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Judgment
Ashok Bhushan, J.
This Appeal by a Suspended Director of the Corporate Debtor has been filed challenging the order dated 16.10.2025 passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi Bench V in IA No. 30 of 2024 by which order IA No.30 of 2024 has been allowed and the Resolution Plan submitted by Respondent No.3 has been approved.
Brief facts of the case necessary to be noticed for deciding the Appeal are:-
The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor commenced by an order dated 01.08.2023 passed in application under Section 7 filed by the State Bank of India alleging default of Rs.29 Crores. Public announcement was made under Form A. Form G was issued. Appellant had challenged the order dated 01.08.2023 by filing a Company Appeal (AT) (Insolvency) No.1076 of 2023 which came to be dismissed by this Tribunal on 27.03.2024. On 15.06.2024 in 12th CoC meeting, the Resolution Plan submitted by Respondent No.3 was approved with 100% vote share. Appellant filed an IA No.5201 of 2024 praying for rejection of the Resolution Plan with certain other prayers. The application IA No.5201 of 2024 came to be heard and dismissed by the Adjudicating Authority vide order dated 15.09.2025. In the application IA No.5201 of 2024, Appellant has questioned the eligibility of SRA. The Adjudicating Authority by the impugned order has allowed the IA filed by the Resolution Professional for approval of the plan and Resolution Plan has been approved.
We have heard Shri Sumant Batra, Learned Counsel for the Appellant, Shri Abhishek Anand, Learned Counsel appearing for the Respondent No.1 and Shri Harshit Khare, Learned Counsel for the Committee of Creditors (CoC).
Learned Counsel for the Appellant challenging the impugned order submits that the SRA was ineligible to submit the Resolution Plan it being related party of the Corporate Debtor within the meaning of Section 5(24)(h) of the IBC. It is submitted that the term sheet was entered between the Corporate Debtor and the Successful Resolution Applicant (SRA) as investor on 09.06.2022 under which the SRA was to invest the amount towards one-time settlement with bank. Investor has also deposited an amount of Rs.10,00,000/- and investor was to get 75% shareholding in the company. Counsel for the Appellant referring to various clauses of non-binding term sheet submits that the said clearly indicate that investor was a related party who was to take part in the operation of the company. Counsel for the Appellant referring to the earlier order passed in IA No.5201 of 2024 submits that in the said IA, the Adjudicating Authority has observed that at the time of approval of the Resolution Plan, issue shall be independently considered. It is submitted that the SRA being ineligible, the Resolution Plan could not have been approved and the Adjudicating Authority committed error in approving the Resolution Plan.
Counsel for the Resolution Professional submits that non-binding term sheet itself contemplated pre-conditions and no definite agreement was entered between the parties, hence, actually investor never came in position to advice the Corporate Debtor, ingredients of Section 5(24) (h) were not met. It is further submitted that the Appellant having raised the objection regarding eligibility of SRA in IA No.5201 of 2024 which application having been dismissed on 15.09.2025 which order has become final it is not open for the Appellant to raise the said question again in this Appeal.
Counsel for the CoC also supported the submission of the Resolution Professional and submits that the SRA was fully eligible and does not suffer from any eligibility. It is submitted that the State Bank of India has refunded the amount of Rs.10,00,000/- received from investors even before filing of Section 7 application.
We have heard Counsel for the parties and perused the record.
