PIRAMAL CAPITAL AND HOUSING FINANCE LIMITED (FORMERLY KNOWN AS DEWAN HOUSING FINANCE CORPORATION LIM vs 63 MOONS TECHNOLOGIES LIMITED) on 1 April, 2025

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 1632-1634 OF 2022

PIRAMAL CAPITAL AND HOUSING FINANCE LIMITED (FORMERLY KNOWN AS DEWAN HOUSING FINANCE CORPORATION

LIMITED)

VERSUS

DIARY No. 6037 of 2022

INDEX

I. THE DETAILS AND CATEGORIES OF THE APPEALS .......... 5

III. SUBMISSIONS BY THE LEARNED ADVOCATES FOR THE IV. RELEVANT PROVISIONS OF THE IBC AND OTHER ACTS 47

VI. ANALYSIS IN THE FIRST CATEGORY OF APPEALS .......... 83

(iii)Mandatory Requirements of Section 30(2) of the IBC

and Regulation 38 of Regulations, 2016 .................... 95

(iv)Maximization of the value of the assets of the

(v) Whether the NCLAT should have entertained the

appeals filed by the 63 Moons under Section 61 of the

Code and tinkered with the Resolution Plan approved

VII. ANALYSIS IN THE SECOND CATEGORY OF APPEALS ... 122

(i) Whether the Resolution Plan violated the Provisions Of

VIII. ANALYSIS IN THE THIRD CATEGORY OF APPEALS ....... 133

1.BR Act – The Banking Regulation Act, 1949

2.CD – Corporate Debtor

3.CIRP – Corporate Insolvency Resolution Process

4.CoC – Committee of Creditors

5.DHFL – Dewan Housing Finance Corporation Limited

6.EOI – Expression of Interest

7.FD Holders – Fixed Deposit Holders

8.FSP – Financial Service Provider

9.FSP Rules – Financial Service Provider Rules, 2019

10.GT – M/s. Grant Thornton

11.HFC – Housing Finance Companies

12.IBC – The Insolvency and Bankruptcy Code,

13.NBFC – Non-Banking Financial Companies

14.NCD Holders – Non-Convertible Debenture Holders

15.NCLAT – National Company Law Appellate Tribunal

16.NCLT/ Adjudicating Authority – National Company Law Tribunal

17.NHB Act – The National Housing Bank Act, 1987

18.Piramal Capital – Piramal Capital and Housing Finance Limited

19.PRAs – Prospective Resolution Applicants

20.RA – Resolution Applicant

21.RBI Act – The Reserve Bank of India Act, 1934

22.Regulations, 2016 – The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons), Regulations,

23.RFRP – Request for Resolution Plan Proposal

24.RP – Resolution Plan

25.SRA – Successful Resolution Applicant

Bela Trivedi, J.

1. In the captioned Appeals, the contextual facts

encompass the issues involved and permit analogous

adjudication. Hence, they are disposed of by this

common judgment and order.

(I) THE DETAILS AND CATEGORIES OF THE APPEALS: -

i. Civil Appeal Nos. 1632-1634 of 2022 have been

filed by the Appellant Piramal Capital and Housing

Limited (Piramal Capital), Successful Resolution

Applicant (SRA) challenging the common

the National Company Law Appellate Tribunal,

New Delhi, (NCLAT) in Company Appeal (AT)

(Insolvency) [hereinafter referred to as

Company Appeal] Nos. 454-455 and 750 of 2021,

only to the extent that it modified the Resolution

Plan (RP) by holding that the RP that permitted the

SRA to appropriate recoveries, if any, from

Avoidance applications filed under Section 66 of

the Insolvency and Bankruptcy Code (IBC) ought

to be set aside and the Resolution Plan be sent

back to the Committee of Creditors (CoC) for

reconsideration on that aspect.

ii. Civil Appeal Nos. 2989-2991 of 2022 have been

filed by the Appellant Union Bank of India

challenging the said common judgment and order

dated 27.01.2022 passed by the NCLAT in

Company Appeal Nos. 454-455 and 750 of 2021.

iii. Civil Appeal Nos. 3694-3695 of 2022 have been

filed by the Appellant 63 Moons and Technologies

Limited, challenging the said common judgment

and order dated 27.01.2022 passed by the NCLAT

in Company Appeal No. 454 of 2021 and 455 of

2021, only to the extent of the

sentence/observation in the impugned order that

“The Resolution Plan be sent back to the CoC for

reconsideration on this aspect.”

iv. Civil Appeal Nos. 2413-2415 of 2022 have been

filed by the Appellants Vinay Kumar Mittal and

Others, claiming to be the Fixed Deposit Holders

(FDH) of the Corporate Debtor (CD) – Dewan

Housing Finance Corporation Limited (DHFL),

challenging the common judgment and order dated

Appeal Nos. 506-507 and 516 of 2022, whereby

the NCLAT has held that Section 238 of IBC

overrides the Reserve Bank of India Act, 1934

(RBI Act), and the National Housing Bank Act,

1987 (NHB Act), and that Adjudicating

Authority/NCLT had not committed any error in

approving the RP that proposed extinguishing

Claims of the Fixed Deposits, without discharging

their payments in full to the FDHs.

v. Civil Appeal arising out of Diary No. 6037 of 2022

has been filed by the Appellants Raghu K.S. and

Others (claiming to be the Fixed

Depositors/Investors in the schemes floated by

DHFL), challenging the judgment and order dated

Appeal No. 538 of 2021, whereby the NCLAT

disposed of the Appeal by holding that the issues

raised in the said Appeal were the same as raised

in Company Appeal Nos. 506, 507 and 516 of 2022

decided on 27.01.2022.

vi. Civil Appeal No. 2402 of 2022 has been filed by the

Appellant Uttar Pradesh State Power Corporation

Contributory Provident Fund Trust challenging the

the NCLAT in Company Appeal No. 760 of 2021,

whereby the NCLAT has dismissed the Appeal of

the Appellant and confirmed the order dated

07.06.2021 passed by the NCLT in M.A. No.

416/2020 in C.P.(IB) No. 4258/MB/2019 in C.P. No.

4258/2019, rejecting the prayer of the Appellant

seeking repayment of the entire amounts of

matured fixed deposits.

vii. Civil Appeal Nos. 8123-8125 of 2022 have been

filed by the Appellants Senbagha Vivek A and

Another (who were not the Party before the

NCLAT), challenging the impugned common

the NCLAT in Company Appeal Nos. 506, 507 and

516 of 2022.

viii. Civil Appeal No. 6286 of 2022 has been filed by the

Appellant THDC India Limited Employee Provident

Fund challenging the impugned judgment and

order dated 04.02.2022 passed by the NCLAT in

Company Appeal No. 90 of 2022, whereby it has

been held by the NCLAT inter alia that the

commercial wisdom of the CoC while approving

the RP, which has also received the approval of the

Adjudicating Authority as well as the Appellate

Tribunal, cannot be allowed to be questioned in the

Appeal.

ix. Civil Appeal No. 2396 of 2022 has been filed by the

Appellant Uttar Pradesh State Power Sector

Employees Trust challenging the impugned

the NCLAT in Company Appeal No. 759 of 2021.

x. Civil Appeal Nos. 1707-1712 of 2022 have been

filed by the Appellant Kapil Wadhawan (KW), an

erstwhile Promoter and Director of DHFL

dated 14.02.2022 passed by the NCLAT, in

Company Appeal No. 539 of 2021, dismissing the

KW’s challenge to the RP of Piramal Capital

approved by the NCLT vide Order dated

07.06.2021 in I.A. No. 449 of 2021 in CP (IB) No.

4258/2019. The said Appeal was dismissed by the

NCLAT on the ground that it had become

infructuous in view of the judgment and order

dated 27.01.2022 in Company Appeal Nos. 454,

455 and 750 of 2021. The Appellant - KW has also

challenged the order dated 27.01.2022 passed by

the NCLAT in Company Appeal No. 647 of 2021,

wherein the NCLAT has held inter alia that the

Appellants being an erstwhile Directors who had

vacated their offices on the supersession of the

Board of Directors by the RBI under Section 45-IE

(4)(a) of the RBI Act, cannot claim their entitlement

to participate in the CoC of the CD, and that a

superseded Director from the Board of Directors

cannot interfere in the Company’s affairs, per

contra a suspended Director always remains on

the erstwhile Board of the Company and assist the

IRP/ RP as per requirement. The Appellant - KW

has also challenged the judgment and order dated

Appeal Nos.370, 376-377 and 393 of 2021,

whereby the NCLAT has set aside the order dated

19.05.2021 passed by the NCLT, which had directed the CoC to consider and vote on 2nd

Settlement Proposal of KW.

xi. Civil Appeal No. 2567 of 2022 has been filed by the

Appellant Dheeraj Wadhawan (DW) challenging

the impugned judgment and order dated

Appeal No. 785 of 2020, whereby the NCLAT has

held that the Appellant – DW was not entitled to

participate in the CoC of DHFL.

xii. Civil Appeal Nos. 2987-2988 of 2022 have been

filed by the Appellant Piramal Capital challenging

the impugned common judgment and order dated

Appeal No. 785 of 2020 and 647 of 2021, to the

extent NCLAT has held that the RP does not

remain confidential after its approval by the

Adjudicating Authority and that a certified copy of

such RP could be obtained by all and sundry as

per Rules. 2. As per the Order passed by this Court on 26.09.2024,

all these Appeals were heard, after categorizing them

into the following three categories: -

Sr. Name of the matter Party/ No. CoC

I. APPEALS RE AVOIDANCE APPLICATIONS- Impugned Order dated 27.01.2022 passed by the Hon’ble NCLAT in Company Appeal (AT) (Ins) No. 454-455 and 750 of 2021 in relation to treatment of recoveries from the Avoidance applications provided under the approved Resolution Plan by Piramal Capital & Housing Finance Limited in the insolvency of Dewan Housing Finance Corporation Limited 1. Piramal Capital & Housing Finance Limited Civil

(Formerly known as Dewan Housing Finance Appeal

Corporation Limited) v 63 Moons Technologies Nos.1632-

Limited and Ors. 1634 of

2. Union Bank of India v 63 Moons Technologies Civil

Limited and Ors Appeal

Nos.2989–

2991 of

3. 63 Moons Technologies Limited v Piramal Civil

Capital and Housing Finance Corporation Appeal

Limited (Formerly known as Dewan Housing Nos.3694-

Finance Corporation Limited) & Ors 3695 of

II. APPEALS BY FD HOLDERS / NCD HOLDERS- -(a)Impugned Order dated 27.01.2022 passed by the Hon’ble NCLAT in Company Appeal (AT) (INS) No. 506, Company Appeal (AT)(INS) No. 507, and Company Appeal (AT) (INS) No.516 of2022; (b) Impugned common order dated 27.01.2022 passed by Hon’ble NCLAT in Company Appeal (AT) (INS) No. 759 of 2021 and Company Appeal (AT) (INS) No. 760of 2021; (c) Impugned Order dated 07.02.2022 passed by Hon’ble NCLAT in Company Appeal (AT) (Ins) No. 538 of2021; (d) Impugned Order and Judgment dated 04.02.2022 in Company Appeal (AT) (Ins) No. 90 of 2021 challenging the payment made to the FD Holders/NCD Holders under the approved Resolution Plan by Piramal Capital & Housing Finance Limited. 1. Raghu KS and Ors. v Piramal Capital and Diary No.

Housing Finance Limited & Ors 6037 of

2. Vinay Kumar Mittal & Ors. V. Dewan Housing Civil

Finance Corporation Ltd. &Ors Appeal

Nos.2413-

2415 of

3. Uttar Pradesh State Power Sector Employees Civil

Trust v Dewan Housing Finance Corporation Appeal

Limited & Anr. No.2396 of

2022 &

Civil

Appeal

No.2402 of

4. U.P. State Power Corporation Contributory

Provident Fund Trust v. Dewan Housing Finance “

Corporation Limited and Anr. 5. Senbagha Vivek A. & Anr v Dewan Housing Diary

Finance Corporation Ltd. & Anr. No.11104

of 2022/

Civil

Appeal

Nos.8123-

8125 of

6. THDC India Limited Employee Fund v The Civil

Administrator, Dewan Housing Finance Appeal

Corporation Ltd. No.6286 of

III. APPEALS BY EX PROMOTERS- (a) Impugned Order dated14.02.2022 passed in Company Appeal (AT) (Ins) No. 539of 2021 approving the Resolution Plan; (b) Impugned Order dated 27.01.2022 passed in Company Appeal (AT)(Ins) No. 785 of 2020 and 647 of 2021 holding that the Appellant does not have the right to attend CoC meetings or get a copy of the Resolution Plan approved by the CoC; (c) Impugned Order dated 27.01.2022 passed in Company Appeal (AT) (Ins) No. 370 of 2021, 376-377of 2021, 393 of 2021 which set aside the order directing CoC to consider and vote on the second settlement proposal submitted by Appellant 1. Kapil Wadhawan v R. Subramaniakumar and Civil

Ors. Appeal

Nos.1707-

1712 of

2. Piramal Capital and Housing Finance Limited Civil

(Formerly known as Dewan Housing Finance Appeal

Corporation Limited) v Dheeraj Wadhawan and Nos.2987-

Anr. 2988 of

3. Dheeraj Wadhawan v The Administrator Civil

Appeal

No.2567 of

(II) FACTUAL BACKGROUND

3. In these long-drawn proceedings, the Factual matrix

may be summarized as under: -

i. The DHFL was a housing finance company and a

non-banking financial company regulated under

the provisions of NHB Act and RBI Act, engaged in

the business of providing housing finance services

to retail customers, including under the Pradhan

Mantri Awas Yojana (under the credit linked

subsidy scheme) as well as certain project loans,

mortgage finance and construction loans etc. The

DHFL had, for conducting its business availed

financial assistance through a range of instruments

including inter alia rupee loans, external

commercial borrowings, non-convertible

debentures, perpetual debentures, subordinate

debt, public deposits etc. from banks, financial

institutions, other lenders like insurance

companies, mutual funds, provident funds,

pension funds and individuals. The DHFL was

accused of committing India’s one of the biggest

financial scams, worth thousands of crores of

rupees, involving accusation of loan frauds, money

laundering, creating web of fake borrowers and

shell companies etc.

ii. The RBI in exercise of its powers conferred under

Section 45-IE (1) of RBI Act, superseded the Board

of Directors of DHFL, on being satisfied that DHFL

had conducted its affairs detrimental to the interest

of its depositors and creditors, and appointed one

Shri R. Subramaniakumar, Ex-MD and CEO of the

Indian Overseas Bank, vide communication dated

20.11.2019.

iii. The RBI then on 29.11.2019 filed a Company

Petition under Section 227 read with Section 239

(2) (zk) of IBC before the NCLT, for initiating CIRP

proceedings.

iv. The Adjudicating Authority – NCLT on 03.12.2019

directed commencement of CIRP of the CD –

DHFL and confirmed the appointment of Mr. R.

