Supreme Court Sets Aside NCLAT and NCLT Orders in ACIL Insolvency Case, Upholds CoC’s Commercial Wisdom

In a landmark judgment, the Supreme Court of India, in a significant ruling, overturned the decisions of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) in the matter of Ramkrishna Forgings Limited v. Ravindra Loonkar, Resolution Professional of ACIL Limited & Anr. The apex court’s bench, comprising Justices Vikram Nath and Ahsanuddin Amanullah, allowed the appeal filed by Ramkrishna Forgings Limited, emphasizing the limited scope of judicial intervention in commercial decisions made during the Corporate Insolvency Resolution Process (CIRP). 

In its judgment, the Supreme Court observed, “The moot question involved is the extent of the jurisdiction and powers of the Adjudicating Authority to go on the issue of revaluation.” The Court highlighted that the Adjudicating Authority’s jurisdiction under the Insolvency and Bankruptcy Code is strictly structured by the provisions of the Code, particularly under Sections 30 and 31. The Court noted, “The jurisdiction of the adjudicating authority and the appellate authority cannot extend into entering upon merits of a business decision made by a requisite majority of the CoC in its commercial wisdom.”

The case revolved around the insolvency resolution of ACIL Limited, a prominent manufacturer of precision engineering and automobile components. The resolution plan proposed by Ramkrishna Forgings Limited had been approved by the Committee of Creditors (CoC) but was kept in abeyance by the NCLT, which directed a re-valuation of the corporate debtor’s assets. This decision was later upheld by the NCLAT.

The Supreme Court’s decision underscored the supremacy of the commercial wisdom of the CoC, stating that “the CoC’s decision-making process in approving Resolution Plans is not subject to unnecessary judicial scrutiny and intervention.” The judgment also clarified the role of the Official Liquidator in valuation, stating that their involvement for re-valuation is not aligned with the Code’s framework, which has a specific mechanism for valuation under CIRP Regulations.

Date of Decision: 21st November 2023

RAMKRISHNA FORGINGS LIMITED VS RAVINDRA LOONKAR, RESOLUTION PROFESSIONAL OF ACIL LIMITED & ANR.