NCLAT upheld the rejection of a ₹7 crore resolution plan for failing to address the cause of default and violating mandatory IBC requirements, reinforcing creditor protection and statutory compliance.
NCLAT Upholds Rejection of ₹7 Crore Resolution Plan
The National Company Law Appellate Tribunal (NCLAT) has affirmed the rejection of a resolution plan worth ₹7 crore on grounds that it failed to address the root cause of the corporate debtor’s default. The plan was submitted during the CIRP and was evaluated by the Committee of Creditors (CoC), which ultimately rejected it for non-compliance with Section 30(3) of the IBC.
The tribunal noted that the resolution applicant did not propose measures to ensure sustainable operations or prevent recurrence of default. Further, the plan violated mandatory parameters including minimum thresholds for operational creditors and lacked adequate financial restructuring. NCLAT emphasized that a resolution plan must not only improve viability but also ensure accountability under the IBC.
This decision reaffirms the CoC’s autonomy in plan approval and underscores that superficial compliance with financial terms is insufficient. Practitioners must ensure resolution plans include credible turnaround strategies and address deficiencies that led to insolvency.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 30(3)