Subramaniakumar as the Administrator to perform

all functions of the Resolution Professional under

the IBC. On 05.12.2019, the Administrator, by

issuing a public announcement, called upon the

creditors of the CD to submit their claims with proof

on or before 17.12.2019.

v. The Administrator received the claims worth

Rs.82,247 Crores. The Administrator, after

collating all claims received against the CD and

determining of financial position of the CD,

constituted CoC on 24.12.2019. The Administrator,

on 28.01.2020 issued an invitation for submissions

of Expression of Interests (EOI) and Form ‘G’ for

submission of RPs for the CD in accordance with

the IBC and the relevant Rules and Regulations

made thereunder. Accordingly, the Administrator

received 24 EOIs from the PRAs.

vi. The Administrator had appointed M/s. Grant

Thornton (GT) as Transaction Auditors for

unearthing the transactions under Section 43 to 51

and 66 of IBC.

vii. The GT after conducting the transaction audit,

submitted a report to the Administrator, containing

particulars of preferential, undervalued, fraudulent,

and extortionate transactions entered into by

DHFL, which could be set aside/ avoided under the

said provisions of IBC. The Administrator, based

on the said report of GT, filed eight Applications

before the NCLT regarding the Preferential,

Undervalued, and Extortionate transactions, and

the Applications with regard to the Fraudulent and

Wrongful trading. The said Applications are

pending for adjudication by the NCLT. The total

amount involved in the Avoidance Applications

pending before the NCLT is about Rs.45,050/-

Crores.

viii. On 02.03.2020, the Administrator issued a

Request for Resolution Plan Proposal (RFRP) for

DHFL in accordance with Regulation 36B of CIRP

Regulations, 2016. The said RFRP was revised by

the Administrator, and the revised RFRP was

issued on 17.03.2020.

ix. However, thereafter considering the complexities

involved with respect to the transactions forming

part of Section 66 application, the CoC in its

Seventh meeting on 10.09.2020 decided that the

RFRP may be suitably modified to incorporate the

language which was in the mutual interest of the

CoC members and the RA, by incorporating that

the PRAs may ascribe a value to the transactions

to all the transactions that are being filed under

Section 66 and also propose the manner of dealing

with any recoveries therefrom.

x. On 16.09.2020, pursuant to the discussion with

the CoC, the Administrator issued a revised and

final version of the RFRP titled "Invitation for

Submissions of Resolution Plan for Dewan

Housing Finance Corporation Limited" ("RFRP

dated 16 September 2020") in accordance with

Regulation 36B of the CIRP Regulations.

xi. On 16.10.2022, following the issuance of the

RFRP dated 16 September 2020, the Piramal

Capital submitted the RP dated 16.09.2020 for the

consideration of the Administrator/CoC. The

Piramal Capital was initially keen on only taking

over the retail assets of the CD and accordingly,

submitted its RP dated 16.09.2020 for Group A

assets under Option II (i.e., retail assets of the CD).

Under this RP, the Piramal Capital offered an

amount of approx. INR 15,000 Crores (plus an

amount of 10% for FDH).

xii. On 09.11.2020, based on further discussions

and upon requests from the Administrator/ CoC to

all PRAs, the Piramal Capital revised its RP and

submitted modified RP on 09.11.2020 (offering an

amount of INR 23,700 Crores) and on 17.11.2020

(offering an amount of INR 27,500 Crores),

respectively under Option II for Group A (retail

assets) of the CD.

xiii. On 22.12.2020, upon the request of the CoC,

the Piramal Capital submitted a revised and final

RP offering a total consideration of INR 37,250

Crores comprising cash and non-cash

considerations. Additionally, it also submitted a RP

under Option II for Group A (retail assets) of the

CD, it offered an aggregate amount of INR 27,200

Crores.

xiv. On 31.12.2020, the erstwhile Director Kapil

Wadhawan filed I.A. No. 2431 of 2020 under

Section 60(5) of the Code praying for a direction

for RBI to place before CoC the 2nd Settlement

proposal for consideration.

xv. On 15.01.2021, all compliant resolution plans

(including the SRA’s RP) were put to vote during

the voting window. The 63 Moons voted in favour

of the RP within its class of debenture holders and

the RP was approved by a majority of 98.94%

votes of the debenture holders. On the basis of the

same, the Authorised representative of the class of

debenture holders (M/s. Catalyst Trusteeship

Limited) voted in favor of the RP before the CoC.

Resultantly, the RP of Piramal was approved by an

overwhelming majority of the CoC with 93.65 %

votes.

xvi. On 24.02.2021, following the approval of the RP

by the CoC, the Administrator filed an I.A. No. 449

of 2021 ("Plan Approval Application") before the

NCLT seeking approval of the RP under Section 31

of the Code.

xvii. On 05.03.2021 – The 63 Moons filed an I.A. No.

623 of 2021 in the Plan Approval Application before

the NCLT inter alia challenging the provisions of

the RP which provided that the Section 66

Recoveries will go to the benefit of the SRA.

xviii. On 13.05.2021, the Plan Approval Application

and I.A. No. 623 of 2021 were reserved for orders.

xix. The NCLT vide its Order dated 19.05.2021

allowed the I.A. No. 2431 of 2020 filed by the

erstwhile Director and directed the Administrator to

place the 2nd Settlement Proposal before the CoC

for consideration and voting within 10 days.

xx. On 23.05.2021, the Administrator, CoC and

Piramal filed Appeals under Section 61 of the

Code, being Company Appeal Nos. 370 of 2021,

376-77 before the NCLAT challenging the order

dated 19.05.2021.

xxi. On 25.05.2021, the NCLAT while issuing notice

stayed the NCLT order dated 19th May, 2021.

Further, the NCLAT vide the order directed the

NCLT to decide the I.A. No. 449 of 2021 (for

approval of the RP).

xxii. On 06.06.2021, Mr. Kapil Wadhawan filed an

I.A. No.1229 of 2021 before the NCLT for

consideration of his objections to the RP.

xxiii. On 07.06.2021, the NCLT passed an order

granting its approval to the Plan Approval

Application thereby approving the RP. The NCLT

vide a separate order, dismissed the I.A. No. 623

of 2021 filed by the 63 Moons. The NCLT refused

to interfere with the RP inter alia on the ground that

the CoC comprising of 77 financial creditors

decided in its commercial wisdom to give away the

Section 66 Recoveries to the SRA after a hard

bargain in exchange of a lump sum resolution

amount of INR 37,250 Crores.

xxiv. On 14.06.2021 & 24.06.2021, the 63 Moons

filed two separate Company Appeals, being No.

454 and 455 of 2021 before the NCLAT

challenging the orders passed by the NCLT in the

Plan Approval Application and I.A. No. 623 of 2021

on almost identical grounds. These Appeals were

tagged and heard together. Additionally, vide I.A.

No. 1173 and 1170 of 2021 filed in the Company

Appeal No. 455 and 454 of 2021 respectively, the

63 Moons sought an interim stay on execution of

the approved RP.

xxv. On 15.07.2021, erstwhile Promoter KW

preferred Company Appeal No. 539 of 2021 before

the NCLAT seeking a prayer to set aside the RP.

xxvi. On 23.07.2021, the NCLAT dismissed the 63

Moons' interim application for a stay on execution

of the approved RP. Following this, the 63 Moons

approached this Court vide Civil Appeal Nos. 4672-

4673 of 2021.

xxvii. On 03.09.2021 - Roopjyot & Ors. filed a

Company Appeal No. 750 of 2021 before the

NCLAT challenging the Plan Approval Order

raising grounds similar to those which were raised

by the 63 Moons. This Appeal was also tagged with

the Company Appeal No. 455 and 454 of 2021 filed

by the 63 Moons. Pertinently, this was first time that

any challenge was raised by Roopjyot & Ors.

against the RP.

xxviii. On 06.09.2021, this Court declined to

entertain the Civil Appeal Nos. 4672-4673 of 2021

and disposed of the same with a direction to the

NCLAT to decide the pending Appeals

expeditiously.

xxix. On 30.09.2021, the SRA implemented the RP

and discharged payment to the creditors. As per

the RP, the SRA - Piramal merged into the CD by

way of a scheme of arrangement. Resultantly, the

SRA - Piramal ceased to exist with effect from

30.09.2021, and the CD under the name "DHFL"

remained as the continuing legal entity.

xxx. On 27.01.2022, the NCLAT passed the common

impugned judgment in the Appeals and directed as

follows:

"The term in the RP that permits the SRA to

appropriate recoveries, if any, from avoidance

applications filed under Section 66 of the Code

ought to be set aside. The RP be sent back to the CoC for reconsideration on this aspect."

xxxi. On 14.02.2022, the NCLAT dismissed the

Company Appeal No. 539 of 2021 filed by the

erstwhile Promoter KW, recording that the RP is

under consideration before the CoC and therefore

the Appeal had become infructuous.

Hence, the present set of Appeals have been filed.

(III) SUBMISSIONS BY THE LEARNED ADVOCATES FOR THE PARTIES

4. Multidimensional submissions were made at length

by all concerned learned Advocates, the crux of which

may be narrated below.

(I) Learned Senior Advocates, Mr. Abhishek Manu

Singhvi and Mr. Balbir Singh appearing for the SRA -

Piramal Capital made elaborate submissions in all the

three categories of Appeals. In the First category of

Appeals with regard to the impugned order dated

27.01.2022 passed by the NCLAT in Company Appeal

Nos.454-455 and 750 of 2021 in relation to treatment

of recoveries from Avoidance applications provided

under the approved RP, they made the following

submissions: -

i. A small group of creditors like the 63 Moons whose

cumulative share in the CoC was less than 0.3%,

could not have preferred the Appeals before the

NCLAT. The respective classes of creditors who

voted overwhelmingly in favour of the RP included

the said creditors, who were NCD Holders, and

therefore they were estopped from challenging the

RP.

ii. The decision on the recoveries arising out of

Avoidance transactions falls within the commercial

wisdom of the CoC and could not have been

interfered with by the NCLAT.

iii. The NCLAT in the impugned judgment has entered

into the domain of the CoC, in as much as it has

isolated a singular part of a composite and inter-

connected RP, and has adjudicated upon the

commercial soundness of the CoC’s decision to

take a higher upfront payment in exchange of

giving up the uncertain recoveries of Section 66

applications.

iv. The reliance placed on the decision in Tata Steel

BSL Limited vs. Venus Recruiter Private

Limited and Others (LPA No.37 of 2021) passed

by the single bench of the Delhi High Court was

erroneous.

v. The impugned judgment of NCLAT is premised on

a misinterpretation of provisions of the IBC and

allied Regulations, in as much as Section 67 does

not relate to treatment of proceeds from Avoidance

applications, instead it deals with a situation where

a respondent party in an Avoidance application

also happens to be a creditor of the CD.

vi. The NCLAT has erroneously placed reliance on

Regulation 37A of IBBI (Liquidation Process)

Regulations, 2016 to arrive at a conclusion that the

proceeds from the Avoidance applications cannot

be shared with the SRA during resolution. In fact,

the Regulation 37(a) of the CIRP Regulations

specifically mentions that the resolution plan shall

include measures for the transfer of all or part of

the assets of the CD.

vii. The NCLAT has incorrectly relied on the foreign

jurisprudence and extraneous considerations in

impugned judgment.

viii. The notional value of INR 1 to Section 66

Applications was legally sound, for the reason that

the notional valuation of Section 66 Applications

was done in response to the provisions of RFRP

issued by the Administrator.

ix. In the alternative, the NCLAT had failed to

appreciate that value of INR 1 was only notional

and the true value ascribed to the Section 66

Applications was embedded in the total resolution

amount of INR 37,250 Crores proposed under the

RP.

x. The impugned judgment amounts to a unilateral

modification of RP contrary to the will of the SRA

and commercial wisdom exercised by the CoC.

xi. The impugned judgment has far-reaching, and

undesirable consequences contrary to the intent of

the Legislature.

