NCLAT Sets Aside Asian Hotels Insolvency for Arbitrary CoC Decision

NCLAT Delhi Sets Aside Asian Hotels Insolvency as CoC Arbitrarily Rejects Full-Dues Settlement

The NCLAT, Delhi, set aside the initiation of insolvency proceedings against Asian Hotels, holding that the Committee of Creditors (CoC) acted arbitrarily by rejecting a settlement that offered full payment of dues.

The corporate debtor had proposed a full settlement before or during CIRP, which was rejected by the CoC without reasoned justification. The Tribunal invoked its equitable powers under Section 60(5) of the IBC, stating that IBC is not a recovery tool for creditors but a mechanism for corporate revival or fair liquidation.

"An offer to pay 100% of the dues cannot be rejected capriciously; the CoC must record reasons and act commercially."

This decision reinforces checks on CoC discretion. Practitioners must ensure CoC decisions are recorded in writing and justified commercially, failing which they risk judicial intervention under NCLAT’s supervisory jurisdiction.