirtyfi ve crores and ten lacs with liquidation value as Rupees one hundred eight crores and fi fty-seven lacs; whereas the Report of (b) Adroit Technical Services Limited dated 14.02.2019 indicated fair market value of Rupees one hundred twenty-fi ve crores and eighty-fi ve lacs and liquidation value of Rupees ninety-four crores and eighty-seven lacs. Thus, it was submitted that after taking care of all the statutory procedural requirements and on the basis of such reports and proper examination of the materials on record and having exercised its commercial wisdom, the CoC-approved Resolution Plan was put up before the NCLT for approval, but the NCLT, exceeding its jurisdiction and without ascertaining any reason for such course of action, passed the direction for revaluation.

pp. 679–680

Learned senior counsel in this connection submitted that there was no occasion for the NCLT to embark upon a totally alien procedure of getting the OL involved in such valuation, for which a mechanism is already provided under the Code and which, as per him, was strictly adhered to in the present case. It was contended that the NCLT had limited power of judicial review given the supremacy of the CoC under the Code. At best, learned senior counsel contended, that it could have disapproved the Resolution Plan on cogent ground(s) relevant for doing so after testing whether it complies with the requirements of Section 30(2) of the Code, but it could not have acquired jurisdiction, where no such residuary or equity based jurisdiction is available under the Code by interfering with the CoC’s decision without pointing out any non-conformity with the provisions of the Code and the Regulations thereunder. For such proposition, he relied upon the decision of this Court in Pratap Technocrats Private Limited v Monitoring Committee of Reliance Infratel Limited, (2021) 10 SCC 623, the relevant being at Paragraphs 25, 26 and 44, where it has been held that the jurisdiction conferred upon the Adjudicating Authority-NCLT in regard to the approval of a Resolution Plan is statutorily structured by Sub-Section 1(1) of Section 31 of the Code and such jurisdiction is limited to determine whether the requirements which are specifi ed in Sub-Section (2) of Section 30 of the Code have been fulfi lled. Further, it has been explained that such jurisdiction which is statutorily defi ned, recognised and conferred, cannot be equated with the jurisdiction in equity that operates independently of the provisions of the statute for the reason that the Adjudicating Authority-NCLT, which is a body owing its existence to the Code, must abide by the nature and extent of its jurisdiction as defi ned therein. Regarding the appointment of the OL for getting valuation of the assets, the stand of Mr. Divan was that it was not in line with the Code and the Regulations made thereunder.

pp. 680–681

It was further canvassed by learned senior counsel that the Code provides for a mechanism for carrying out valuation of the assets of a Corporate Debtor in form of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the “CIRP Regulations”), particularly Regulations 27 and 35 thereof, inasmuch as Regulation 27 provides that the RP shall appoint two registered valuers to determine the fair value and liquidation value of the Corporate Debtor whereas Regulation 35 provides that the two valuers shall submit the fair value and liquidation value to the RP after physical verifi cation of the inventory and fi xed assets of the Corporate Debtor and further provides that if the estimates shown by the two valuers are signifi cantly diff erent, or upon a proposal from the CoC, the RP may appoint a third registered valuer for valuation of the assets of the Corporate Debtor.

pp. 681–682

Another aspect which learned senior counsel drew the Court’s attention to was the fact that the NCLT’s observations in its order dated 01.09.2021 observing that the amount off ered by the appellant was very close to the fair value of the assets of the Corporate Debtor was a nonissue and an uncalled for observation since such fair value of the assets of the Corporate Debtor was never available to the appellant at the time of submitting its fi rst Resolution Plan. Thus, learned senior counsel submitted that the premise of the appellant’s off ered amount being in close proximity to the fair value of the assets was inherently erroneous and without basis and the decision to refer it to the OL based on such sole factor is obviously and equally without any basis and fi t to be set aside.