(II) In the Second category of Appeals filed by the FD

Holders/ NCD Holders challenging the impugned

order dated 27.01.2022 passed by the NCLAT, Mr.

Abhishek Manu Singhvi and Mr. Balbir Singh

appearing for the SRA-Piramal Capital made the

following submissions: -

i. The Appellants, that is the FD Holders/ NCD

Holders, have no locus standi to challenge the

Resolution Plan by filing the Civil Appeals.

ii. Section 21 (6A) (b) of IBC read with Regulation 16

(A) of the CIRP Regulations, 2016 provides for a

mechanism for appointment of an Authorized

Representative who could look after the myriad

interest of large number of financial creditors in the

CoC. In the instant case FD Holders and NCD

Holders were represented by the respective

representatives, who had demonstrated their

objections to the RP before the CoC, and therefore

individual member of such group cannot be

allowed to raise independent challenge in relation

to the CIRP and/ or the RP separately by filing the

Appeals.

iii. Section 36 (A) of the NHB Act and Section 45 (QA)

of the RBI Act do not mandate full repayment of

deposits. Therefore, the distribution mechanism in

the RP could not be said to be illegal or contrary to

the provisions of the RBI Act and NHB Act.

iv. The RP is also compliant with Rule 5 (d)(i) of FSP

Rules.

v. This Court has repeatedly held that the manner of

distribution of proceeds falls within the CoC’s

commercial wisdom and such commercial wisdom

is given paramount status and that the scope of

judicial review by the NCLT and NCLAT is very

limited. (K. Sashidhar vs. Indian Overseas Bank and Others,1 and Maharashtra Seamless

Limited vs. Padmanabhan Venkatesh and Others.2)

vi. The NHB Act and the IBC are special statutes and

the statute enacted later in point of time must

prevail.

vii. The FD Holders are estopped from contending

that they were not the financial creditors. As per the

settled legal position the relationship between a

depositor and a Bank is not equivalent to one

between a beneficiary and a trustee.

(III) So far as Third category of Appeals filed by the ex-

promoters challenging the impugned order dated

14.02.2022 approving the RP, the order dated

27.01.2022 holding that the ex-promoters did not

have the right to attend the CoC meetings or get a

copy of Resolution Plan approved by the CoC, the

Learned Senior Advocates Mr. Singhvi and Mr. Balbir

Singh, defending the said impugned order, made the

following submissions: -

i. KW’s settlement proposals do not warrant any

consideration in these Appeals since they were not

accepted by the requisite majority of 89% of CoC.

Moreover, an Application under Section 12(A) of

IBC for withdrawal of CIRP petition pursuant to a

settlement proposal had to be tabled by the RBI,

which had refused to do so.

ii. Commercial wisdom of CoC is paramount and

ascription of notional value INR 1 is acceptable.

iii. Decisions taken by an overwhelming majority of

CoC basing value of CD as determined by the

registered valuers, after negotiations with SRA, is

not subject to judicial scrutiny. Resolution Plans

cannot be scrutinized from an equitable

perception.

iv. The Piramal Capital’s RP is binding inter se

Piramal Capital and CoC, and no modifications are

permitted after the approval of the plan by the CoC.

v. Independent recourses such as assignments,

settlements, and institution of recovery

proceedings in respect of loans, impugned in

Avoidance applications are valid because it is

Piramal Capital’s responsibility to ensure a holistic

revival of DHFL and resolution of its distressed

assets.

vi. Pendency of Avoidance applications does not bar

the CIRP proceedings.

vii. Suspension and Supersession of Board of

Directors have distinct legal effects since

suspension occurs only due to inability to pay

debts while supersession occurs due to fraud and

mismanagement.

viii. The Insolvency proceedings of DHFL were

conducted in a clear, transparent and time bound

manner to preserve and maximize value of the

assets for CoC.

ix. The Piramal Capital’s RP was accepted by

overwhelming majority votes of 93.65% in the

CoC, and RBI also has given its NOC for change

of control/ ownership/ management basis to the

said Resolution Plan on 16.02.2021. 5. The learned Senior Advocates Mr. Tushar Mehta and

Mr. Navin Pahwa appearing for the CoC made the

following common submissions in all the Appeals:

i. The CoC comprised of (a) 26 banks and 12

financial institutions voting 40.60% in the CoC (b)

NCD Holders (secured and unsecured) 63 Moons

class and Roopjyot class voting 53.22% in the CoC

(c) FD Holders voting 6.18% in the CoC.

ii. Section 32 readwith Section 61(3) contain limited

ground to challenge the RP and does not provide

any ground to challenge the RP on any of its

commercial terms.

iii. Section 45-IE (1) of the RBI Act empowers the RBI

to supersede the Board of Directors of the

company in the public interest or to prevent the

affairs of NBFC being conducted in a manner

detrimental to the interest of the depositors or the

creditors or for securing proper management of

such company. The RBI having been satisfied

superseded the Board of DHFL on 20.11.2019

which was never challenged by the ex-promoters

of DHFL.

iv. RBI had filed the Company Petition No. 4258 of

2019 under Section 227 read with Section

239(2)(zk) of the IBC read with Rules 5, 6 of the

FSP Rules before the NCLT for initiating CIRP of

DHFL, and the said petition was admitted by the

NCLAT vide the order dated 03.12.2019, which

was also never challenged by the ex-promoters of

DHFL.

v. Section 45-IE (4)(a) of the RBI Act states that upon

supersession of Board of Directors, the chairman,

managing director and other directors shall, from

the date of the supersession, vacate their offices.

Hence, once the directors vacate their office, they

are not a stakeholder of the CD any more and have

no locus either to sit in the CoC meetings, demand

RP or even challenge the same.

vi. Section 29A(c) of IBC explicitly disqualifies the

promoters of the CD from being a RA, subject to

certain conditions, and the Board of DHFL having

been superseded, the promoters did not have any

right or locus to challenge the RP approved by

CoC.

vii. The DHFL had used different enterprise

resource planning software application for

maintaining fictitious books, loans and verification

of financial statement. It was found that the

underwriting procedures for loan sanctioning and

disbursal were not followed. It was further found

that out of sampled 50 entities, 34 entities had

invested a portion of amount received from DHFL

into the promoter company.

viii. As per the GT’s report dated 24.09.2020 on

Slum Rehabilitation Authority transaction, it was

found that the loans aggregating crores of rupees

against the master developers and 14 assignee

developers for construction of two SRA projects,

were used for investments into the companies

linked to the promoters of DHFL.

ix. The Avoidance and Fraudulent transactions as

contemplated in IBC were identified by the GT,

wherein it was found that the DHFL had made

inter-corporate deposits into three entities, which

were used for buying the NCDs of Wadhawan

Global Corporation, though the said three entities

did not have any income from the business

operations.

x. The consortium of lenders had appointed KPMG,

a Forensic Auditor, to carry out a special review of

DHFL who had prepared the Special Review Audit

Report highlighting large number of fraudulent

transactions and falsification of books of accounts.

Such fraudulent transactions and acts have

resulted into number of criminal cases registered

against ex-promoters Mr. Kapil Wadhawan and

Dheeraj Wadhawan by CBI.

xi. When the ex-promoters of DHFL were found

responsible for the fraudulent transactions, which

were the subject matter of Section 66 applications,

they could not have contended that the subject

matter of these applications should be valued at a

higher value in the RP, and not INR 1 value for such

Avoidance transactions.

xii. The CoC in its commercial wisdom had decided

to transfer the speculative part of the assets i.e.,

Section 66 Fraudulent Trading to the PRAs,

thereby eliminating any risk from the said

transactions and resulting in an increase in the

upfront value of recovery. In any case, the benefit

of avoiding/setting aside any transaction under

Section 43, 45, 47, 49 and 50 shall enure to the

benefit of DHFL’s creditors only.

xiii. The bid process was transparent, competitive

and aimed at maximizing the value of assets of the

CD.

xiv. The conduct of ex-promoters has been marred

by impropriety in as much as several criminal

cases relating to cheating, fraud and siphoning of

funds have been instituted against them which are

pending in the courts of law. 6. The learned Advocate Mr. Santosh Kumar Paul

appearing for the Respondent - 63 Moons

Technologies Limited, the secured NCD Holders has

made the following submissions: -

i. Originally it was envisaged by the Piramal Capital

that any recoveries from the transactions avoided/

set aside under Section 43 to 51 and 66 of the IBC

would enure to the benefit of DHFL’s creditors and

that the PRAs will not receive any benefit

therefrom. Afterwards, the RFRP was amended on

16.09.2020 to the effect that the recoveries from

Section 43, 45, 47, 49 and 50 (and not Section 66)

shall enure to the benefit of the creditors, and with

respect to the recoveries from Section 66, the RAs

must propose the manner of continuing and

dealing with the legal action initiated and propose

the manner of treatment of any proceeds arising

therefrom. Ultimately, the Piramal Capital was

declared as SRA, and it was decided that all

recoveries from Avoidance applications filed by the

Administrator would benefit the Piramal Capital.

The Respondent No. 1 - 63 Moons had objected,

such clause being illegal. The NCLAT having

considered the said objection decided the said

issue in favour of the Respondent - 63 Moons.

ii. As per the settled legal position, the recoveries

from Avoidance transactions ought to enure to the

benefit of DHFL’s creditors only.

iii. As per the judgment of Delhi High Court, in case of

Venus Recruiters Private Limited vs. Union of India and Others,3 the Avoidance applications are

meant to give benefit to the creditors of the CD and

not to the CD in its new avatar after the approval of

the RP. The said judgment of Delhi High Court was

not disturbed upon Appeal before the Division

3 2020 SCC OnLine Del 1479

Bench of the High Court, and the SLP against the

said decision is pending before this Court.

iv. A mandatory statutory duty has been cast upon the

Tribunal in terms of Section 31 read with Section

30(2) of the IBC to ensure that a RP which is

placed before it for approval has complied with the

relevant provisions of law.

v. The Respondent - 63 Moons had voted owing to

express liberty granted by the NCLT, without

prejudice to the respondent’s rights and

contentions, hence the plea of estoppel was not

available to the Appellant - Piramal. As per the

position of law settled by this Court in M.K.

Rajagopalan vs. Dr. Periasamy Palani Gounder and Another,4 the commercial wisdom of CoC

means a considered decision taken by CoC with

reference to the commercial interest and interest of

revival of CD and maximization of value of its

assets. 7. The Learned Senior Advocate Mr. Dhruv Mehta

appearing for the Appellants - the FD Holders of CD,

who have challenged the impugned order dated

4 2024 (1) SCC 42

07.02.2022 passed by the NCLAT in Company Appeal

No. 538 of 2021 made the following submissions: -

i. The NCLAT had erred in passing the impugned

order, not appreciating that in terms of Section

30(2)(e) read with Sections 31(3)(i) of the Code,

the RP ought to have been struck down as being

in contravention of the provisions of the NHB Act

and RBI Act, which provide for security of deposits

made by the FD Holders.

ii. An unjustified resort to Section 238 of the Code

has the effect of rendering the provisions contained

in Section 30(2)(e) of the Code nugatory.

iii. Section 36(A) of NHB Act makes it clear that the

deposits have to be repaid strictly in accordance

with the terms of such deposits. Section 36 of NHB

Act provides that the provisions thereof shall have

the effect notwithstanding anything inconsistent

contained in any other law for the time being in

force.

iv. Unlike a regular CD, a FSP stands on a different

footing and should entail greater scrutiny in

examining its compliance with the applicable laws

for the time being in force. The commercial wisdom

of CoC cannot stretch to cover regulatory aspects

specifically provided for under the NHB Act read

with its directions. 8. The Learned Senior Advocate Mr. Maninder Singh

appearing for the Appellant Uttar Pradesh State

Power Sector Employees Trust in C.A. No. 2396 of

2022 made the following submissions: -

i. The monies invested by the FD Holders were held

in Trust by DHFL.

ii. Rule 10 of the FSP Rules provides that Rule

5(b)(Moratorium) of the FSP Rules and Section 14

of the Code do not apply to any third-party assets

or properties in custody or possession of the FSP,

including any funds, securities and other assets

required to be held in Trust for the benefit of third

parties. The Explanation to Section 18 of the Code

also provides that assets owned by third-party in

possession of the CD, held under Trust or under

contractual arrangements including bailment,

could not be assets for the purpose of Section 18.

