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Unlocking Financial Recovery: A Comprehensive Analysis of the Insolvency and Bankruptcy Code 2016

Naresh Kumar Sharma V. Shekhar resorts (689 of 2020)

This appeal has been preferred by the suspended Board of Directors of 'M/s Shekhar Resorts Limited' (Corporate Debtor) by AA (NCLT) where RP 2 NCJ infra approved by the Coc with a voting percentage of 100% later approved by AA.

This appeal was not maintainable as the case has no merit. The AA had a opinion on equitable perception than commercial wisdom.

Legal issue which has been addressed under this case is whether the RP has initiated the correct valuation of CD assets?

Object behind prescribing such valuation process is to assist the Coc to take decision on resolution plan properly.

This case seems to be important because it lays down the concept of commercial wisdom to be predominant than equitable perception. Also, according to this appeal it is clear that appellants want to further run the company and infuse more funds.

Mr. Naresh Kumar Sharma (Ex management) of corporate debtor bought an appeal against Shekhar resorts (R1) NCJ Infrastructures (R2) order of NCLT on admission of CIRP. In the previous order by NCLT it was held that CD is not willful defaulter, which was also accepted by the respondent i.e., Oriental bank of commerce.

The appellant shown that the total debt arising out was of Rs. 19.68 crores in which he had paid Rs 15.88 crores till March 2018.

The question of maintainability of petition under section 7 of IBC was raised. NCLAT dismissed the appeal after hearing both the sides saying that NCLAT cannot interfere on the order passed by NCLT.[1]

Case comment on IBC
This case was referred to NCLAT by suspended board of directors of M/S Shekhar resorts (Corporate debtor) came out through passed judgment by NCLT. Under this case the appeal is not maintainable and the appellants have no case in merit. On the observations of the judges this appeal deserved to be dismissed at a very threshold stage.

Learned council for appellants submits that the RP is approved of 143 crores while the actual value which shall be ascertained is 410 crores. [2]

The main issue was raised in regard to the valuation of assets of corporate debtor.

Appellant being the ex-management of the corporate debtor have assailed the impugned order on various grounds
  1. R2 was offered Rs 143 crores but the actual value of property was 490 crores.
  2. The asset of the corporate debtor comprises of three properties including hotel orient taj, Agra and some plots in greater Noida and Agra. It was claimed the CD had ownership of the above named five-star hotel at Agra in addition to having two more properties and appellants had valuation reports in relation thereto from R1 during CIRP and filed the applications in this regard.
  3. The value of resolution plan is Rs 50 crores less than the fair Value of Rs 157 crores, hence the appellant suffered prejudice.
  4. It was submitted that NCLT order cannot be sustained because it has been passed by one member quorum, while at the time of hearing there were two members quorum.
  5. No opportunity of hearing was provided to appellate for rectification of defects by resolution professional.
  6. The impugned order was passed without comparison of fair value, liquidation value and the actual outlay in resolution plan.
  7. It was further submitted that the 100% claims of financial creditors including Coc have been satisfied on terms of resolution plan that is 90 crores, but the actual liability did not exceed Rs. 120 crores.
On contrary, respondent, no 1 held that appeal is not maintainable and appellant has failed to show how resolution plan is contravention of law. Also added 'Maharashtra seamless limited vs Padmanabhan Venkatesh and ors.' Challenge by appellants to the liquidation value of corporate debtor cannot be sustained and appellants did not cooperate with resolution professional during CIRP and AA had to issue warrant against appellant for seeking cooperation.[3]

no irregularity, much less a material irregularity at the hands of Resolution Professional in Corporate Insolvency Resolution Process or infraction of any of the grounds enumerated under Section 61(3) (i) to (v) have been raised in this appeal to dislodge and disturb the commercial wisdom of Committee of Creditors in approving the Resolution Plan of Respondent No. 2 nor has the Appellant been able to establish any lapse on the part of Adjudicating Authority in examining and determining that the approved Resolution Plan did in any manner not conform to conditions under Section 30(2) of the I&B Code and that the same was in conflict with any extant law.

As regard to quorum special bench of judicial member had been reconstituted by the hon'ble president, during the outbreak of Covid 19 through virtual mode.

As regards to valuation it is apt to notice that the fair value being ascertained at Rs. 157.12 crore and the liquidation value ascertained at Rs. 125.92 crore, respectively, Respondent no 2 offered Rs. 143.50 crore which in the opinion of committee of creditors was the best plan providing for satisfaction of claims of all the stakeholders and being viable and feasible, all aspects of matter having been taken into consideration by the committee of Creditors based on their commercial wisdom, which is not justiciable either before the adjudicating or before this Appellate tribunal. The code does not provide that the value given by the Resolution Applicant should match the fair value or the liquidation value.

Hence, the court ought to cede ground to the commercial wisdom of creditors rather than assess the resolution plan on the basis of quantitative Analysis.

Procedural History (Precedent of the cases)
  1. Maharashtra seemless Limited vs. Padmanabhan Venkatesh & Ors[TK1] [i][4]
  2. K Shashidhar Vs. Indian Overseas Bank and ors [5]


In this case the appellant disagreed on the valuation by RP. According to appellant the fair value which was ascertained at Rs. 157.12 crore and liquidation value which was ascertained at Rs. 125.92 Crore.

On the part of appellant it is seemed to be inequitable, but in the opinion of Committee of Creditors was the best plan providing for satisfaction of claims of all the stakeholders and being viable and feasible, all aspects of the matter having been taken into consideration by the Committee of Creditors based on their commercial wisdom.

Viewed from any angle, the submissions made on behalf of the appellant do not merit acceptance and are required to be rejected. For what has been discussed hereinabove, this appeal fails and stands dismissed

The Code does not provide that the value given by the Resolution Applicant should match the fair value or the liquidation value. On this aspect of the matter, it would be profitable to refer to the observations of Hon'ble Apex Court in 'Maharashtra Seamless Limited' No provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.[6]

Hence, this appeal has been dismissed and held that No irregularity on the part of RP has been noticed in the process of CIRP.

Hence this appeal is not maintainable and appellants had no case on merit, NCLAT dismissed the appeal on 14th September 2020.

  4. Civil Appeal No. 4242 of 2019
  5. CIVIL APPEAL NO.10673 OF 2018

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