pp. 682–683

It was submitted that this Court has held, in Maharashtra Seamless Limited v Padmanabhan Venkatesh, (2020) 11 SCC 467, the relevant being at Paragraphs 27 to 29, that aspects related to the valuation of the Corporate Debtor are not open to judicial scrutiny by the NCLT as the object behind such valuation process is to assist the CoC in taking a proper decision in respect of a Resolution Plan and the valuation conducted in respect of the assets of the Corporate Debtor and it has further been indicated that the Adjudicating Authority-NCLT can approve a Resolution Plan even when it is below the liquidation value and that there is no provision under the Code which states that a resolution applicant’s bid must match the liquidation value as the liquidation value is determined merely to assist the CoC in taking a decision on the Resolution Plan.

p. 683

On the same proposition, learned senior counsel referred to M K Rajagopalan v Dr Periasamy Palani Gounder, 2023 SCC OnLine SC 574, the relevant being at Paragraphs 167, 168 and 169, holding that when the CoC was fully satisfi ed with the valuation conducted in respect of the Corporate Debtor and had endorsed the same, then it was unnecessary and unjustifi able on the part of the NCLAT to presume irregularities in the Resolution Plan and interfere therewith.

p. 683

It was submitted that the RP in statutory form had certifi ed that the Resolution Plan received from the appellant complied with all the provisions of the Code and the Regulations and did not contravene any provisions of law.

p. 683

It was contended that the fi nding of the NCLAT that an avoidance transaction of approximately Rupees one thousand crores had come to light and the present case justifi es its interference since fi gures of crores are involved, could not have been an issue as it has no bearing in the instant case and ought not to have been considered by the NCLAT. It was submitted that safeguard against avoidance transaction and its impact upon a Corporate Debtor’s CIRP has been provided in the Code and the Regulations as also expounded in judicial precedents. In this regard, attention was drawn to Section 26 of the Code which provides that fi ling of avoidance application(s) by the RP shall not aff ect the CIRP proceedings. It was further stated that Regulation 38(2)(d) , CIRP Regulations has been recently introduced through the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2022 (hereinafter referred to as the “2022 Amendment”) with eff ect from 14.06.2022 which requires, for all Resolution Plans submitted to the Adjudicating Authority on or after the 2022 Amendment to provide for treatment of avoidance applications post-approval of a Resolution Plan, along with the manner in which the proceeds from such proceedings will be distributed. It was contended that even though in the present case, the approval application has been fi led by the RP prior to the 2022 Amendment, the Resolution Plan provides for the treatment of proceeds generated through avoidance applications and states that all amounts received by ACIL pursuant to any avoidance transaction shall be payable to the FC(s) and no avoidance pay-out amounts shall be payable by the Corporate Debtor, which in the present case would mean that avoidance transaction of approximately Rupees one thousand crores will not aff ect the ongoing CIRP, in view of the Resolution Plan providing a clear way for its treatment. In this connection, learned senior counsel referred to the decision by a Division Bench of the High Court of Delhi in Tata Steel BSL Limited v Venus Recruiter Pvt. Ltd., 2023 SCC OnLine Del 155, Paragraph 91 whereof says that when any kind of benefi t is acquired from the adjudication on avoidance application and the Resolution Plan is silent on the treatment of such applications, such benefi t must be given to the creditors of the Corporate Debtor.

pp. 683–685

Learned senior counsel submitted that the commercial wisdom of the CoC has been held to be supreme in K Sashidhar v Indian Overseas Bank, (2019) 12 SCC 150, the relevant being at Paragraphs 52, 59 & 64 and Committee of Creditors of Essar Steel India Ltd. v Satish Kumar Gupta (2020) 8 SCC 531. Further, reliance was placed on the decision in Ebix Singapore (P) Ltd. v Committee of Creditors of Educomp Solutions Limited, 2021 SCC OnLine SC 707, holding that the Adjudicating Authority under Section 31(2) of the Code can only examine the validity of the Resolution Plan on the anvil of the stipulation in Section 30(2) of the Code and either approve or reject the Resolution Plan but cannot compel the CoC to negotiate further with a successful Resolution Applicant and also that the Adjudicating Authority is duty bound to ensure the completion of CIRP within the prescribed timeline of 330 days under the Code.

p. 685

As far as the reference in the Impugned Judgment by the NCLAT, that interference was justifi ed since “fi gures of crores” are involved, learned senior counsel submitted that it has no basis in the Code or law, as it does not provide for diff erential treatment to a Resolution Plan, based on the quantum of the fi gure involved in the Corporate Debtor’s insolvency.