In this regard, reliance has been placed on the

observations made in Embassy Property

Developments Private Limited vs. State of Karnataka and Others.5

iii. As held by the various High Courts, the monies

deposited by the FD Holders are not in the nature

of a loan but in fact a deposit to be held in Trust by

the Company till the time of maturity. Therefore, the

monies deposited by the FD Holders were not the

monies of DHFL but in fact were the monies

deposited in Trust, thereby making DHFL liable to

repay such deposits in full.

iv. The NCLT and NCLAT had failed to consider that

the repayment obligations of DHFL, which was a

deposit receiving Housing Finance Institution,

engaged in the business of providing Financial

Services in terms of the license granted by NHB

and RBI. Hence, the FD Holders ought to have

been paid as per the terms of their deposits, in full,

in view of the statutory obligation of DHFL.

v. In absence of any contradictions between the

Code and the NHB Act, the overriding effect

contained in Section 238 of the Code does not

apply.

vi. Public Depositors are neither secured creditors nor

unsecured creditors but constitute a third class of

creditors who stand on a higher footing than

secured/unsecured creditors with a statutory right

to the repayment. Hence, the claim of the public

deposit holders ought not to be equated with that

of any other creditor of DHFL and ought to be

repaid in full as statutorily mandated. 9. The learned Senior Advocate Mr. Nakul Diwan

appearing for the Respondent Nos. 4 to 7 in C.A. Nos.

1632-1634 of 2022 and C.A. Nos. 2989-2991 of 2022

has made following submissions, supporting the

judgment and order dated 27.01.2022 passed by the

NCLAT:

i. Although the SRA - Piramal Capital has enhanced

its offer in the RP, such enhancement was not

against consideration of the recoveries to be made

from the Avoidance transactions. Even otherwise

the value ascribed by the SRA to the Avoidance

applications was merely valued at a nominal price

of INR 1 and such enhancement cannot be said to

be in consideration of the recoveries to be made

under the Avoidance transaction, which were

valued at INR 45,000 Crores alone.

ii. The Respondents had abstained from voting in

favour of RP, as Clause 2.13.3 was an illegal

provision contrary to the IBC. On careful

appreciation of the provisions of IBC, the NCLAT

vide its judgment dated 27.01.2022 rightly set

aside Clause 2.13.3 and directed the CoC to

reconsider the same.

iii. In K. Sashidhar vs. Indian Overseas Bank and

Others (supra), and in Committee of Creditors of

Essar Steel India Limited vs. Satish Kumar Gupta and Others,6 it is held that there is a scope

of judicial scrutiny in RP if it is not in accordance

with Section 30(2) read with Section 31(I) of the

IBC. 10. The Learned Senior Advocate Mr. Kapil Sibal,

appearing for the ex-promoters Kapil Wadhawan and

Dheeraj Wadhawan made the following submissions:

i. Any recoveries from the Avoidance applications

ought to be for the benefit of creditors, having

regard to the object and purpose and legal history

of the IBC.

ii. Piramal Capital cannot be permitted to retain

recoveries past/future from the Avoidance

applications, which otherwise should be only for

the benefit of the creditors.

6 2020 (8) SCC 531

iii. Section 25 of the IBC sets out the duties of the

Resolution Professional. One of the duties is to

preserve and protect the assets of the CD and to

file Avoidance applications for the benefit of the

CD.

iv. The Avoidance applications are filed in respect of

Sections 43, 44, 45, 46, 50 and 51, falling within

Chapter III. The provisions pertaining to the

Fraudulent trading or Wrongful trading fall under

Section 66 contained in Chapter VI. Considering

the scheme of the Code, as also the object and

purpose of the Code, it is clearly demonstrated that

the benefit of the Avoidance applications is

intended for the benefit of the CD, for which the

responsibility has been cast upon the Resolution

Professional.

v. The provision of Piramal’s RP which permits

benefits of Avoidance applications under Section

66 of the Code to be retained by the Piramal

Capital is contrary to law. In the alternative, it is

submitted that as an exception the benefit of

Avoidance applications can be assigned to the

third parties, (in the present case Piramal),

however, it was the duty of the Resolution

Professional to ensure that the assignment was

done for proper consideration, and in the instant

case, the assignment of Avoidance transactions

was not shown to be for proper consideration.

vi. The fulcrum on which the Resolution Process

under the Code proceeds is the full and correct

knowledge of the affairs of the CD, however, in the

instant case, the creditors had no knowledge of the

value of the securities/properties which formed the

basis of Avoidance transactions under Section 66

of the Code. Therefore, the CoC could not be said

to have exercised its commercial wisdom while

approving the RP of the Piramal Capital.

vii. The Administrator also sought to exclude the

ex-promotors on a specious plea that they were

superseded, despite the fact that the ex-promoters

through several letters had made efforts to inform

Administrator and CoC, the significant value of

business and assets of DHFL in the interest of the

creditors.

viii. Assuming, without admitting, that CoC had all

the relevant information, the CoC had miserably

failed to demonstrate the rationale behind the

recoveries from Avoidance transactions under

Section 66 of the IBC Code being ascribed NIL

value and assigning the same to Piramal at Rupee

1.

ix. The Piramal Capital’s subsequent conduct

demonstrated that there was value locked up in the

Avoidance transactions and despite such value the

benefit of the same was not factored in the bid

amount.

x. The CoC’s justification for the Piramal’s valuation

of Avoidance transactions for Rupee 1 was

contrary to the records and unjustified.

xi. The amount under Section 43 and 45 of the Code

are a small portion of the total amount impugned in

the Avoidance applications. There is no difference

in the potentiality of recovery from transactions

impugned under Section 66 or Section 45 in the

present case. The nature of trading in respect of

Section 66 applications is not fictitious. The actions

of Piramal in filing Section 7 applications makes it

evident that the classification of entire transactions

as fraudulent by the Administrator was incorrect.

xii. The ex-promoters/KW and DW were entitled to

participate in the CoC, to have access to all

records and documents as well as the copy of the

RP.

xiii. The provisions of the IBC would prevail over the

RBI Act in view of the non-obstante clause in

Section 238 of the Code. Thus, the rights of the

Director under the Code remain unaffected by the

effect of supersession under the RBI Act.

xiv. The IBC was made applicable to the Financial

Service Providers such as the DHFL under the

FSP Rules.

xv. There was no modification as provided under

Rule 5 of the FSP Rules, which could affect the ex-

promoter/Director’s right of participation.

xvi. Piramal Capital cannot be permitted to unjustly

enrich itself at the cost of the creditors by retaining

the benefit for which it has not paid any value.

xvii. The objective of the IBC for value maximization

has not been taken into consideration under the

shield of commercial wisdom of CoC.

xviii. Lastly, no fair and transparent procedure, in the

nature of auction/ assignment of the underlying

assets for the part of Avoidance transactions, was

undertaken to enable the realization of full value of

the underlying assets and ensure maximization of

value in the interest of the creditors of DHFL.

(IV) RELEVANT PROVISIONS OF THE IBC AND OTHER ACTS

11. Before adverting to the rival submissions made by the

learned counsels for the parties, let us have a glance

through the provisions contained in the IBC and other

Acts & Rules relevant for the purpose of deciding

these Appeals. 12. As the long title of IBC suggests, IBC has been

enacted to consolidate and amend the laws relating

to reorganization and insolvency resolution of

corporate persons, partnership firms and individuals

in a time bound manner for maximization of value of

assets of such persons, to promote entrepreneurship,

availability of credit and balance the interest of all the

stakeholders including alteration in the order of

priority of payment of Government dues and to

establish an Insolvency and Bankruptcy Board of

India, and for matters connected therewith or

incidental thereto. The objective behind enacting the

IBC is to provide an effective legal framework for

timely resolution of Insolvency and Bankruptcy, which

would support the development of credit markets and

encourage entrepreneurship. It would also improve

Ease of Doing Business, and facilitate more

investments leading to higher economic growth and

development. The provisions of the IBC had come

into force on different dates as notified by the Central

Government by Notification in the Official Gazette

from time to time. 13. Chapter II pertains to the Corporate Insolvency

Resolution Process. Section 7 thereof pertains to the

Initiation of Corporate Insolvency Resolution Process

by Financial Creditor and Section 8 thereof pertains

to the Insolvency Resolution by Operational Creditor.

Section 16 provides for appointment and tenure of

Interim Resolution Professional and Section 18

thereof enumerates the duties of the Interim

Resolution Professional appointed by the

Adjudicating Authority, on the commencement of

insolvency proceedings. Section 21 empowers the

Interim Resolution Professional to constitute a

Committee of Creditors (CoC), after collation of all

claims received against the CD and determination of

financial position of the CD. The CoC is comprised of

all Financial Creditors of the CD, subject to the

provisions of Section 21. 14. Section 22 pertains to the Appointment of Resolution

Professional who is to be appointed by the CoC within

7 days of the constitution of the CoC. The duties of

Resolution Professional are enumerated in Section

25. As per clause (j) of sub-section (2) of Section 25,

the Resolution Professional has to file an application

for avoidance of transactions in accordance with

Chapter III, if any. Section 26 states that the filing of

an Avoidance application under clause (j) of sub-

section (2) of Section 25 by the Resolution

Professional shall not affect the proceedings of CIRP. 15. Section 29 requires the Resolution Professional to

prepare an information memorandum containing

relevant information as may be specified by the

Insolvency and Bankruptcy Board of India. An eligible

RA can submit a RP on the basis of the information

memorandum prepared by the Resolution

Professional, as per Section 30. The Resolution

Professional after examining each RP received by

him and after confirming that the same are in

consonance with sub-section (2) of Section 30, would

present the same to the CoC for its approval. The

relevant part of Section 30 is quoted below.

“30. Submission of Resolution Plan –

(2) The resolution professional shall examine

each resolution plan received by him to confirm

that each resolution plan--

(a) provides for the payment of insolvency

resolution process costs in a manner

specified by the Board in priority to

the payment of other debts of the corporate

debtor;

(b) provides for the payment of debts of

operational creditors in such manner as may

be specified by the Board which shall not be

less than--

(i) the amount to be paid to such creditors

in the event of a liquidation of the

corporate debtor under section 53; or

(ii) the amount that would have been paid

to such creditors, if the amount to be

distributed under the resolution plan had

been distributed in accordance with the

order of priority in sub-section (1) of

section 53, whichever is higher and

provides for the payment of debts of

financial creditors, who do not vote in

favour of the resolution plan, in such

manner as may be specified by the

Board, which shall not be less than the

amount to be paid to such creditors in

accordance with sub-section (1) of

section 53 in the event of a liquidation of

the corporate debtor.

Explanation 1.--For the removal of doubts, it is

hereby clarified that a distribution in accordance

with the provisions of this clause shall be fair

and equitable to such creditors.

Explanation 2.-- For the purposes of this clause,

it is hereby declared that on and from the date

of commencement of the Insolvency and

Bankruptcy Code (Amendment) Act, 2019, the

provisions of this clause shall also apply to the

corporate insolvency resolution process of a

corporate debtor--

(i) where a resolution plan has not been

approved or rejected by the Adjudicating

Authority;

(ii) where an appeal has been preferred

under section 61 or section 62 or such an

appeal is not time barred under any

provision of law for the time being in

force; or

(iii) where a legal proceeding has been

initiated in any court against the decision

of the Adjudicating Authority in respect of

a resolution plan;

(c) provides for the management of the

affairs of the Corporate debtor after approval

of the resolution plan;

(d) the implementation and supervision of

the resolution plan;

(e) does not contravene any of the

provisions of the law for the time being in

force;

(f) conforms to such other requirements as

may be specified by the Board.

Explanation.-- For the purposes of clause

(e), if any approval of shareholders is

required under the Companies Act, 2013 or

any other law for the time being in force for

the implementation of actions under the

resolution plan, such approval shall be

deemed to have been given and it shall not

be a contravention of that Act or law];

(4) The committee of creditors may approve a

resolution plan by a vote of not less than “sixty-

six” per cent of voting share of the financial

creditors, after considering its feasibility and

viability, the manner of distribution proposed,

which may take into account the order of priority

amongst creditors as laid down in sub-section

(1) of section 53, including the priority and value

of the security interest of a secured creditor and

such other requirements as may be specified by

the Board:

Provided …………………..

Sub-section (6) of Section 30 requires the Resolution

Professional to submit the RP as approved by the

CoC to the Adjudicating Authority. 16. Section 31 being important for the purpose of these

appeals, the relevant part thereof is reproduced

hereunder: -

“31. Approval of Resolution Plan –

(1) If the Adjudicating Authority is satisfied that

the resolution plan as approved by the

committee of creditors under sub-section (4) of

section 30 meets the requirements as referred

to in sub-section (2) of section 30, it shall by

order approve the resolution plan which shall be

binding on the corporate debtor and its

employees, members, creditors, including the

Central Government, any State Government or

any local authority to whom a debt in respect of

the payment of dues arising under any law for

the time being in force, such as authorities to whom statutory dues are owed, guarantors and

other stakeholders involved in the resolution

plan.

Provided that the Adjudicating Authority shall,

before passing an order for approval of

resolution plan under this sub-section, satisfy

that the resolution plan has provisions for its

effective implementation.

(2) Where the Adjudicating Authority is satisfied

that the resolution plan does not confirm to the

requirements referred to in sub-section (1), it

may, by an order, reject the resolution plan.

