NCLAT Delhi Holds that a Financial Creditor cannot claim Wrong Conduct of a CIRP if he does not Attend the Proceedings

Under the Insolvency and Bankruptcy Code (IBC), 2016, if the Corporate Debtor defaults, a process to resolve the corporate insolvency of such a debtor can be initiated. This process is called the Corporate Insolvency Resolution Process (CIRP). It may be initiated by a financial creditor u/s 7[1], an operational creditor u/s 9[2], or a corporate debtor’s corporate applicant u/s 10[3]. To initiate such a process, an application has to be filed before the National Company Law Tribunal (NCLT).

Recently, the National Company Law Appellate Tribunal (NCLAT) passed an Order in the case of Consolidated Finvest & Holdings Ltd. v. Subhash Kumar Kundra[4] dated 21^stMarch 2023 to hold that a financial creditor who does not attend the proceedings cannot claim that the CIRP was conducted wrongly.

Analyzing the Judgment

Background of Facts

In this case, CLC Industries Ltd. joined the Corporate Insolvency Resolution Process (CIRP), and the Committee of Creditors (CoC) approved a Resolution Plan with a 92.85% voting share. The Adjudicating Body received a resolution plan approval application from the Resolution Professional. Consolidated Finvest& Holdings Ltd. (Financial Creditor/Appellant) filed an application requesting permission to submit a Resolution Plan for the Corporate Debtor as well as the rejection of the Resolution Plan allowed by the CoC. The Adjudicating Body dismissed the Financial Creditor’s claim and imposed a Rs. 10 Lakhs penalty for filing a frivolous application. The Financial Creditor filed an appeal against the order with the NCLAT.

The Decision of NCLAT

The NCLAT upheld the Adjudicating Authority’s decision not to allow the Corporate Debtor permission to submit a Resolution Plan and to reject the Resolution Plan approved by the CoC.

The NCLAT reiterated that a financial creditor who does not attend the session cannot claim wrong conduct of the proceedings and that the Adjudicating Authority rightly refused all of the application’s prayers. The Appellant made several requests in their application, including permission to present a fresh resolution plan. However, the opportunity to do that does not arise because no plan was submitted in response to Form G.

Finally, the appellant’s attorney sought a reduction in the costs imposed by the adjudicating authority. However, the NCLAT had no intention of lowering the amount. Thus, the NCLAT denied the Financial Creditor’s appeal.

Conclusion

The Tribunal dismissed the appeal and held that a financial creditor who does not attend the session cannot claim the wrong conduct of the CIRP.  Furthermore, the Tribunal also rejected the prayer for reducing the costs imposed as the Adjudicating Authority had already reduced it from 25 lakhs to 10 lakhs. Therefore, the appeal was dismissed and the Adjudicating Authority’s decision was upheld.

[1] Section 7, Insolvency and Bankruptcy Code, 2016.

[2] Section 9, Insolvency and Bankruptcy Code, 2016.

[3] Section 10, Insolvency and Bankruptcy Code, 2016.

[4]Consolidated Finvest& Holdings Ltd. v. Subhash Kumar Kundra, CompanyAppeal (AT) (Insolvency) No. 312of 2023.