p. 685

With regard to the OL being given the chance of coming up with re-valuation, the stand taken by learned senior counsel was that the OL is created by the Companies Act, 2013 and is not contemplated under the Code which provides a specifi c mechanism for valuation to be conducted in respect of the assets of a Corporate Debtor under the CIRP Regulations, specifi cally Regulations 27 and 35, as noted hereinabove.

p. 685

Learned senior counsel submitted that even if for the sake of argument, it may be accepted that the NCLT can exercise discretion in rare cases and order for re-valuation, in the present case, the same cannot be justifi ed as absolutely no reason has even been indicated by the NCLT or the NCLAT for undertaking such exercise in respect of the assets of the Corporate Debtor, which is arbitrary and unjustifi ed.

p. 685

It was submitted that there was no objection from any quarter, much less any stakeholder, with respect to the valuation of the Corporate Debtor and also the appellant’s Resolution Plan and most importantly, no material was placed on record before the NCLT or NCLAT to justify interference in the CoC’s commercial wisdom. SUBMISSIONS ON BEHALF OF THE RESPONDENTS:

p. 686

Learned counsel for the respondents supported the contentions of the appellant, advanced by Mr. Divan. ASSISTANCE BY THE SOLICITOR GENERAL AND THE ADDITIONAL SOLICITOR GENERAL FOR THE UNION OF INDIA:

p. 686

In the present case, although the RP and CoC were arrayed as respondents but having regard to the issues raised, this Court by order dated 05.05.2022 had requested the learned Solicitor General, Mr. Tushar Mehta to assist. In terms thereof, he has fi led written submissions. Mr. Balbir Singh, learned Additional Solicitor General has also assisted this Court.

p. 686

In sum, the written note deals with the legal aspects and the fi nal stand is that the Adjudicating Authority-NCLT would have no jurisdiction or power to sit in appeal over the commercial wisdom of the CoC and interference would be warranted only when the NCLT or the Appellate Authority (viz. NCLAT) finds the decision of the CoC to be wholly capricious, arbitrary, irrational and dehors the provisions in the Code or the Regulations.

p. 686

For such proposition, he relied upon the decision in Vallal RCK v Siva Industries and Holdings Limited, 2022 SCC OnLine SC 717, the relevant being at Paragraph 24, with regard to the binding and fi nal nature of the Resolution plan after due approval by the CoC.

p. 686

Mr. Singh also referred to Arun Kumar Jagatramka v Jindal Steel and Power Limited, (2021) 7 SCC 474, the relevant being Paragraph 95, holding that the need for judicial intervention or innovation from NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principle of the Code. He also referred to Committee of Creditors of Essar Steel India Ltd. (supra), where at Paragraph 69, it has been observed that a harmonious reading of Sections 31(1) & 60(5) of the Code would lead to the result that the residual jurisdiction of the NCLT under Section 60(5)(c) of the Code cannot, in any manner, whittle down Section 31(1) of the Code, by the investment of some discretionary or equity jurisdiction in the Adjudicating Authority-NCLT outside Section 30(2) of the Code, when it comes to a Resolution Plan pending adjudication.

p. 687

However, it was also pointed out that in cases which warrant interference, to contend that the Adjudicating Authority-NCLT has no jurisdiction to decide any dispute with respect to valuation and take remedial steps to correct an erroneous valuation exercise would not be the correct proposition in view of the powers conferred under Section 60(5) of the Code.

p. 687

With regard to the impact of pendency of avoidance applications on the approval of the Resolution Plan, the stand was that it has no bearing on the approval by the NCLT of the Resolution Plan approved by the CoC as it has been provided in the Resolution Plan that proceeds of avoidance transactions, if any, will go to the FC(s) and thus, on this score, the Resolution Applicant (appellant) will not be benefi tted as it is the FC(s) who will get the benefi t of such realisation. As regards the uncertainty of Plot/Site No.GH 38 (Land) in Sector 1, IMT Manesar, Haryana, which was allotted by the Haryana State Industrial and Infrastructure Development Corporation to the Corporate Debtor, it was submitted that the Resolution Plan itself provisions that proceeds from monetisation thereof will go to the FC(s). ANALYSIS, REASONING AND CONCLUSION:

