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Judgment
Ashok Bhushan, J.
These two appeals have been filed against the same order dated 08.12.2025 passed by the adjudicating authority (National Company Law Tribunal, Ahmedabad Bench, Court – I) in I.A. (Plan)/17 (AHM)/2025. By the impugned order, adjudicating authority has rejected the I.A. (Plan)/17 (AHM)/2025 and has directed for liquidation of corporate debtor under Section 33(1)(b) of the Insolvency and Bankruptcy Code, 2016, (for short the Code or the IBC). Aggrieved by the said order, these two appeals have been filed.
Comp. App. (AT) (Ins.) No. 164/2026 has been filed by Ms. Sonali Sumit Mehta, the Successful Resolution Applicant (SRA) and Comp. App. (AT) (Ins.) No. 165/2026 has been filed by Mahadev Construction Pvt. Ltd., the sole member of the Committee of Creditors (CoC).
Brief facts of the case necessary to be noticed for deciding the appeals are:
The corporate debtor – Rexsona Tiles Pvt. Ltd. was incorporated on 31.01.2014. Company is involved in cutting, shaping and finishing of stones used in construction. Corporate debtor earned revenues in Financial Year 2021-22, 2022-23 & 2023-24 and also losses in the respected years.
Company sold its asset in the year 2022-23. Audit Report of 2023-24 states that company has sold out entire property, plant and equipment in the year 2024. On 31.03.2024, the inventory of the corporate debtor is NiL.
The corporate debtor took a loan from Mahadev Constructions Private Limited of Rs. 8 lakhs on 17.01.2024.
A Section 9 application was filed by M/s. Bell Impex on 04.03.2024 against the corporate debtor. Corporate Insolvency Resolution Process (CIRP) against the corporate debtor commenced on 06.12.2024. Interim Resolution Professional (IRP) constituted the CoC with Mahadev Construction Pvt. Ltd. as sole member of the CoC with 100% voting shares. Form – G was published in response to which the appellant – Sonali Sumit Mehta in Comp. App. (AT) (Ins.) No.164/2026 filed a resolution plan. The resolution plan of Sonali Sumit Mehta was approved in 8th CoC meeting on 18.08.2025. I.A. (Plan)/17 (AHM)/2025 was filed by the Resolution Professional (RP) for approval of the resolution plan.
Adjudicating authority considered the resolution plan and by impugned order rejected the application for approval of the resolution plan and directed for liquidation under Section 33(1)(b) of the IBC, aggrieved by the aforesaid order, these two appeals have been filed.
We have heard learned counsel Mr. Karan Valecha appearing for the appellant in Comp. App. (AT) (Ins.) No. 164/2026 as well as learned counsel Mr. Abhishek Anand appearing for the appellant in Comp. App. (AT) (Ins.) No. 165/2026. Mr. Vinod Tarachand Aggarwal, RP has appeared in person.
Learned counsel for the appellant challenging the order submits that the resolution plan submitted by SRA was approved by 100% CoC. Adjudicating authority has rejected the application for approval of the resolution plan interfering with the commercial wisdom of the CoC. Observation of the adjudicating authority that the resolution plan is not feasible and viable is interfering with the commercial wisdom of the CoC which after being satisfied with feasibility and viability of the resolution plan has approved the same. Doubts raised by the adjudicating authority on the whole CIRP process were unfounded. The resolution plan satisfied statutory requirement of Sections 30 & 31 of the IBC. Adjudicating authority could not have rejected the plan relying on Sections 30 & 31(2) and Regulation 38(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, (for short the CIRP Regulations, 2016). Adjudicating authority erred in substituting its own subjective assessment of plan over the commercial wisdom exercised by the CoC. Resolution plan met all statutory requirement including Section 29A eligibility, feasibility and viability and all other requirements. Observation of the adjudicating authority that appellant – Mahadev Construction Pvt. Ltd. being not an institution financial creditor does not hold expertise to perform the function of the CoC is against the scheme of the Code. The mere fact that corporate debtor has no employee or business cannot be a reason to conclude that corporate debtor cannot be revived as a going concern. Learned counsel for the appellant in both the appeals have raised above submissions, challenging the order of the adjudicating authority rejecting the plan and directing for liquidation.
