NCLAT affirmed the rejection of a ₹7 crore resolution plan for failing to remedy the cause of default and breaching mandatory IBC requirements.
The National Company Law Appellate Tribunal (NCLAT) has upheld the rejection of a resolution plan worth ₹7 crore, confirming that it failed to address the root cause of default as mandated under Section 30(3) of the Insolvency and Bankruptcy Code (IBC).
The tribunal found that the plan did not provide for adequate working capital or a viable revival strategy, and violated the requirement that resolution plans must ensure compliance with all statutory dues and protect operational creditors’ interests. NCLAT reiterated that adherence to the ‘object and purpose’ of IBC is non-negotiable.
Implication: Resolution applicants must ensure their plans explicitly remedy default causes and satisfy all statutory criteria. Practitioners should conduct comprehensive due diligence to avoid rejection on substantive IBC compliance grounds.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 30(3)