p. 687

Having considered the matter in depth, the Court is unable to uphold the decisions rendered by the Adjudicating Authority-NCLT as also the NCLAT. The moot question involved is the extent of the jurisdiction and powers of the Adjudicating Authority to go on the issue of revaluation in the background of the admitted and undisputed factual position that no objection was raised by any quarter with regard to any defi ciency/irregularity, either by the RP or the appellant or the CoC, in fi nally approving the Resolution Plan which was sent to the Adjudicating Authority-NCLT for approval. Further, the statutory requirement of the RP involving two approved valuers for giving reports apropos fair market value and liquidation value was duly complied with and the fi gures in both reports were not at great variance. Signifi cantly, the same were then put up before the CoC, which is the decision-maker and in the driver’s seat, so to say, of the Corporate Debtor. K Sashidhar (supra) and Committee of Creditors of Essar Steel India Ltd. supra) are clear authorities that the CoC’s decision is not to be subjected to unnecessary judicial scrutiny and intervention. This came to be reiterated in Maharashtra Seamless Limited (supra), which also emphasised that the CoC’s commercial analysis ought not to be qualitatively examined and the direction therein of the NCLAT to direct the successful Resolution Applicant to enhance its fund fl ow was disapproved of by this Court. Thus, if the CoC, including the FC(s) to whom money is due from the Corporate Debtor, had undertaken repeated negotiations with the appellant with regard to the Resolution Plan and thereafter, with a majority of 88.56% votes, approved the fi nal negotiated Resolution Plan of the appellant, which the RP, in turn, presented to the Adjudicating Authority-NCLT for approval, unless the same was failing the tests of the provisions of the Code, especially Sections 30 & 31, no interference was warranted. In Kalpraj Dharamshi v Kotak Investment Advisors Limited, (2021) 10 SCC 401, the Court concluded that ‘… in view of the paramount importance given to the decision of CoC, which is to be taken on the basis of “commercial wisdom”, Nclat was not correct in law in interfering with the commercial decision taken by CoC by a thumping majority of 84.36%.’

pp. 687–688

In Pratap Technocrats Private Limited (supra), the Court, after considering the relevant case-laws, pointed out that the Indian Legislature had departed from foreign insolvency regimes, as under: ‘44. These decisions have laid down that the jurisdiction of the adjudicating authority and the appellate authority cannot extend into entering upon merits of a business decision made by a requisite majority of the CoC in its commercial wisdom. Nor is there a residual equity based jurisdiction in the adjudicating authority or the appellate authority to interfere in this decision, so long as it is otherwise in conformity with the provisions of IBC and the Regulations under the enactment. 45. Certain foreign jurisdictions allow resolution/reorganisation plans to be challenged on grounds of fairness and equity. One of the grounds under which a company voluntary arrangement can be challenged under the United Kingdom’s Insolvency Act, 1986 is that it unfairly prejudices the interests of a creditor of the company . The United States’ Bankruptcy Code provides that if a restructuring plan has to clamp down on a dissenting class of creditors, one of the conditions that it should satisfy is that it does not unfairly discriminate, and is fair and equitable . However, under the Indian insolvency regime, it appears that a conscious choice has been made by the legislature to not confer any independent equity based jurisdiction on the adjudicating authority other than the statutory requirements laid down under sub-section (2) of Section 30 IBC. 46. An eff ort was made by Mr Dushyant Dave, learned Senior Counsel, to persuade this Court to read the guarantees of fair procedure and non-arbitrariness as emanating from the decision of this Court in Maneka Gandhi v. Union of India [Maneka Gandhi v. Union of India, (1978) 1 SCC 248] into the provisions of IBC. IBC, in our view, is a complete code in itself. It defi nes what is fair and equitable treatment by constituting a comprehensive framework within which the actors partake in the insolvency process. The process envisaged by IBC is a direct representation of certain economic goals of the Indian economy. It is enacted after due deliberation in Parliament and accords rights and obligations that are strictly regulated and coordinated by the statute and its regulations. To argue that a residuary jurisdiction must be exercised to alter the delicate economic coordination that is envisaged by the statute would do violence on its purpose and would be an impermissible exercise of the adjudicating authority’s power of judicial review. The UNCITRAL, in its Legislative Guide on Insolvency Law, has succinctly prefaced its recommendations in the following terms [Available at <https://uncitral.un.org/sites/uncitral.un.org/fi les/mediadocuments/uncitral/en/05-80722_ebook.pdf> last accessed 6-8-2021, pp. 14-15.] : “C. Balancing the goals and key objectives of an insolvency law 15. Since an insolvency regime cannot fully protect the interests of all parties, some of the key policy choices to be made when designing an insolvency law relate to defi ning the broad goals of the law (rescuing businesses in fi nancial diffi culty, protecting employment, protecting the interests of creditors, encouraging the development of an entrepreneurial class) and achieving the desired balance between the specifi c objectives identifi ed above. Insolvency laws achieve that balance by reapportioning the risks of insolvency in a way that suits a State’s economic, social and political goals. As such, an insolvency law can have widespread eff ects in the broader economy.” 47. Hence, once the requirements of IBC have been fulfi lled, the adjudicating authority and the appellate authority are duty-bound to abide by the discipline of the statutory provisions. It needs no emphasis that neither the adjudicating authority nor the appellate authority have an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework.’ (emphasis supplied)