We have considered the submissions of the counsel for the parties and perused the records.
The question to be considered and answered in this appeal is as to whether the order of the adjudicating authority dated 08.12.2025 rejecting the I.A. (Plan)/17(AHM)/2025 is in excess of its jurisdiction and contrary to the limited scope of interference conceded to adjudicating authority while considering an application for approval for resolution plan. We need to first notice that adjudicating authority in the impugned order has clearly noticed the parameters and limited scope of interference by the adjudicating authority. It is sufficient to refer to paragraph 72 of the judgment, where adjudicating authority after noticing the judgment of the Hon’ble Supreme Court in ‘K. Sashidhar’ Vs. ‘Indian Oversees Bank & Ors.’ reported in [(2019) 12 SCC 150], has made following observations:
“72.This Tribunal is fully conscious of the principle that judicial intervention by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, must be limited and restrained. As reiterated in a catena of decisions by the Hon'ble Supreme Court, including in K. Sashidhar v. Indian Overseas Bank [2019] 102 taxmann.com/12 SCC 150, Committee of Creditors of Essar Steel Ltd. V. Satish Kumar Gupta 8 SCC 531, Ebix Singapore (P) Ltd v. Committee of Creditors of Educomp Solutions Ltd [2021] 130 taxmann.com 208, Vallal RCK v. Siva Industries &Holding Ltd ((2022) 9 SCC 803), the commercial wisdom of the CoC is not to be interfered with, save in exceptional circumstances. However, this Tribunal cannot remain a mute spectator where the very anchor of the insolvency resolution process, the bona fide, and the commercial judgment of the CoC is corroded by patent arbitrariness and opacity.”
The adjudicating authority has passed the impugned order after elaborately considering all relevant facts and sequence of the events, details of the resolution plan. Adjudicating authority has noted the background facts, the actions of the corporate debtor financial position of the corporate debtor. Adjudicating authority after noticing all relevant facts has highlighted certain relevant facts in paragraph 67 of the judgment written facts pertaining to the corporate debtor and CIRP in paragraph 67 of the judgment. It is useful to notice paragraph 67 of the judgment which is as follows:
“67.ANALYSIS AND FINDINGS OF THIS TRIBUNAL
Before adverting to the Application filed by the RP and the submitted Resolution Plan, we consider it appropriate to highlight essential facts about the case as available in the records.
•The corporate debtor was incorporated on 31.01.2014.
•Loan of Rs 8,00,000 was obtained on 17.01.2024 from M/s Mahadev Construction Private Limited and this company formed the single member Committee of Creditors.
•Application under section 9 was filed by M/s Bell Impex on 04.03.2024.
•The company did not have any employee at the time of publishing Form G and thereafter.
•The company did not have any business and was not a going concern as per Information Memorandum.
•One motorcycle and one computer are the only plant and machinery of the Corporate Debtor.
•The Corporate Debtor had tangible assets of Rs 2756.77 lakhs as on 31.03.2023 and it sold all the assets in the financial year 2023-2024 and only assets remaining were computer and motorcycle (of value Rs 0.35 lakhs as on 31.03.2024). A cash of Rs 2427.75 lakhs was received due to sale of assets. That means by selling the assets, the company did not have any machines/plant/building can be used later on to carry on any business and the RP in the Information Memorandum noted that the Corporate Debtor is not a going concern entity.
•The Corporate Debtor sold entire stock/inventory during FY 2023-2024.
•The Corporate Debtor had a business loss of Rs 20,54,00,321.
•Net worth of the Corporate Debtor is negative by Rs 788.88 lakhs.
•It appears that the case of the Corporate Debtor was under income tax scrutiny but may not have proceeded with due to moratorium under section 14 of the IBC, 2016.
•Many civil suits were filed against the company.
•13 parties have filed FIR in Police Station due to failure of company to pay the creditors.
•As on 06.12.2024, the CD had an amount receivable of Rs 3,59,14,128 from sundry debtors for exports made from foreign parties. No information on any permission taken by the CD from RBI for non-receipt of the money as per FEMA Regulations.