17. Section 32 pertains to the Appeal to be filed from an

order approving the RP in the manner and on the

grounds laid down in sub-section (3) of Section 61. 18. The jurisdiction of the Adjudicating Authority (NCLT)

for corporate persons is circumscribed in sub-section

(5) of Section 60, which reads as under:

“60. Adjudicating authority for corporate

persons:

(5) Notwithstanding anything to the contrary

contained in any other law for the time being in

force, the National Company Law Tribunal shall

have jurisdiction to entertain or dispose of— (a)

any application or proceeding by or against the

corporate debtor or corporate person; (b) any

claim made by or against the corporate debtor

or corporate person, including claims by or

against any of its subsidiaries situated in India;

and (c) any question of priorities or any question

of law or facts, arising out of or in relation to the

insolvency resolution or liquidation proceedings

of the corporate debtor or corporate person

under this Code.

19. Section 61 provides for the Appeals and Appellate

Authority. The relevant part thereof is reproduced as

under:

“61. Appeals and Appellate Authority. –

(1) Notwithstanding anything to the contrary

contained under the Companies Act 2013 (18 of

2013), any person aggrieved by the order of the

Adjudicating Authority under this part may prefer

an appeal to the National Company Law

Appellate Tribunal.

(3) An appeal against an order approving a

resolution plan under section 31 may be filed on

the following grounds, namely:

(i) the approved resolution plan is in

contravention of the provisions of any law for the

time being in force;

(ii) there has been material irregularity in

exercise of the powers by the resolution

professional during the corporate insolvency

resolution period;

(iii) the debts owed to operational creditors of

the corporate debtor have not been provided for

in the resolution plan in the manner specified by

the Board;

(iv) the insolvency resolution process costs

have not been provided for repayment in priority

to all other debts; or

(v) the resolution plan does not comply with any

other criteria specified by the Board.

20. So far as Avoidance applications under Chapter-III

are concerned, Section 43 pertains to the Application

to be filed in respect of the Preferential transactions

and the relevant time therefor, and Section 44

pertains to the orders that may be passed by the

Adjudicating Authority in such application filed under

Section 43(1). Section 45 pertains to the Application

to be filed for the avoidance of Undervalued

transactions, and Section 46 pertains to the relevant

period for avoidable transactions. Section 47 pertains

to the Application that may be filed by Creditor in

cases of Undervalued transactions, and the orders to

be passed by the Adjudicating Authority in such

Application. Section 48 pertains to the orders that may

be passed by the Adjudicating Authority in cases of

Undervalued transactions contemplated under sub-

section (1) of Section 45, and Section 49 pertains to

the orders that may be passed by the Adjudicating

Authority on being satisfied that CD has entered into

an Undervalued transaction as referred to in sub-

section (2) of Section 45. Section 50 pertains to the

Application to be filed in respect of Extortionate Credit

transactions and Section 51 pertains to the orders that

may be passed by the Adjudicating Authority in the

Application made under Section 50(1) of IBC. 21. Section 66 pertaining to the “Fraudulent trading or

Wrongful trading” being relevant for the purpose of the

present Appeals, the same is reproduced hereunder:

“66. Fraudulent trading or wrongful trading.

1) If during the corporate insolvency resolution

process or a liquidation process, it is found that

any business of the corporate debtor has been

carried on with intent to defraud creditors of the

corporate debtor or for any fraudulent purpose,

the Adjudicating Authority may on the

application of the resolution professional pass

an order that any persons who were knowingly

parties to the carrying on of the business in such

manner shall be liable to make such

contributions to the assets of the corporate

debtor as it may deem fit.

(2) On an application made by a resolution

professional during the corporate insolvency

resolution process, the Adjudicating Authority

may by an order direct that a director or partner

of the corporate debtor, as the case may be,

shall be liable to make such contribution to the

assets of the corporate debtor as it may deem

fit, if—

(a) before the insolvency commencement

date, such director or partner knew or ought

to have known that there was no

reasonable prospect of avoiding the

commencement of a corporate insolvency

resolution process in respect of such

corporate debtor; and

(b) such director or partner did not exercise

due diligence in minimising the potential loss

to the creditors of the corporate debtor.

(3) Notwithstanding anything contained in this

section, no application shall be filed by a

resolution profession under sub-Section (2), in

respect of such default against which initiation

of corporate insolvency resolution process is

suspended as per Section 10A.

Explanation. — For the purposes of this section

a director or partner of the corporate debtor, as

the case may be, shall be deemed to have

exercised due diligence if such diligence was

reasonably expected of a person carrying out

the same functions as are carried out by such

director or partner, as the case may be, in

relation to the corporate debtor.”

22. Section 67 deals with the proceedings under Section

66. It reads as under: -

“67. Proceedings under Section 66. –

(1) Where the Adjudicating Authority has passed

an order under sub-section (1) or sub-section

(2) of section 66, as the case may be, it may give

such further directions as it may deem

appropriate for giving effect to the order, and in

particular, the Adjudicating Authority may—

(a) provide for the liability of any person under

the order to be a charge on any debt or

obligation due from the corporate debtor to him,

or on any mortgage or charge or any interest in

a mortgage or charge on assets of the corporate

debtor held by or vested in him, or any person

on his behalf, or any person claiming as

assignee from or through the person liable or

any person acting on his behalf; and

(b) from time to time, make such further

directions as may be necessary for enforcing

any charge imposed under this section.

Explanation. —For the purposes of this section,

“assignee” includes a person to whom or in

whose favour, by the directions of the person

held liable under clause (a) the debt, obligation,

mortgage or charge was created, issued or

transferred or the interest created, but does not

include an assignee for valuable consideration

given in good faith and without notice of any of

the grounds on which the directions have been

made.

(2) Where the Adjudicating Authority has passed

an order under sub-section (1) or sub-section

(2) of section 66, as the case may be, in relation

to a person who is a creditor of the corporate

debtor, it may, by an order, direct that the whole

or any part of any debt owed by the corporate

debtor to that person and any interest thereon

shall rank in the order of priority of payment

under section 53 after all other debts owed by

the corporate debtor.”

23. Section 238 states that the provisions of IBC shall

have effect, notwithstanding anything inconsistent

therewith contained in any other law for the time being

in force or any instrument, having effect by virtue of

any such law. 24. The Insolvency and Bankruptcy Board of India (IBBI),

in exercise of the powers conferred under Section 240

of IBC, has framed the Regulations called “The

Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons)

Regulations, 2016 (for short, Regulations, 2016)

laying down a detailed procedure required to be

followed for the Insolvency Resolution Process for

Corporate Persons. Regulation 37 of the said

Regulations requires the RP to provide for the

measures, as may be necessary, for Insolvency

Resolution of the CD for maximization of value of its

assets. Regulation 38 states about the mandatory

contents of the RP. Regulation 39 states about the

procedure to be followed while approving the Plan,

also prescribing time limit for each stage of the

process. The relevant part of Regulation 39 is

reproduced as under:

“Regulation 39- Approval of Resolution plan

(2) The resolution professional shall submit to

the committee all resolution plans which comply

with the requirements of the Code and

regulations made thereunder along with the

details of following transactions, if any,

observed, found or determined by him: -

(a) preferential transactions under section 43;

(b) undervalued transactions under section 45;

(c) extortionate credit transactions under section

50; and

(d) fraudulent transactions under section 66,

and the orders, if any, of the adjudicating

authority in respect of such transactions.

(3) The committee shall-

(a) evaluate the resolution plans received under

sub-regulation (2) as per evaluation matrix;

(b) record its deliberations on the feasibility and

viability of each resolution plan; and

(c) vote on all such resolution plans

simultaneously.

(3A) Where only one resolution plan is put to

vote, it shall be considered approved if it

receives requisite votes.

(4) The resolution professional shall endeavour

to submit the resolution plan approved by the

committee to the Adjudicating Authority at least

fifteen days before the maximum period for

completion of corporate insolvency resolution

process under section 12, along with a

compliance certificate in Form H of the

Schedule and the evidence of receipt of

performance security required under sub-

regulation (4A) of regulation 36B.

(9) A creditor, who is aggrieved by non-

implementation of a resolution plan approved

under sub-section (1) of section 31, may apply

to the Adjudicating Authority for directions.”

25. The IBBI has also framed the Regulations called the

IBBI (Liquidation Process) Regulations, 2016. Since,

the NCLAT has referred to Regulation 37A thereof,

the same is reproduced as under:

“Regulation 37A – Assignment of not readily

realizable assets. –

1) A liquidator may assign or transfer a not

readily realisable asset through a transparent

process, in consultation with the stakeholders’

consultation committee in accordance with

regulation 31A, for a consideration to any

person, who is eligible to submit a resolution

plan for insolvency resolution of the corporate

debtor.

Explanation. - For the purposes of this sub-

regulation, “not readily realisable asset” means

any asset included in the liquidation estate

which could not be sold through available

options and includes contingent or disputed

assets and assets underlying proceedings for

preferential, undervalued, extortionate credit

and fraudulent transactions referred to in

sections 43 to 51 and section 66 of the Code.”

26.The Reserve Bank of India Act, 1934 (RBI Act) was enacted to regulate the issue of Bank Notes and for keeping reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. The RBI is also responsible to operate the monetary policy framework in India. The relevant part of the provisions contained in Section 45-IE of RBI Act, under which the RBI had superseded the Board of Directors of DHFL and appointed the Administrator, is reproduced as under: -“45-IE. Supersession of Board of directors of non-banking financial company (other than Government Company). — (1) Where the Bank is satisfied that in the public interest or to prevent the affairs of a non-banking financial company being conducted in a manner detrimental to the interest of the depositors or creditors, or of the non-banking financial company (other than Government Company), or for securing the proper management of such company or for financial stability, it is necessary so to do, the Bank may, for reasons to be recorded in writing, by order, supersede the Board of Directors of such company for a period not exceeding five years as may be specified in the order, which may be extended from time to time, so, however, that the total period shall not exceed five years. (2) The Bank may, on supersession of the Board of Directors of the non-banking financial company under sub-section (1), appoint a suitable person as the Administrator for such period as it may determine.

27.Section 45 (QA) of RBI Act having been relied upon, the same is reproduced as under: “45QA. Power of Company Law Board to order repayment of deposit. — (1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and condition of such deposit. (2) Where a non-banking financial company has failed to repay and deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board constituted under section 10E of the Companies Act, 1956 (1 of 1956), may, if it is satisfied, either on its own motion or on an application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the non-banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order: Provided that the Company Law Board may, before making any order under this sub-section, give a reasonable opportunity of being heard to the non-banking financial company and the other persons interested in the matter.”

28.The NHB Act has been enacted to establish a Bank to be known as the National Housing Bank to operate as a principal agency to promote housing finance institutions, both at local and regional levels and to provide financial and other support to such institutions and for matters connected therewith or incidental thereto. Section 36(A) of NHB Act having been relied upon, the same is also reproduced for ready reference: “36A. Power to order repayment of deposit. — (1) Every deposit accepted by a housing finance institution which is a company unless renewed, shall be repaid in accordance with the terms and conditions of such deposit. (2) Where a housing finance institution which is a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, such officer of the National Housing Bank, as may be authorised by the Central Government for the purpose of this section (hereinafter referred to as the "authorised officer") may, if he is satisfied, either on his own motion or on any application of the depositor, that it is necessary so to do to safeguard the interests of the housing finance institution, the depositors or in the public interest, direct, by order, such housing finance institution to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order: Provided that the authorised officer may, before making any order under this sub-section, give a reasonable opportunity of being heard to the housing finance institution and the other persons interested in the matter.” (V) SCOPE OF JUDICIAL REVIEW: -

29.Before adverting to the issues involved in these Appeals, let us examine the scope of judicial review by the NCLT under Section 31 and the scope of judicial review by NCLAT under Section 61 of IBC.

30.From the bare perusal of the Statement of Objects and Reasons, it is discernible that one of the prime objects of IBC is to provide for implementation of the Insolvency Resolution Process in a time bound manner for maximization of value of assets in order to balance the interests of the stakeholders. The Legislature in order to fill up critical gaps in the corporate insolvency framework, had made amendments in certain provisions by Act of 26 of 2019, making the RP approved by the Adjudicating Authority binding on the Central Government, any State Government or local authority to whom a debt is owned in respect of payment of dues arising under any law for the time being in force.

31.If one glances through the scheme of the IBC, its purpose is also explicitly spelt out from the various provisions of the Act itself. The role and importance of the CoC have been stated in Section 21, the duties of the Resolution Professional in Section 25, the approval of RP by the Adjudicating Authority in Section 31. Certain mandates have been given in Section 31 for the effective implementation of the RP, as approved by the CoC. The said requirements are (i) the RP must be approved by the CoC by a vote of not less than 66% of voting share of the financial creditors, as contemplated in sub-section (4) of Section 30. (ii) the RP submitted by the Resolution Professional must confirm the requirements of subsection (2) of Section 30. The mandatory contents of the RP have also been stated in Regulation 38 of the Regulations, 2016. Thus, having regard to Section 31, it is clear that the Adjudicating Authority i.e. NCLT, if it is satisfied that the RP as approved by the CoC under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by an order approve the RP, which shall be binding on all the stakeholders. The Adjudicating Authority can reject the RP under sub-section (2) of Section 31, where it is satisfied that the RP does not confirm to the requirements referred to in sub-section (1) thereof.

