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AA was right in directing successful resolution applicant to enhance their fund inflow upfront: SC

January 23, 2020[2020] 113 taxmann.com 421 (SC)
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IBC : There is no provision in Code or Regulations under which bid of any Resolution Applicant has to match liquidation value arrived at in manner provided in clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

• Object behind prescribing such valuation process is to assist CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by CoC, statutory mandate on Adjudicating Authority under section 31(1) is to ascertain that a resolution plan meets requirement of sub-sections (2) and (4) of section 30 thereof.

• Section 31(1) lays down in clear terms that for final approval of a resolution plan, Adjudicating Authority has to be satisfied that requirement of sub-section (2) of section 30 has been complied with. The proviso to section 31(1) stipulates other point on which an Adjudicating Authority has to be satisfied. That factor is that resolution plan has provisions for its implementation.

• Whether where Adjudicating Authority had primarily relied on section 31 in approving resolution plan and there was no breach of any provisions, and successful resolution applicant wanted to run the company and infuse more funds, Appellate Authority ought not to have interfered with order of Adjudicating Authority in directing successful Resolution Applicant to enhance their fund inflow upfront. Accordingly order of NCLAT is set aside and that of Adjudicating Authority is affirmed.

• (Padmanabhan Venkatesh v. V. Venkatachalam [2019] 105 taxmann.com 234 (NCL-AT) - Set aside)

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