•Total liquid assets as on 06.12.2024 were: Cash Rs 14,509; HDFC Bank Balance of Rs 34,25,228.33; Bank FD in Cosmos Bank of Rs 9,00,000. Total liquid assets come to Rs 43,39,737 with the company, and these belong to the CD and ultimately will be owned by the RA (if plan is approved), against the Plan value of Rs 53 lakhs. There are many additional current assets, including potential tax asset in the form of business loss of more than Rs 20 crores, as discussed in this order.
•Fair value of CD is Rs 85,60,241.50
•Liquidation Value is Rs 47,43,382.5, whích mostly comprises of cash on hand, bank balance, and fixed deposit in bank.
•Resolution Plan Value Rs 53,00,000/-.”
Adjudicating authority has noticed that corporate debtor in the year 2023-24 has sold entire stock inventory and only asset remaining with corporate debtor was a computer and motorcycle for value of Rs.0.35 lakh as on 31.03.2024. A cash of Rs.2,427.75 lakh was received due to sale of assets.
Corporate debtor as on 06.12.2024 has total liquid assets of Rs.43,39,737/-.
Adjudicating authority observed that when corporate debtor has liquid assets of more than Rs.43 lakh no reasons is forthwith coming as to why the loan of Rs.8 lakh was obtained on 17.01.2024 and immediately thereafter on 04.03.2024, Section 9 application was filed by one operational creditor.
Adjudicating authority has noticed the provisions of Sections 31 & 30(2) and Regulation 38(4) of the CIRP Regulations, 2016. Adjudicating authority noticing the sequence of the events and events of the case had observed that no justifiable reasons have shown to seek a loan of Rs. 8 lakhs from Mahadev Construction company on 17.01.2024 which is a miniscule amount in comparison to cash receipt of Rs.2,427.75 lakh due to sale of asset in the same order. It is relevant to extract certain observations made in paragraph 74 by the adjudicating authority, which is as follows:
“74.…There appears to be no justifiable reason to seek a loan of Rs 8 lakhs from M/s Mahadev Construction Company on 17.01.2024 as this amount is miniscule in comparison to cash received of Rs 2427.75 lakhs due to sale of assets in the same year, who became the sole CoC member and was obligated to perform the functions of the CoC during the CIRP period. The sole CoC member apparently did not look into the fact that the Corporate Debtor had no business, no assets, and no employees and whether the liquidation could have been a better option. The Corporate Debtor already had cash/cash balance equivalent of Rs 43 lakhs and many other valuable assets, including tax assets due to business loss of more than Rs. 20 crores even then it approved the plan of Rs 53 lakhs. The Plan value of Rs 53 lakhs indicate that the business had no goodwill or intangible. The entire exercise suggests an accommodation or collusive arrangement with the sole purpose of helping the Corporate Debtor obtain benefits, reliefs, and concessions under Section 32A of the IBC, 2016, particularly regarding non-recovery of export proceeds, constituting a potential violation of the Foreign Exchange Management Act, 1999 (FEMA), and attracting inquiry under FEMA Section 13.”
Adjudicating authority in the same paragraph has further observed:
“74.…The CD has no business, no assets, and no employees. None is going to benefit from the money received from the Resolution Plan other than the sole CoC member and the suspended management. The RA proposed payment of Rs 53 lakhs. The CD already had about Rs 43 lakhs and that would go to the Resolution Applicant, as it will have control and ownership of the CD. The Resolution Applicant also gets right to potentially misuse the business loss by transferring the same to a profit making company and reduce tax payment. It raises concerns about its alignment with the IBC's objective of genuine insolvency resolution, as there is no resolution of insolvency in this case.”
The above observations made by the adjudicating authority were based on relevant facts occuring including the financial statements, balance sheet and liquid cash of the corporate debtor. The above observation of the adjudicating authority are based on relevant facts of the record and cannot be ignored. The jurisdiction of adjudicating authority to interfere with the application praying for approval of resolution plan approved with CoC has applied its mind to the above aspect. Adjudicating authority noticing the Regulation 38(3) of the CIRP Regulations, 2016, has come to the conclusion that resolution plan failed to specify the criteria laid down in the above regulation. In paragraphs 82 & 83 of the impugned order, following has been observed:
“82.The Tribunal would also like to mention that the underlying purpose of a resolution plan is not merely the settlement of claims but the revival of the Corporate Debtor as a going concern in a manner that is commercially viable and legally compliant. In this regard, Regulation 38(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, outlines key parameters that every resolution plan must comply with. The said regulation reads as under:
"Regulation 38(3): The resolution plan shall demonstrate that -
(a)it addresses the cause of default;
(b)it is feasible and viable;
(c)it has provisions for its effective implementation;
(d)it has provisions for approvals required and the timeline for the same; and
(e)the resolution applicant has the capability to implement the resolution plan.”