32.At this juncture, it is also necessary to refer to Section 61 which deals with the grounds on which Appeals could be preferred before the Appellate Authority i.e. NCLAT against the order approving the RP under Section 31 by the NCLT. As per sub-section (3) of Section 61, an appeal against an order of approving the RP under Section 31 could be filed on one of the five grounds mentioned therein. One of the grounds on which an Appeal could be filed is, when the approval of RP by the NCLT is in contravention of the provisions of any law for the time being in force. Another ground is, when there has been material irregularity in exercise of the powers by the Resolution Professional during the Corporate Insolvency Resolution period. There are other three grounds with which we are not concerned in the present set of Appeals. Suffice it to say that there are specific grounds mentioned in the sub-section (3) for preferring of an Appeal before the NCLAT under Section 61 of the Code. Thus, the powers to be exercised by the NCLAT under Section 61, have also been specifically confined to the grounds mentioned therein.

33.The reasons for circumscribing the powers of NCLT under Section 31 in approving/rejecting the RP approved by the CoC and of the NCLAT under Section 61 in entertaining the Appeals arising out of the orders passed by the NCLT approving the RP on limited grounds are not far to be culled out. The very prominent purpose of the IBC has been spelt out in the long title of the Act itself, which is to promote entrepreneurship, availability of credit and balance the interest of all the stakeholders in the CIRP proceedings in a time bound manner. This Court in catena of decisions has dealt with the dominant purpose and objectives of enacting the IBC, while examining the scope of judicial review by the NCLT and the NCLAT over the commercial wisdom exercised by the CoC.

34.In Arcelormittal India Private Limited vs. Satish Kumar Gupta and Others,7 this Court had elaborately adverted to the legislative history and delineated the broad contours of the provisions of the IBC, from which it could be seen that the commercial wisdom of CoC has been given prominent status without any judicial intervention, for ensuring the completion of Resolution Process within the timelines prescribed by the IBC. It is also required to be noted that there is a mandate of completing the Resolution Process within 270 days (outer limit), failing which an initiation of Liquidation process has been made inevitable. This Court in the said judgment after discussing the scheme of the Act, and also the earlier judgments, emphasized on the prescription of timelimit for the completion of Insolvency process. Paragraph 75 of the said judgment being relevant is reproduced hereunder: -“75. In fact, even the literal language of Section 12(1) makes it clear that the provision must read as being mandatory. The expression “shall be completed” is used. Further, sub-section (3) makes it clear that the duration of 180 days may be extended further “but not exceeding 90 days”, making it clear that a maximum of 270 days is laid down statutorily. Also, the proviso to Section 12 makes it clear that the extension “shall not be granted more than once.” 35. In K. Sashidhar vs. Indian Overseas Bank and Others (supra), this Court dealt with the discretion of the Adjudicating Authority (NCLT) and the jurisdiction of the NCLAT as an Appellate Authority and held as under: -“55. Whereas, the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan “as approved” by the requisite per cent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides : (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under Section 188 of the I&B Code. The powers and functions of the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Section 30(4) of the I&B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under Section 30(4) of the I&B Code. 57. On a bare reading of the provisions of the I&B Code, it would appear that the remedy of appeal under Section 61(1) is against an “order passed by the adjudicating authority (NCLT)”, which we will assume may also pertain to recording of the fact that the proposed resolution plan has been rejected or not approved by a vote of not less than 75% of voting share of the financial creditors. Indubitably, the remedy of appeal including the width of jurisdiction of the appellate authority and the grounds of appeal, is a creature of statute. The provisions investing jurisdiction and authority in NCLT or Nclat as noticed earlier, have not made the commercial decision exercised by CoC of not approving the resolution plan or rejecting the same, justiciable. This position is reinforced from the limited grounds specified for instituting an appeal that too against an order “approving a resolution plan” under Section 31. First, that the approved resolution plan is in contravention of the provisions of any law for the time being in force. Second, there has been material irregularity in exercise of powers “by the resolution professional” during the corporate insolvency resolution period. Third, the debts owed to operational creditors have not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board. Significantly, the matters or grounds—be it under Section 30(2) or under Section 61(3) of the I&B Code—are regarding testing the validity of the “approved” resolution plan by CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by CoC in exercise of its business decision. 58. Indubitably, the inquiry in such an appeal would be limited to the power exercisable by the resolution professional under Section 30(2) of the I&B Code or, at best, by the adjudicating authority (NCLT) under Section 31(2) read with Section 31(1) of the I&B Code. No other inquiry would be permissible. Further, the jurisdiction bestowed upon the appellate authority (Nclat) is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in Section 61(3) of the I&B Code, which is limited to matters “other than” enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers.”

36.The Court also considered the amendment to Section 30(4) i.e. fourth proviso which was added to sub-section (4) which came into force from 23.11.2017, and observed as under: -“68. Suffice it to observe that the amended provision merely restates as to what the financial creditors are expected to bear in mind whilst expressing their choice during consideration of the proposal for approval of a resolution plan. No more and no less. Indubitably, the legislature has consciously not provided for a ground to challenge the justness of the “commercial decision” expressed by the financial creditors—be it to approve or reject the resolution plan. The opinion so expressed by voting is non-justiciable. Further, in the present cases, there is nothing to indicate as to which other requirements specified by the Board at the relevant time have not been fulfilled by the dissenting financial creditors. As noted earlier, the Board established under Section 188 of the I&B Code can perform powers and functions specified in Section 196 of the I&B Code. That does not empower the Board to specify requirements for exercising commercial decisions by the financial creditors in the matters of approval of the resolution plan or liquidation process. Viewed thus, the amendment under consideration does not take the matter any further.”

37.In Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Others (supra), a Three-Judge Bench discussed in detail the issues pertaining to the role of Resolution Professionals, CoCs, and the jurisdiction of NCLT and NCLAT and observed as under: -“64. Thus, what is left to the majority decision of the Committee of Creditors is the “feasibility and viability” of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be accepted by the resolution applicant with a consequent modification as to distribution of funds, payment being provided to a certain type of operational creditor, namely, the electricity distribution company, out of upfront payment offered by the proposed resolution applicant which may also result in a consequent reduction of amounts payable to other financial and operational creditors. What is important is that it is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place.”

38.On the issue of jurisdiction of the Adjudicating Authority i.e. NCLT and the Appellate Tribunal i.e. NCLAT, it was held in Essar Steel (supra) as under:-“Jurisdiction of the Adjudicating Authority and the Appellate Tribunal 65. As has already been seen hereinabove, it is the Adjudicating Authority which first admits an application by a financial or operational creditor, or by the corporate debtor itself under Sections 7, 9 and 10 of the Code. Once this is done, within the parameters fixed by the Code, and as expounded upon by our judgments in Innoventive Industries Ltd. v. Icici Bank [Innoventive Industries Ltd. v. Icici Bank, (2018) 1 SCC 407 : (2018) 1 SCC (Civ) 356] and Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. [Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., (2018) 2 SCC 674 : (2018) 2 SCC (Civ) 288] , the Adjudicating Authority then appoints an interim resolution professional who takes administrative decisions as to the day to day running of the corporate debtor; collation of claims and their admissions; and the calling for resolution plans in the manner stated above. After a resolution plan is approved by the requisite majority of the Committee of Creditors, the aforesaid plan must then pass muster of the Adjudicating Authority under Section 31(1) of the Code. The Adjudicating Authority's jurisdiction is circumscribed by Section 30(2) of the Code. In this context, the decision of this Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150: (2019) 4 SCC (Civ) 222] is of great relevance. 67. …..Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar. 69. It will be noticed that the non obstante clause of Section 60(5) speaks of any other law for the time being in force, which obviously cannot include the provisions of the Code itself. Secondly, Section 60(5)(c) is in the nature of a residuary jurisdiction vested in NCLT so that NCLT may decide all questions of law or fact arising out of or in relation to insolvency resolution or liquidation under the Code. Such residual jurisdiction does not in any manner impact Section 30(2) of the Code which circumscribes the jurisdiction of the Adjudicating Authority when it comes to the confirmation of a resolution plan, as has been mandated by Section 31(1) of the Code. A harmonious reading, therefore, of Section 31(1) and Section 60(5) of the Code would lead to the result that the residual jurisdiction of NCLT under Section 60(5)(c) cannot, in any manner, whittle down Section 31(1) of the Code, by the investment of some discretionary or equity jurisdiction in the Adjudicating Authority outside Section 30(2) of the Code, when it comes to a resolution plan being adjudicated upon by the Adjudicating Authority. This argument also must needs be rejected.”

39.Again, a Three-Judge bench in Ghanashyam Mishra and Sons Private Limited through the Authorised Signatory vs. Edelweiss Asset Reconstruction Company Limited through the Director and Others,8 examined the legislative intent of making the RP binding on all the Stakeholders after it gets seal of approval from the Adjudicating Authority, and observed as under: -“64. It could thus be seen, that the legislature has given paramount importance to the commercial wisdom of CoC and the scope of judicial review by adjudicating authority is limited to the extent provided under Section 31 of the I&B Code and of the appellate authority is limited to the extent provided under sub-section (3) of Section 61 of the I&B Code, is no more res integra. 65. Bare reading of Section 31 of the I&B Code would also make it abundantly clear that once the resolution plan is approved by the adjudicating authority, after it is satisfied, that the resolution plan as approved by CoC meets the requirements as referred to in sub-section (2) of Section 30, it shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders. Such a provision is necessitated since one of the dominant purposes of the I&B Code is revival of the corporate debtor and to make it a running concern.”

40.Recently, this Court in Ebix Singapore Private Limited vs. Committee of Creditors of Educomp Solutions Limited and Another,9 reiterating that the Adjudicating Authority is prohibited from secondguessing the commercial wisdom of the parties or directing unilateral modification to the RPs, as held in Essar Steel (supra) and K. Sashidhar (supra), further held as under“157. These are binding precedents. Absent a clear legislative provision, this Court will not, by a process of interpretation, confer on the adjudicating authority a power to direct an unwilling CoC to renegotiate a submitted resolution plan or agree to its withdrawal, at the behest of the resolution applicant. The adjudicating authority can only direct the CoC to re-consider certain elements of the resolution plan to ensure compliance under Section 30(2) IBC, before exercising its powers of approval or rejection, as the case may be, under Section 31 [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531, para 73 : (2021) 2 SCC (Civ) 443] . In State of A.P. v. P. Laxmi Devi [State of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720], while determining the constitutionality of a statute, this Court observed that it should be wary of transgressing into the domain of the legislature, especially in matters relating to economic and regulatory legislation. This Court observed : (P. Laxmi Devi case [State of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720] “80. … As regards economic and other regulatory legislation judicial restraint must be observed by the court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialisation when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions.” 158. Judicial restraint must not only be exercised while adjudicating upon the constitutionality of the statute relating to economic policy but also in matters of interpretation of economic statutes, where the interpretative manoeuvres of the Court have an effect of transgressing into the law-making power of the legislature and disturbing the delicate balance of separation of powers between the legislature and the judiciary. Judicial restraint must be exercised in such cases as a matter of prudence, since the court neither has the necessary expertise nor the power to hold consultations with stakeholders or experts to decide the direction of economic policy. A court may be inept in laying down a detailed procedure for exercise of the power of withdrawal or modification by a successful resolution applicant without impacting the other procedural steps and the timelines under IBC which are sacrosanct. Thus, judicial restraint must be exercised while intervening in a law governing substantive outcomes through procedure, such as IBC. In this case, if resolution applicants are permitted to seek modifications after subsequent negotiations or a withdrawal after a submission of a resolution plan to the adjudicating authority as a matter of law, it would dictate the commercial wisdom and bargaining strategies of all prospective resolution applicants who are seeking to participate in the process and the successful resolution applicants who may wish to negotiate a better deal, owing to myriad factors that are peculiar to their own case. The broader legitimacy of this course of action can be decided by the legislature alone, since any other course of action would result in a flurry of litigation which would cause the delay that IBC seeks to disavow.”

41.What is “commercial wisdom” of CoC has been very aptly put by this Court in a latest decision in M.K. Rajagopalan vs. Dr. Periasamy Palani Gounder and Another (supra), which is worth reproducing: -“160. As noticed hereinbefore, commercial wisdom of CoC is given such a status of primacy that the same is considered rather a matter nonjusticiable in any adjudicatory process, be it by the adjudicating authority or even by this Court. However, the commercial wisdom of CoC means a considered decision taken by CoC with reference to the commercial interests and the interest of revival of the corporate debtor and maximisation of value of its assets. This wisdom is not a matter of rhetoric but is denoting a wellconsidered decision by the protagonist of CIRP i.e. CoC. As observed by this Court in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] , the financial creditors forming CoC “act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision.” This Court also observed in K. Sashidhar [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] that “[t]here is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan.” 161. These observations read with the observations in Essar Steel [Essar Steel India Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] with reference to the reasons stated in the Report of Bankruptcy Law Reforms Committee of November 2015, make it clear that commercial wisdom of CoC is assigned primacy in CIRP for it represents collective business decision, which is arrived at after thorough examination of the proposed resolution plan and assessment made with involvement of experts by the body of persons who are most vitally interested in rapid and efficient decision making. It follows as a necessary corollary that to be worth its name, the commercial wisdom of CoC would come into existence and operation only when all the relevant information is available before it and is duly deliberated upon by all its members, who have direct and substantial interest in the survival of corporate debtor and in the entire CIRP. 162. In light of the aforesaid position of law and its operation in relation to the decision-making process of CoC, it needs hardly any emphasis that each and every aspect relating to the resolution plan, and more particularly its financial layout, has to be before the CoC before it could be said to have arrived at a considered decision in its commercial wisdom.”

