NCLT Not a Mere ‘Counter Signatory’, Can Reject CoC-Approved Plan if CIRP Process Appears Suspect: NCLAT

The NCLAT held that the NCLT is not a mere “counter signatory” obligated to mechanically approve a resolution plan passed by the Committee of Creditors (CoC).

It observed that where the Corporate Insolvency Resolution Process (CIRP) appears suspect or suffers from serious irregularities, the Adjudicating Authority can reject the plan despite CoC approval.

The tribunal noted concerns, including alleged erosion of the corporate debtor’s asset value, disappearance of substantial liabilities, and failure of the Resolution Professional to conduct proper audits or disclose relevant facts to the CoC. 

In such circumstances, judicial scrutiny is permissible to ensure fairness, transparency, and compliance with the Insolvency and Bankruptcy Code.

[Nimai Gautam Shah, Resolution Professional of M/s. Zep Infratech Ltd v. Raj Radhe Finance Ltd. & Ors.]