83.In the present case, upon a detailed consideration of the material on record, it is evident that the resolution plan fails to satisfy the criteria laid down in the above regulation. Further, section 30 (2) of the IBC, 2016 requires that the plan provide for the implementation of the plan and resolution of the insolvency. The RA has no plans to provide a resolution to the corporate insolvency. As discussed in detail with cogent reasons, the Plan fails to meet the requirements of clauses (c), (d), (e), and (f) of Section 30(2) of the IBC, 2016.”
The adjudicating authority on valid reasons have observed that the resolution plan is not commercially feasible and viable. Feasibility and viability of resolution plan is one of the statutory requirements as required by Regulations 38(3)(b) of the CIRP Regulations, 2016. Adjudicating authority has returned its finding that plan is not feasible and viable in paragraph 80 of the judgment, which is as follows:
“80.In view of the facts discussed above, we resist short of stating that the CoC not only acted in a "capricious, arbitrary, irrational" manner but also approved the plans that contravene the provisions of IBC and the Regulations. In that regard, the CoC has failed to exercise its commercial wisdom in deciding on the Resolution Plan, which, in a real sense, does not take into account the ground realities of the CD and is not commercially feasible and viable. There are no assets with the Corporate Debtor and therefore value maximisation from the assets of the CD does not arise.”
Adjudicating authority has come to the conclusion that resolution plan does not comply with the provisions of Sections 30 & 31 & Regulation 38(3) of the CIRP Regulations, 2016, which was only after recording the said finding that the plan has been rejected. In paragraph 86, following findings have been recorded:
“86.Thus, in substance and spirit, the resolution plan does not comply with the provisions of section 30 and 31 of the IBC, 2016 and the Regulation 38(3), and the manner in which the CoC has approved it without these essential elements being satisfied raises serious questions about the integrity of the resolution process as a whole.”
Adjudicating authority after coming to the conclusion that resolution plan is in violation of the statutory provisions have directed for liquidation under Section 33(1)(b). When the resolution plan has been rejected Section 33(1)(b) obliged the adjudicating authority to pass an order for liquidation of the corporate debtor. In paragraph 93, adjudicating authority has directed liquidation of the corporate debtor. Paragraph 93 is as follows:
“93.As a consequence, following the rejection of the resolution plan under Section 31(2) for non-compliance with statutory requirements, the Tribunal, pursuant to Section 33(1)(b) orders the liquidation of the Corporate Debtor to maximize creditor value and conclude the insolvency process at the earliest. The Corporate Debtor's lack of business operations, absence of employees, and no tangible assets, and financial assets being mainly cash in the bank accounts, coupled with the resolution plan's failure to propose a viable revival strategy, render liquidation the only feasible course to maximize creditor value and achieve the IBC's objective of efficient insolvency resolution.”
The detailed consideration by the adjudicating authority of the resolution plan and statutory requirement which has not been fulfilled in the resolution plan are the reasons for rejecting the resolution plan. We thus do not find any substance in the submission of the appellant that adjudicating authority without finding any statutory violation of provisions of Section 30(2) has rejected the resolution plan. Adjudicating authority has considered all aspects of the matter and after being satisfied that plan does not satisfy the requirement of Section 30(2) as well as Regulation 38(3) of the CIRP Regulations, 2016 has rejected the resolution plan.
The order of the adjudicating authority thus cannot be said to be beyond the jurisdiction of the adjudicating authority. Thus, we are satisfied that in the facts of the present case no error has been committed by the adjudicating authority in rejecting the resolution plan and directing for liquidation.
We do not find any sufficient grounds made out by the appellant to interfere with the order of the adjudicating authority in exercise of the appellate jurisdiction.
Both the appeals are dismissed.