42.In view of the above legal position settled by this Court in the fleet of judgments, it is no more res integra that the legislature has given paramount importance to the “commercial wisdom” of CoC, and that the scope of the judicial review by the Adjudicating Authority (NCLT) is limited to the extent provided under Section 31, and that of the Appellate Authority (NCLAT) is limited to the extent provided under sub-section (3) of Section 61 of the IBC. After a RP is approved by the requisite majority of the CoC, it must pass the muster of Adjudicating Authority under Section 31(1) of the IBC. Section 31 also makes it abundantly clear that once the RP is approved by the Adjudicating Authority, after it is satisfied that the RP as approved by the CoC meets the requirements as referred to in sub-section (2) of Section 30, it shall be binding on the CD and its employees, members, creditors, guarantors and stakeholders. The legislature has consciously not provided for a ground to challenge the justness of the “commercial decision” taken by the Financial Creditors, because one of the dominant purposes of the IBC is revival of the CD and to make it a running concern.

43.While considering the feasibility and viability of the Prospective Resolution Plans, the CoC can always suggest a modification therein and exercise its commercial wisdom. However, once the RP is approved by the requisite majority of CoC, and when such RP is placed before the Adjudicating Authority for its approval under Section 31, the Adjudicating Authority has to only see whether such RP as approved by the CoC meets the requirements as referred to in Section 30(2). It is only where the Adjudicating Authority is satisfied that the RP does not confirm to the requirements of sub-section (1) of Section 31, it may by an order reject the RP. It is true that the NCLT has to decide all the questions on law or fact arising out of or in relation to the insolvency resolution or liquidation under the residuary jurisdiction vested in NCLT under Section 60(5), however as held in Essar Steel (supra), such residual jurisdiction does not in any manner impact Section 30(2) of the Code, which circumscribes the jurisdiction of the Adjudicating Authority, when it comes to the confirmation of RP, as has been mandated by Section 31(1) of the Code.

44.Similarly, the scope of interference by the Appellate Authority i.e., NCLAT under Section 61 in the Appeals arising out of the order approving a RP under Section 31, is also very limited and restricted to the specific grounds mentioned in sub-section (3) of Section 61. The grounds for filing Appeal under Section 61 have to be confined to sub-section (3) thereof.

45.Keeping in view the above settled legal position, let us deal with the three categories of Appeals separately. (VI) ANALYSIS IN THE FIRST CATEGORY OF APPEALS: -

46.In the First category of Appeals, the impugned order dated 27.01.2022 passed by the NCLAT, in the Company Appeal Nos. 454-455 and 750 of 2021, in relation to the treatment of recoveries from the Avoidance applications provided in the RP submitted by the SRA - Piramal Capital, is under challenge. As stated earlier, the C.A. Nos.1632-1634 of 2022 have been filed by the SRA - Piramal Capital, and C.A. Nos.2989-2991 of 2022 have been filed by the Union of India, challenging the impugned judgment to the extent the NCLAT modified the RP and the C.A. Nos. 3694-3695 of 2022 have been filed by the 63 Moons to the extent the NCLAT sent back the RP to CoC for reconsideration. The NCLAT vide the said impugned order has set aside the term in the RP that permitted the SRA to appropriate recoveries if any, from Avoidance applications filed upon Section 66 of the IBC, and sent back the RP to CoC for reconsideration on that aspect.

47.The NCLAT treating the Appeals at the instance of 63 Moons as maintainable under Section 61(3) of IBC, observed as under: “9.113 The appellants, aggrieved persons on account of illegalities perpetrated in the approved Resolution Plan, have preferred these appeals, requiring adjudication on an important question of law. Accordingly, these appeals have duly urged the requisite ground for Section 61 (3) of the Code. 9.114 Providing the benefit of the outcome of avoidance applications to the Resolution Applicant results in unjust enrichment of Respondent No. 2/RA at the expense of all the creditors of the Corporate Debtor. Moreover, the same is vitiated by illegalities and material irregularities, and the same could not have been cured on the pretext of the commercial wisdom of CoC.”

48.The NCLAT in the impugned judgment, while acknowledging the proposition that the commercial wisdom of the CoC is supreme so far as commercial aspects of the RP is concerned, held that the said principle is not applicable to the present facts where the issue of illegality has been raised. According to the NCLAT, the depositors of DHFL are the rightful beneficiaries, if not owners, of the monies that have been siphoned off by the Promoters/Directors of the CD. The NCLAT thereafter taking resort to Regulation 37A of IBBI (Liquidation Process) Regulations, 2016, observed as under: “9.109 Regulation 37A of the IBBI (Liquidation Process) Regulations, 2016 (the "Liquidation Process Regulations"), which empowers a Liquidator to assign or transfer a not readily realizable asset during the liquidation of a Corporate Debtor. The conspicuous absence of a similar provision in the CIRP Regulations, which permits assignment or transfer of recoveries from avoidance transactions to a resolution applicant, supports the case of the Appellant that such recoveries cannot be transferred to a resolution applicant in the CIRP process, which is qualitatively different and distinct from the liquidation process.”

49.Ultimately, the NCLAT concluded in Para 16-19 as under: -“16. Therefore, before approving the Resolution Plan, the Adjudicating Authority was obligated to test the Resolution Plan in terms of Section 30 (2) of the Code. In the instant case, the Administrator referred the matter to CoC to decide on the applicability of the Venus judgement of Delhi High Court in providing the outcome of avoidance transactions to the Successful Resolution Applicant. Adjudicatory power could not have been delegated to the CoC. The Adjudicating Authority has not taken any decision about the applicability of the Venus judgement on the issue of providing the outcome of avoidance transaction to the resolution applicant. The Adjudicating Authority has stated that "as far as the claims of avoidance transactions, CoC has consciously decided that the money realised through these avoidance transactions would accrue to the members of the CoC. At the same time, they have also consciously decided after a lot of deliberations negotiations that money realised if any under Section 66 of the IBC, i.e. fraud and fraudulent transactions, CoC has ascribed the value of lNR one and if any positive money recovery the same would go to the Resolution Applicant of the Corporate Debtor." Therefore, it cannot be considered the findings of the Adjudicating Authority. The CoC was not empowered to exercise such Adjudicatory power and decide. Insolvency Law Committee Report, 2020, specifically provides that the key aim of providing certain transactions is to avoid unjust enrichment of some parties in the insolvency at the cost of all creditors. The underlying policy of such a proceeding is to prevent unjust enrichment of one party at the expense of other creditors. Thus, factual factors such as the kind of transactions being provided, party funding the action, assignment of claims, and creditors affected by transaction or trading may be considered when deciding on the distribution of recoveries. Thus, it was recommended that instead of providing anything prescriptive in this regard, the decision on the treatment of recoveries might be left to the adjudicating authority. 17. Accordingly, the Adjudicating Authority should have decided whether the recoveries vested with the corporate debtor should be applied for the benefit of creditors of the corporate debtor, the successful resolution applicant or other stakeholders. In arriving at this decision, the Adjudicating Authority may take note of the facts and circumstances of the case and other listed factors. 18. The Respondents have also argued that the possibility of recovering monies from avoidance transactions is very low. However, the amount of the actual recovery that may be made in the future is entirely irrelevant. Since Respondent No. 2 has ascribed a value of lNR 1 to the avoidance transactions, Respondent No. 2 has not factored in the avoidance transactions in the Resolution Plan amount. Moreover, there is no material on record to suggest that the avoidance transactions have been factored in Respondent No. 2 's Resolution Plan. Therefore, the oral contention of the Respondents that the avoidance transactions have been factored in the Resolution Plan amount is unsupported and not borne out from the material on record. 19. Therefore, the present appeals ought to be allowed. The term in the Resolution Plan that permits the Successful Resolution Applicant to appropriate recoveries, if any, from avoidance applications filed under Section 66 of the Code ought to be set aside. The Resolution Plan be sent back to the CoC for reconsideration on this aspect.” (i) QUESTIONS:

50.Having regard to the submissions made by the learned counsels for the parties, and to the findings arrived at by the NCLAT in the impugned order, the main question that falls for consideration before this Court is“Whether the RP in question approved by the CoC and the NCLT was in contravention of the provisions of any law, for the time being in force, requiring the NCLAT to exercise its jurisdiction under Section 61 of the IBC?”

51.The ancillary questions to the main question would be(i) What are the Applications for Avoidance of transactions required to be filed by the Resolution Professional in accordance with Chapter III, and what are the Applications in respect of Fraudulent trading or Wrongful trading required to be filed by the Resolution Professional under Section 66 of the IBC? (ii) What are the mandatory requirements as referred in sub-section (2) of Section 30 read with Regulation 38 of the Regulations, 2016? (iii) What is maximization of the value of assets of the Corporate Debtor? (iv) Whether the NCLAT should have entertained the Appeals of the 63 Moons under Section 61 of the Code and interfered with the commercial wisdom exercised by the CoC?

52.In our opinion, the cumulative answers of the ancillary questions would answer the main question. Therefore, let us first of all examine as to what are the Applications required to be filed by the Resolution Professional, popularly known as the Avoidance Applications? (ii) AVOIDANCE APPLICATIONS: -

53.One of the duties statutorily cast upon the Resolution Professional in Clause (j) of sub-section (2) of Section 25 of the Code is that the Resolution Professional shall file application for Avoidance of transactions in accordance with Chapter III, if any. Having regard to the said Chapter III, which pertains to “Liquidation Process,” it appears that there are three types of Applications that could be filed by the Resolution Professional for avoidance transactions. (i) Application for avoidance of Preferential transactions under Section 43, (ii) Application for avoidance of Undervalued transactions under Section 45 and (iii) Application for avoidance of Extortionate Credit transactions under Section 50.

54.Section 26 specifically states that the filing of an Avoidance Application under Clause (j) of subsection (2) of Section 25 by the Resolution Professional shall not affect the proceedings of CIRP. Meaning thereby, irrespective of the pendency of the Avoidance Applications filed by the Resolution Professional, the CIRP Proceedings could be proceeded further.

55.So far as Section 66 is concerned, the same falls under Chapter VI and it pertains to the “Fraudulent trading or Wrongful trading.” Sub-section 1 of Section 66 provides that if during the CIRP or a Liquidation process, it is found that any business of the CD has been carried on with intent to defraud creditors of the CD or for any fraudulent purpose, the Adjudicating Authority may on the application of the Resolution Professional, pass an order that any persons who were knowingly parties to the carrying on of the business in such manner, shall be liable to make such contributions to the assets of the CD, as it may deem fit. From the bare reading of Section 66(1), it is very much discernible that the said provision pertains to the “Fraudulent trading or Wrongful trading” in respect of the business of the CD.

56.Thus, there is a clear distinction between the Avoidance Applications that may be filed by the Resolution Professional in view of Section 25(2)(j), for avoidance of transactions in accordance with Chapter III of the Code, and the Applications that may be filed by the Resolution Professional in respect of the Fraudulent trading or Wrongful trading under Section 66, which falls under Chapter VI of the Code. The legislature has consciously kept the Applications in respect of Fraudulent trading or Wrongful trading falling in Chapter VI, outside the purview of Section 25(2), which requires the Resolution Professional to undertake the actions and file applications for the avoidance of transactions in accordance with Chapter III. Both, the Avoidance Applications under Chapter III and the Applications in respect of Fraudulent trading or Wrongful trading under Chapter VI, operate in different situations. The powers of the Adjudicating Authority in respect of the Avoidance Applications filed under Chapter III and the powers of the Adjudicating Authority in respect of the Applications pertaining to the Fraudulent and Wrongful trading filed under Chapter VI, have also been separately circumscribed.

57.In the cases of Preferential transactions as Professional may file an Application, when he is of the opinion that the CD, at a relevant time, had given a preference in such transactions, and in such manner as laid down in sub-section (2), to any persons as referred to in sub-section 4 of Section 43. The Adjudicating Authority may pass any of the orders as specified in Clauses (a) to (g) of Section 44, in such Application filed by the Resolution Professional under Section 43(1).

58.Similarly, in the cases of Undervalued transactions as Professional may file an Avoidance Application if he determines that certain transactions were made during the relevant period prescribed under Section 46 which were undervalued. In such applications, the Resolution Professional may pray to declare such transactions as void and to reverse the effect of such transaction in accordance with Chapter III. The Adjudicating Authority may pass any of the orders specified in Clauses (a) to (d) of Section 48 in such Application filed under Section 45(1). He may also pass orders specified in Clause (i) and (ii) of Section 49, in respect of the Undervalued transactions referred to in Section 45(2).

59.In case of Extortionate Credit transactions, as Professional may file Avoidance Application, where the CD had been a party to an Extortionate Credit transaction involving the receipt of financial or operational debt during the period within two years preceding the insolvency commencement date, and where the terms of such transactions required exorbitant payments to be made by the CD. In case of such Extortionate Credit transactions, the Adjudicating Authority may pass any of the orders specified in Clause (a) to (e) of Section 51. It is pertinent to note that in all these types of Avoidance Applications falling under Chapter III, the transactions in question, the properties involved and the persons with whom such transactions were made, could be ascertained by the Adjudicating Authority and therefore it is empowered to pass orders to avoid or set aside such transactions, under Sections 44, 48, 49 and 51, as the case may be.