The only question to be answered in this Appeal is as to whether SRA is ineligible being related party to the Corporate Debtor. Learned Counsel for the Appellant has relied on Section 5(24)(h) of the IBC which is as follows:-
“5.Definitions. –(24) “related party”, in relation to a corporate debtor, means-
(h)any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act;”
The ineligibility of the SRA is contended on the basis of ‘non-binding term sheet- subject to contract’ dated 09.06.2022 which has been brought on record as Annexure A-3 to the Appeal. Counsel for the Appellant submits that several clauses of the term-sheet indicate that main investor Shipra Gupta who is SRA was to act as operating partner and investor was to get 75% in the company. Learned Counsel for the Appellant has referred to Clauses 8, 12, 13, 19 and 20 of the term sheet which is as follows:-
“8.One Time Settlement or OTS: The amount required to be infused by Investors to settle all Principal and interest obligations of Term Loans and Working Capital Limited taken by Company from State Bank of India (earlier State Bank of Travancore) from time to time over the years 2013 till date. As per current discussions, we understand that the amount is Rs. 65m No third-party debt liabilities on the Company post-Closing: Subject to OTS and use of Investment Amount as agreed below, Company shall not have any third-party dues at the time of Closing except for Statutory liabilities, unless agree with Existing Promoter.
Any third-party obligations should be taken over by Mr. Sunil Kumar Juneja in his personal capacity or a payment schedule to be agreed to be with such creditors which shall be paid on behalf of M. Sunil Kumar Juneja. [Discussion point: Aim is to ensure that no third party can drag the company into NCLT/IBC/or create any nuisance for its dues once the plant has restarted post change of management]
All existing promoter loans shall be written off and extinguished [unless this allows for a tax-efficient way to pay the operating profit incentive to Mr. Juneja
12.Investors Stake Investor(s) shall got a 75% seventy-five percent in the Company on a Fully Diluted Basis on Investment of equity amount as above.
Such stake in the Company includes all real assets such as land, building, plant, and machinery as well as intellectual properties including Brand(s), Copyrights, and any other research and designs, etc. with the Company.
Any Intellectual property including Brand(s), Copyrights and any other research and designs in the name of Existing Shareholders shall be transferred to Company as part of this transaction, if any, at no cost for the Company.
13.Operating Partners and their proposed remuneration Mr. Sunil Kumar Juneja & Shipra Gupta shall be the operating partners and shall draw an annual remuneration of Rs 24m and Rs 15m) respectively during the first year of operation subject to the commencement of plant operations & realization of cash profit from the Business. This amount may be revised mutually between the shareholders depending upon the profitability of the operations.
19.Restrictions on Existing Shareholders: Existing Shareholders undertake that they shall not sell, encumber, pledge or create a lien on their shares, or do any other act which has the effect of undermining the underlying beneficiary/fiduciary/legal rights and responsibilities of the Existing Shareholders. Any action from the Existing Shareholders shall be with the express written consent of the Investors till the Definitive Agreements are valid However, such permission shall not be unreasonably withheld if such a lien is offered to financial institutions and/or banks for seeking funds for the Company's activity.
20.Lock-in Period: Existing Promoters will not sell their shares to any third party prior to the third anniversary of the Closing of this investment.”
Counsel for the Respondent referring to the term sheet has referred to condition precedent which are dealt in clauses 32, 33 and 34. It is submitted that the term sheet contemplated a futuristic business plan and investor was to get 75% in company after definite agreement was to be executed. It is submitted that no definite agreement was ever executed and when definite documentation did not take place, the business plan did not come into existence, hence, there was no occasion for director or partner of the company to advice on the direction or instructions of the investors.
From the relevant clauses of the term sheet, as noticed above, it is clear that term sheet is non-binding term sheet which was subject to contract. The contract which is definite documentation never took place and the allotment of share was proposed at closing, no share ever allotted to the investors.
The ingredients of Section 5(24)(h) were, thus, not present in the facts of the present case but hold SRA as related party.
The next submission which has been advanced by Counsel for the Respondent is that the Appellant has filed an IA No.5201 of 2024 where Appellant has contended that SRA is ineligible. In the IA No.5201 of 2024, following prayers were made which have been noted in paragraph 2 of the order dated 15.09.2025:-
“2.The Applicant in the present application has prayed for the following reliefs:
i.Reject the resolution plan of successful resolution applicant approved by the Committee of Creditors in filed by resolution professional vide I.A. No. 30 of 2024;
ii.Allow the present Application and direct the Respondent/COC to consider and approve the OTS Plan given by the Ex-Management of the Corporate Debtor.
iii.Pass any further order as deemed necessary to protect the interest of the applicant and to meet the end of justice.”
