CASE NAME	Ramkrishna Forgings Limited vs Ravindra Loonkar, Resolution Profession of Acil Limited & Anr.
CITATION	Civil Appeal No.1527/2022
COURT	In the Supreme Court of India.
Bench	Vikram Nath
Date of Decision	21 November, 2023

Introduction

The case of Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Professional of ACIL Limited & Anr. It marks a pivotal moment in India’s insolvency jurisprudence, addressing the balance between judicial intervention and the commercial wisdom of the Committee of Creditors (CoC). This Supreme Court ruling delves into the extent of adjudicatory powers under the Insolvency and Bankruptcy Code (IBC), 2016, particularly in relation to the approval and valuation of resolution plans.

The dispute arose when the National Company Law Tribunal (NCLT) kept the approval of a CoC-sanctioned resolution plan in abeyance, directing a fresh revaluation of the corporate debtor’s assets despite no objections from stakeholders. The National Company Law Appellate Tribunal (NCLAT) upheld this decision, prompting an appeal before the Supreme Court. At the heart of the case was the question of whether the adjudicating authorities could override the CoC’s decision-making authority without clear statutory justification.

By reaffirming the supremacy of commercial wisdom and restricting unwarranted judicial intervention, the Supreme Court’s verdict reinforced the principles of procedural efficiency and statutory compliance under the IBC. This landmark ruling underscores the judiciary’s role in maintaining the delicate balance between regulatory oversight and the autonomy of insolvency resolution mechanisms.

FACTS

The appellant, Ramkrishna Forgings Limited, challenged the adjudicatory approach adopted in the Corporate Insolvency Resolution Process (CIRP) of ACIL Limited (the corporate debtor), specifically regarding the approval and valuation of its resolution plan. The dispute originated from the National Company Law Tribunal’s (NCLT) decision to delay approval of the resolution plan and order a revaluation of the corporate debtor’s assets despite the plan having already secured the approval of the Committee of Creditors (CoC) with an overwhelming majority of 88.56%.

ACIL Limited, a manufacturer of precision engineering and automobile components, was admitted into CIRP following an application filed by IDBI Bank Ltd. The Resolution Professional (RP), Mr. Ravindra Loonkar, was appointed to oversee the process. As part of the resolution process, the RP invited expressions of interest, leading to Ramkrishna Forgings Limited submitting its initial resolution plan on April 11, 2019. This plan underwent multiple revisions based on negotiations with the CoC, ultimately culminating in a final plan submitted on August 5, 2019, which proposed a total payout of ₹129.5 crores. The CoC approved the resolution plan on August 14, 2019, with a significant majority, and the RP subsequently submitted it to the NCLT for approval.

Despite meeting all procedural requirements under the Insolvency and Bankruptcy Code (IBC), 2016, the NCLT, through its order dated September 1, 2021, deferred approval of the resolution plan and directed the Official Liquidator (OL) to conduct a fresh valuation of the corporate debtor’s assets. The tribunal justified its decision by raising concerns that the resolution plan’s financial offer was close to the fair market value of the assets. The order was challenged before the National Company Law Appellate Tribunal (NCLAT), which upheld the NCLT’s ruling, stating that given the “figures of crores” involved, a fresh valuation was justified.

The appellant contended that the NCLT and NCLAT had exceeded their jurisdiction under the IBC by interfering with the commercial wisdom of the CoC. It argued that the resolution plan had undergone extensive deliberation and revisions, had been approved by the CoC after multiple valuation reports were already considered, and fully complied with Sections 30 and 31 of the IBC. The appellant further maintained that the Code does not grant the adjudicating authority discretionary power to order a revaluation when a resolution plan meets all statutory criteria.

Dissatisfied with the decisions of the NCLT and NCLAT, Ramkrishna Forgings Limited filed an appeal before the Supreme Court, raising critical questions about the scope of judicial intervention in CIRP, the finality of CoC-approved plans, and the procedural adherence required under the IBC. The case underscored the balance between regulatory oversight and the autonomy of insolvency resolution, making it a significant ruling in India’s insolvency framework.

ISSUES

1. Whether the NCLT’s decision to order a revaluation of the corporate debtor’s assets, despite the resolution plan being approved by the Committee of Creditors (CoC) with an 88.56% majority, was legally justified under the Insolvency and Bankruptcy Code (IBC), 2016.
2. Whether the adjudicating authorities (NCLT and NCLAT) exceeded their jurisdiction by interfering with the commercial wisdom of the CoC in contravention of Sections 30 and 31 of the IBC.
3. Whether the delay in approving the resolution plan due to judicial intervention undermined the principles of procedural efficiency and statutory compliance established under the IBC.