pp. 688–690

In the case at hand, we fi nd that there was no occasion before the Adjudicating Authority-NCLT to be swayed only on the per se ground that the hair-cut would be about 94.25% and that it was not convinced that the fair value of the assets have been projected in proper manner as the bid of the appellant was very close to the fair value of the assets of ACIL. Ordering revaluation of the assets, by the OL, Ministry of Corporate Aff airs, Government of India, in-charge of the particular area, cannot be justifi ed. As explained in Innoventive Industries Ltd. v ICICI Bank, (2018) 1 SCC 407 and Swiss Ribbons Private Limited v Union of India, (2019) 4 SCC 17, the Code was specifi cally introduced by Parliament for ensuring quick and time-bound resolution of insolvency of corporate entities in fi nancial trouble, by fi rst attempting to revive the Corporate Debtor, failure whereof would entail liquidation of the Corporate Debtor’s assets, and no unnecessary impediment should be created to delay or derail the CIRP. In the present case, both the NCLT and NCLAT erred to fully recognise that under the Resolution Plan, the Corporate Debtor was set to be revived and not liquidated. Thus, the minimum mandatory component in the Resolution Plan was only a refl ection of the actual money, including upfront payment, which would go towards the FC(s). As discussed previously, the fi nal Resolution Plan provided for the monetization proceeds of the land as also the avoidance amounts to go to the FC(s) of the Corporate Debtor.

pp. 690–691

At this juncture, it also cannot be lost sight of that it is for the FC(s) who constitute the CoC to take a call, one way or the other. Stricto sensu, it is now well-settled that it is well within the CoC’s domain as to how to deal with the entire debt of the Corporate Debtor. In this background, if after repeated negotiations, a Resolution Plan is submitted, as was done by the appellant (Resolution Applicant), including the fi nancial component which includes the actual and minimum upfront payments, and has been approved by the CoC with a majority vote of 88.56%, such commercial wisdom was not required to be called into question or casually interfered with. Surprisingly, the discussion in both orders is wanting, except for the diff erence in the fi gure of the total outstanding dues and the amount of money which the appellant was to put up initially for taking over the Corporate Debtor, for this Court to understand as to what other reasons, grounded in the Code’s provisions, compelled the Adjudicating Authority-NCLT to embark upon the novel path of ordering revaluation by the OL. At the cost of repetition, nobody had moved before the NCLT or raised any objection challenging the Resolution Plan pending approval. Even the NCLAT has only indicated that when “fi gures of crores” are emerging stage-wise, “then there is no harm to look at the Expert opinion”, which the Adjudicating Authority-NCLT in this case has asked for.

