In a recent landmark decision, the Supreme Court has underscored that the National Company Law Tribunal (NCLT) must issue a detailed and reasoned order when rejecting a resolution plan under Section 31(2) of the Insolvency and Bankruptcy Code, 2016. The court’s ruling highlights the imperative for courts and tribunals to articulate cogent reasons for their decisions.
The Supreme Court overturned a prior NCLT order that had deferred approval of a resolution plan, directing an Official Liquidator to revalue the assets of the Corporate Debtor. The National Company Law Appellate Tribunal (NCLAT) had upheld the NCLT’s decision, but the Supreme Court set aside both orders, asserting that the NCLT’s authority to direct revaluation is limited by the provisions of the Insolvency and Bankruptcy Code (IBC).
The Bench, composed of Justice Vikram Nath and Justice Ahsanuddin Amanullah, clarified that the NCLT can order a revaluation of the Corporate Debtor’s assets when necessary, but such directives must strictly adhere to the boundaries set by the IBC. The court emphasized that the NCLT’s jurisdiction and powers derive solely from the Code and its regulations.
The case involved ACIL (“Corporate Debtor”), admitted into the Corporate Insolvency Resolution Process (CIRP) under the IBC. The Committee of Creditors approved a resolution plan submitted by Ramkrishna Forgings Limited (“Successful Resolution Applicant/SRA”). However, the NCLT, in a previous order, had suspended the approval, prompting an appeal to the NCLAT, which was subsequently dismissed.
The Supreme Court, drawing on legal precedents, stressed the duty of courts and quasi-judicial authorities to provide detailed reasoning for their decisions. The court stated, “Reason is the heartbeat of every conclusion. Without the same, it becomes lifeless.” The verdict directed the NCLT to reconsider the application for approval of the resolution plan.
This ruling establishes a precedent, emphasizing transparency and justification in the NCLT’s decision-making process under the IBC. The court’s scrutiny of the NCLT’s order underscores the importance of reasoned judgments in insolvency proceedings, ensuring fairness and legal soundness in the resolution of corporate insolvency cases.