ARGUMENTS FROM BOTH SIDES 

Arguments by the petitioners

• The petitioner argued that the NCLT and NCLAT overstepped their jurisdiction by ordering a revaluation of the corporate debtor’s assets despite the resolution plan securing an 88.56% majority approval from the Committee of Creditors (CoC). This intervention violated the principle of commercial wisdom under the Insolvency and Bankruptcy Code (IBC), 2016.
• It was contended that the resolution plan adhered to all statutory requirements under Sections 30 and 31 of the IBC. The valuation process was conducted per regulations, with multiple rounds of negotiation and expert assessments. The CoC’s decision was final and binding, leaving no scope for additional judicial scrutiny.
• The petitioner highlighted that the NCLT’s decision to keep the resolution plan in abeyance and order a revaluation caused unnecessary delays, contradicting the IBC’s objective of ensuring timely resolution. The prolonged litigation jeopardized the corporate debtor’s revival and undermined the resolution applicants’ confidence.
• No stakeholders, including financial creditors and the resolution professional, had raised objections to the valuation of assets or the resolution plan. The NCLT’s unilateral decision to reassess asset valuation lacked any factual or legal justification, making the order arbitrary and ultra vires.

Arguments by the Respondents

• The respondents defended the NCLT’s order, arguing that given the significant financial impact of the resolution plan, ensuring an accurate valuation was crucial. They contended that the approved financial offer was close to the fair market value, warranting a fresh valuation to protect creditor interests.
• While commercial wisdom is generally respected, the respondents asserted that courts have the authority to intervene in cases where the valuation process appears flawed or questionable. They argued that the NCLT’s directive aimed to enhance transparency and fairness in the resolution process.
• The respondents maintained that insolvency proceedings involve not just corporate creditors but also public interest considerations. Ensuring the best possible value for assets was essential to prevent undue financial losses to stakeholders, including public sector creditors.

DECISION

In Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Professional of ACIL Limited & Anr., the Supreme Court addressed key concerns regarding judicial intervention, the commercial wisdom of the Committee of Creditors (CoC), and procedural compliance under the Insolvency and Bankruptcy Code (IBC), 2016.

The Court held that the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) had overstepped their jurisdiction by ordering a revaluation of ACIL Limited’s assets despite the resolution plan securing an 88.56% approval from the CoC. It reaffirmed that adjudicating authorities cannot interfere with the commercial wisdom of the CoC unless there is a clear violation of the statutory framework under Sections 30 and 31 of the IBC. The Court emphasized that the NCLT’s order, which delayed the approval process and mandated a reassessment of asset valuation, contradicted the IBC’s objective of ensuring a time-bound resolution.

Consequently, the Supreme Court set aside the decisions of the NCLT and NCLAT, directing the immediate approval of the CoC-approved resolution plan. This ruling reinforced the principle that judicial authorities must uphold procedural efficiency while respecting the autonomy of insolvency resolution mechanisms under the IBC.

CONCLUSION

The Supreme Court’s ruling in Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Professional of ACIL Limited & Anr underscores the importance of procedural integrity, statutory compliance, and the non-interference of adjudicating authorities in the commercial wisdom of the Committee of Creditors (CoC) under the Insolvency and Bankruptcy Code (IBC), 2016.

The Court held that the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) exceeded their jurisdiction by ordering a revaluation of the corporate debtor’s assets despite the resolution plan securing an 88.56% approval from the CoC. It reiterated that the commercial wisdom of the CoC, once exercised within the statutory framework, is not subject to judicial review unless there is a clear violation of Sections 30 and 31 of the IBC. The Court emphasized that the NCLT’s decision to keep the resolution plan in abeyance contradicted the IBC’s objective of ensuring a time-bound insolvency resolution process.

By setting aside the NCLT and NCLAT orders and directing the immediate approval of the CoC-approved resolution plan, the Supreme Court reinforced the principle that insolvency resolution must be free from unnecessary judicial intervention. This decision serves as a crucial precedent, affirming that while regulatory oversight is essential, it must not impede the efficient and fair execution of the insolvency framework established under the IBC.