p. 691

It is worthwhile to note that the Adjudicating Authority has jurisdiction only under Section 31(2) of the Code, which gives power not to approve only when the Resolution Plan does not meet the requirement laid down under Section 31(1) of the Code, for which a reasoned order is required to be passed. We may state that the NCLT’s jurisdiction and powers as the Adjudicating Authority under the Code, fl ow only from the Code and the Regulations thereunder. It has been held in Jaypee Kensington Boulevard Apartments Welfare Association v NBCC (India) Limited, (2022) 1 SCC 401: ‘273.1. The adjudicating authority has limited jurisdiction in the matter of approval of a resolution plan, which is well-defi ned and circumscribed by Sections 30(2) and 31 of the Code. In the adjudicatory process concerning a resolution plan under IBC, there is no scope for interference with the commercial aspects of the decision of the CoC; and there is no scope for substituting any commercial term of the resolution plan approved by the Committee of Creditors. If, within its limited jurisdiction, the adjudicating authority fi nds any shortcoming in the resolution plan vis-à-vis the specifi ed parameters, it would only send the resolution plan back to the Committee of Creditors, for re-submission after satisfying the parameters delineated by the Code and exposited by this Court.’ (emphasis supplied)

p. 692

From the assistance rendered and the judicial precedents brought to notice, it is clear that the order dated 01.09.2021 by the NCLT cannot withstand judicial scrutiny, either on facts or in law. There may have been a situation where due to glaring facts, an order of the nature impugned herein could be left untouched and this Court would have refrained from interference, but only if detailed reasoning, disclosing the facts for being persuaded to embark on such path, were discernible in the order dated 01.09.2021, which unfortunately is cryptic and bereft of detail. Recording of reasons, and not just reasons but cogent reasons, for orders is a duty on Courts and Tribunals. In the recent past, from Kranti Associates Private Limited v Masood Ahmed Khan, (2010) 9 SCC 496 to Manoj Kumar Khokhar v State of Rajasthan, (2022) 3 SCC 501, the clear position in law is that a Court or even a quasi-judicial authority has a duty to record reasons for its decision. Needless to add, ‘Reason is the heartbeat of every conclusion. Without the same, it becomes lifeless.’ That apart, the order of the NCLT dated 01.09.2021 suff ers from a jurisdictional error, as in the facts that prevailed, it was not entitled to pass the direction that it did.

pp. 692–693

Under the circumstances, while this Court could have adopted the course of remanding the matter back to the NCLT for fresh/de novo consideration, but being conscious of the fact that such course would impede quick resolution as the CIRP is in a stalemate right from 01.09.2021 and after having applied our minds to the factual aspects also, we do not fi nd that remand for consideration afresh, now, would serve the purpose of justice or aid the objects of the Code.

p. 693

Accordingly, and for all the reasons afore-stated, this appeal stands allowed. The order dated 01.09.2021 of the NCLT and the Impugned Judgment dated 19.01.2022 of the NCLAT are set aside. The NCLT will pass appropriate orders in terms of this judgment, on the Approval Application, being I.A. No.1636 of 2019 in CP(IB) No.170(PB)/2018, within three weeks from the date of production of a copy of this judgment. Pending avoidance application(s) on the fi le of the NCLT in connection herewith shall proceed on their own merits, but with expedition. No order as to costs.

p. 693

Insofar as the pending Interlocutory Applications herein are concerned, they are dealt with below: a. I.A. No.25463/2022: Does not survive in view of the decision in the appeal; disposed of. b. I.A. No.25464/2022: Does not survive in view of the decision in the appeal; disposed of. c. I.A. No.185233/2022: Wrongly shown as pending in the ordersheet; already disposed of vide order dated 17.04.2023.

p. 693

Insofar as Mr. Singh’s submissions that this Court may not exclude from the NCLT’s ambit any power to direct re-valuation, we have given our anxious thought to the same. Our view is that while certainty in law and legal principles is the obvious aim, the law is to be applied in the context of the facts. If a matter where the facts are stark comes to light, the same would have to necessarily be dealt with by the NCLT within the four corners of the Code itself, having due regard to the extant circumstances. It is for the NCLT to exercise power strictly within the domain permitted by the Code. In this behalf, one may peruse the decisions in Embassy Property Developments Private Limited v State of Karnataka, (2020) 13 SCC 308 and Gujarat Urja Vikas Nigam Limit ed v Amit Gupta, (2021) 7 SCC 209.

pp. 693–694