In the said application, the Adjudicating Authority dismissed the said application by order dated 15.09.2025 after considering the term sheet relied by the Appellant in the present case. The Adjudicating Authority after hearing the parties has held that the SRA is not related party within the meaning of Section 5(24)(h). In paragraph 12 of the judgment, following was held:-
“12.Since, no definitive Investment agreement (as required under the Non-Binding Term Sheet) was executed between the SRA and the Corporate Debtor, and Rs 10 lakhs deposited by the SRA with the SBI was already returned back before filing Section 7 Petition, the SRA is/was not in position to give any advice, directions or instructions to the director, partner or manager of the Corporate Debtor for doing act. Further, as held by the Karnataka High Court in M/S. Azeem Infinite Dwelling v. M/S. Patel Engineering Ltd. (MANU/KA/1320/2024) and Delhi High Court in Oravel Stays Private Limited vs Zostel Hospitality Private Limited, Non-Binding Term Sheet is merely an offer unless definitive agreement is executed between the parties. Therefore, we are of the view that mere signing Non-Binding Terem Sheet by Ms. Shipra Gupta (on behalf of Investors), SRA cannot be said to be related party' of the Corporate Debtor in terms of Section 5(24)(h) and therefore not ineligible to submit Resolution Plan in terms of Section 29A (j) of the IBC.”
The submission of the Appellant that the Adjudicating Authority has held that the issue shall be independently considered while considering IA No.30 of 2024 also need consideration. The said observation has been made in paragraph 13:-
“13.The Applicant has, also alleged that the Resolution plan submitted by the SRA lacks a clear, detailed financial strategy or projections, which undermines its feasibility. Section 31 requires the Adjudicating Authority to ensure that the plan is viable and capable of implementation. The Applicant has also stated that Section 31 mandates that creditors, particularly operational creditors, must receive at least the liquidation value in a resolution plan. It is further submitted by the Applicant that the steep reduction in payments to operational creditors as outlined in this plan is indicative of non-compliance with this requirement. By offering creditors substantially less than what they would receive under liquidation, the plan is not in adherence to the liquidation value provision. It is further contended that the plan does not comply with the mandate of Section 31 of the Code and Regulation 38 of CIRP Regulations. The Applicant has however not provided any material/document to substantiate these allegations. Further, we have yet to consider and examine the merits of the Resolution Plan and to see whether Resolution Plan meets the requirements of Section 30(2) including relevant Regulations. Therefore, at this stage, when the merits of Resolution Plan have not been considered, and in absence of any material placed on record by the Applicant, no specific findings on these issues can be recorded. Needless to say, these issues shall independently be considered while considering IA No. 30 of 2024 for Approval of Resolution Plan.”
The observation made in paragraph 13 of the judgment were with regard to allegation of the applicant that the plan submitted by SRA lacks a clear, detailed financial strategy or projections, which undermines its feasibility. In the above context, the Adjudicating Authority held that the said issue shall independently be considered while considering IA No.30 of 2024. The Adjudicating Authority having held that the SRA was not ineligible to submit the Resolution Plan, the said findings having been returned in paragraph 12 of the judgment dated 15.09.2025, the order passed by the Adjudicating Authority on 15.09.2025 rejecting the application of the Appellant having never been challenged has become final. When the issue was raised of ineligibility of the SRA by Appellant by filing an application which has been rejected by the Adjudicating Authority, the Appellant cannot be allowed to raise the said issue again and again. The Adjudicating Authority vide order dated 15.09.2025 having found SRA not ineligible the said issue has become final. We, thus, do not find any substance in the submission advanced by the Appellant in this Appeal. We do not find any error in the order dated 16.10.2025 passed by the Adjudicating Authority approving the Resolution Plan. There is no merit in the Appeal. The Appeal is dismissed.