60.However, in cases of “Fraudulent or Wrongful trading” in respect of the business of the CD as contemplated in Section 66, the properties and the persons involved may or may not be ascertainable and therefore the Adjudicating Authority is not empowered to pass orders to avoid or set aside such transactions, but is empowered to pass orders to the effect that any persons, who were knowingly parties to the carrying on of business in such manner, shall be liable to make such contributions to the assets of the CD, as it may deem fit. The Adjudicating Authority in such applications may also direct that the Director of the CD shall be liable to make such contribution to the assets of the CD as it may deem fit, as contemplated in Section 66(2). In case of Fraudulent trading or Wrongful trading, it would be a matter of inquiry to be made by the Adjudicating Authority as to whether the business of CD was carried on with intent to defraud creditors of the CD or was carried on for any fraudulent purpose.

61.In view of the above, the Applications filed in respect of “Fraudulent and Wrongful trading” carried on by the CD, could not be termed as “Avoidance Applications” used for the Applications filed under Sections 43, 45 and 50 to avoid or set aside the Preferential, Undervalued or Extortionate transactions, as the case may be. There is clear demarcation of powers of the Adjudicating Authority to pass orders in the Avoidance Applications filed by the Resolution Professional under Section 43, 45 and 50 falling under Chapter III and the Applications filed by the Resolution Professional in respect of the Fraudulent and Wrongful trading of CD, under Section 66 falling under Chapter VI of the IBC. If the Resolution Professional has filed common applications under Sections 43, 45, 50 and also under Section 66, the Adjudicating Authority shall have to distinguish the same and decide as to which provision would be attracted to which of the Applications, and then shall exercise the powers and pass the orders in terms of the provisions of IBC. (iii) Mandatory Requirements of Section 30(2) of the IBC and Regulation 38 of Regulations, 2016

62.After having elaborated upon the Avoidance Applications, let us see what are the mandatory requirements, a Resolution Professional is required to confirm on the receipt of the RPs submitted by the PRAs. As per sub-section (1) of Section 30, a RA may submit a RP along with an affidavit stating that he is eligible under Section 29(A), to the Resolution Professional prepared on the basis of the information memorandum. On the receipt of RPs from the eligible RAs, the Resolution Professional has to examine each RP to confirm that each RP provides for the payment of Insolvency Resolution Process cost in the manner specified by the Board in priority to the payment of other debts of the CD, and provides for the payment of debts of operational creditors in such manner as may be prescribed by the Board, as required under sub-section (2) of Section 30. The Resolution Professional has also to confirm that each RP provides for the management of the affairs of CD after the approval of the RP; the implementation and supervision of the RP; and also that the plan does not contravene any of the provisions of the law for the time being in force, and such other requirements specified by the Board. The other mandatory contents of a RP have been specified in Regulation 38 of the Regulations, 2016.

63.The Resolution Professional, in view of sub-section (3) of Section 30 has to present to the CoC for its approval such RPs which confirm the conditions referred to in sub-section (2) thereof. Sub-Section (4) of Section 30 states that the CoC may approve the RP by a vote of not less than 66% of the voting share of the Financial Creditors, after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst Creditors as laid down in subsection (1) of Section 53, including the priority and value of the security interest of a secured creditor, and such other requirements as may be specified by the Board.

64.The Resolution Professional then has to submit the RP as approved by the requisite number of votes of CoC to the Adjudicating Authority. In view of subsection (1) of Section 31, if the Adjudicating Authority is satisfied that the RP approved by the CoC under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by an order approve the RP, which shall be binding on the CD and its employees, members, creditors, statutory authorities, guarantors and stakeholders involved in the RP. Where the Adjudicating Authority is satisfied that the RP does not confirm to the requirements referred to in sub-section (1) of Section 31, it may, by an order reject the RP.

65.Thus, the entire process right from the submission of RPs by the PRAs till the final approval/rejection of the Plan by the Adjudicating Authority has been duly prescribed, which is mandatory in nature. If there is any non-compliance of the mandatory requirements stated in Section 30(2) of IBC, readwith Regulation 38 of the Regulations, 2016, the Adjudicating Authority is empowered to reject the plan as envisaged in sub-section (2) of Section 31. If however, the plan approved by the CoC as per Section 30(4), meets with the requirements under Section 30(2), the Adjudicating Authority has to approve such plan under Section 31(1), which would be binding to all the stakeholders as stated therein. (iv) Maximization of the value of the assets of the Corporate Debtor

66.Much emphasis was laid, during the course of the arguments, for the maximization of the value of the assets of the CD. It hardly needs to be emphasized that in CIRP, the role of the CoC is that of a protagonist, who takes the key decisions in its commercial wisdom and also takes the consequences thereof. It cannot be gainsaid that the decisions of CoC must reflect the fact that it has taken into account the maximization of the value of the assets of the CD, and that the interest of all the stakeholders has been adequately balanced. However, “What is maximization of the assets” has not been defined in the Code though stated in the Preamble. Of course, it has been referred in Regulation 37 of the Regulations, 2016, which states that RPs shall provide for the measures as may be necessary for insolvency resolution of the CD, for maximization of the value of its assets, which may include the measures as provided in Clauses (a) to (l) thereof. Since the Preamble of IBC envisages “maximization of the value of the assets of the Corporate Debtor,” and to promote entrepreneurship, the measures necessary for maximization of assets stated in Regulation 37, amongst others, will have to be taken into consideration by the CoC while considering the proposed RPs for approval.

67.As observed in K. Sashidhar (supra), the Financial Creditors forming CoC, act on the basis of thorough examination of the proposed RPs and the assessment made by their team of experts. The entire process has to be carried out in an absolutely transparent manner, and each and every aspect relating to the RP, and more particularly its financial layout and the measures proposed for maximization of the value of the assets of the CD, has to be placed before the CoC. The CoC, if after considering such measures for maximization of the value of the assets of the CD as proposed by the RA in the RP submitted by it, and considering the feasibility, viability and such other requirements as mandated in the IBC and in the Regulations, 2016, approves the plan with the requisite number of votes as required under Section 30(4), after exercising its commercial wisdom, then the scope of judicial review by the Adjudicating Authority under Section 31 will be limited only to the extent of satisfying itself about the compliance of the requirements of Section 30(2). The judicial review by the Appellate Authority under Section 61 in the appeal against the order of Adjudicating Authority approving the plan, is further limited to the grounds mentioned in Clauses (i) to (v) specified in subsection (3) of Section 61. (v) Whether the NCLAT should have entertained the appeals filed by the 63 Moons under Section 61 of the Code and tinkered with the Resolution Plan approved by the CoC and the NCLT? –

68.Keeping in view, the above discussed legal position, let us examine the facts of the case to decide whether the Appellate Authority i.e. NCLAT should have entertained the appeals at the instance of 63 Moons, and interfered with the RP approved by the CoC and NCLT, by tinkering with the isolated clauses of the approved RP which pertained to the treatment of recoveries from the Applications under Section 66 of IBC.

69.As stated earlier, based on the Audit Reports of GT, the auditors appointed by the Administrator to carry out the Transaction Audit and to unearth the transactions that could be avoided/set aside under the IBC, the Administrator had filed the Applications before the NCLT regarding the Preferential, Undervalued and Extortionate Transactions seeking to avoid/set aside the same under Sections 43 to 51 and 66 of IBC. The summary of these Applications referred to by the NCLAT in the impugned order is reproduced hereunder: -I. 1st Application filed on August 30 2020, under Section 60 (5) & 66 of the Code. The Application is in respect of the investigation and observations of the transaction auditor, filed by the Administrator in respect of disbursements made by DHFL to certain entities, referred to as the Bandra Books Entities, under Section 60(5) and Section 66 of the Code on August 30, 2020, against Kapil Wadhawan, Dheeraj Wadhawan, Township Developers India Ltd, Wadhawan Holdings Private Limited, Dheeraj Township Developers Private Limited, Wadhawan Consolidated Holdings Pvt. Ltd., Wadhawan Global Hotels & Resorts Pvt. Ltd, Wadhawan Lifestyle Retail Pvt. Ltd. and certain other entities. The amount involved therein is Rs. 17,394 crores. II. 2nd Application was filed on September 27 2020, under Section 60 (5) & 66 of the Code. The Application is about certain irregularities in loan disbursements towards the development of SRA projects undertaken by DHFL in the past. The amount involved therein is Rs. 12,705.53 crores. III. 3rd Application was filed on October 5 2020, under Sections 45, 46, 49, 60(5) and 66 of the Code. The Application is in relation to the undervalued and fraudulent nature of certain agreements entered into by the Company at the time the Company sold its stake in Pramercia Life Insurance Limited to DHFL Investments Limited and certain ICDs given by the DHFL to ICD entities. The amount involved therein is Rs. 2, 150.84 crores. IV. 4th, 5th and 6th Applications filed in December 2020 - The Applications are about: a. Disbursement to specific entities in the form of loans against property and utilisation of the same towards premature redemption of certain NCDs, undertaken by DHFL in the past under Sections 43, 45 and 66 of the Code - as Application "A". b. Diversion of excess funds from the account of DHFL for purchase of NAPHA Building under Section 66 of the Code as Application "B". c. Fraudulent and undervalued advancement of ICDs by DHFL to certain entities in the past and the subsequent creation of a pledge over the non-convertible debentures issued by DHFL under Sections 45 and 66 of the Code - as Application "C". A copy of the letter dated December 13, 2020, issued by Respondent No. I to Stock Exchange summarising the said transaction is annexed with Appeal Paper book. The amount involved therein is Rs.1,058.32 crores. V. 7th Application filed on February 3 2021, under Sections 45, 60 (5) and 66 of the Code -The Application is about disbursement made to certain entities as developer loans and loans against property. The amount involved therein is Rs. 4,793.36 crores. VI. 8th Application was filed on February 20 2021, under Section 45, 60 (5) and 66 of the Code. The Application is in relation to irregularities in disbursements of Other Large Product Loan (OLPL) by the DHFL in the past. The amount involved therein is Rs. 6,182.11 crores. The details of the Avoidance applications in the tabular chart are mentioned below: Rs. Crores (Approx) Sr. Avoidance Reference Section Principal Interest Total (in No. Application (in +Notional Crores) date Crores) amount 1. 30.08.2020 Bandra 60(5) 14046 3348 17394 Books and 66 2. 27.09.2020 SRA Loans 60(5) 10980 1726 12706 and 66 3. 05.10.2020 DIL 45, 46, 49, 1740 125 1865 Transaction 60(5) & 66 228 58 286 4. 12.12.2020 LAP Loans 43, 45 and 592 56 648 5. 12.12.2020 NAPHA 66 330 330 Properties 6. 12.12.2020 ICD 45 and 66 71 9 80 7. 03.02.2020 DLAP Loans 45, 4793 766 5559 60(5) & 66 8. 20.02.2021 OLPL Loans 45, 60(5) & 5382 800 6182 Total filed Total 38161 6889 45050 figures in crores

70.As transpiring from the voluminous documents produced on record by the learned counsels for the parties, it appears that during the course of meetings of CoC, the PRAs had submitted various RPs, amongst which a RP dated 16.10.2020, was submitted by the Piramal Capital bidding for Group A assets under Option II offering 15,000 crores plus an amount of 10% for FD Holders. Then, a RP dated 09.11.2020 was submitted bidding for Group A assets under Option II offering bid amount of Rs.23,700 crores. Another RP dated 17.11.2020 was submitted bidding for Group A assets under Option II offering bid amount of Rs.27,500 crores. RP dated 14.12.2020 was submitted bidding for the entire assets under Option I offering bid amount of Rs.34,950 crores, and bidding for Group A assets under Option II offering bid amount of Rs.27,200 crores. Lastly, Piramal Capital presented the RP dated 22.12.2020 bidding for the entire assets under Option I for Rs. 37,250 crores, or for Group A assets under Option II bidding for Rs.27,200 crores. The treatment of Avoidance transactions under the Resolution Plan dated 22.12.2020 was as under: -“Re: Treatment of avoidance transactions under the Resolution Plan. (xxxi) As regards avoidance transactions, the Resolution Plan provided as follows, in line with the RFRP dated 16 September 2020: "2.13. Treatment of preferential transactions, undervalued transactions, extortionate transactions and fraudulent trading. 2.13.1. The Administrator shall submit, to the CoC, details of the transactions avoided or set aside by the NCLT in terms of Section 43, 45, 47, 49, and 50 of the IBC (Avoidance Transactions), if any, observed, found or determined by him and the orders, if any, of the NCLT in respect of such transactions. 2.13.2. The Resolution Applicant intends to pursue, on a best-efforts basis, the application(s) filed by the Administrator before the NCLT in respect of these Avoidance Transactions. Any positive monetary recovery received by the Company as a result of orders passed in relation to the Avoidance Transactions shall be distributed, net of costs and expenses (including taxes), to the Financial Creditors pro rata to the extent the Financial Debt for Financial Creditors, provided that, the CoC may in its discretion adopt a different manner of distribution (which may take into account the order of priority amongst Financial Creditors as laid down in section 53(1) of section of the IBC and such decision of the CoC shall be accepted by the Resolution Applicant, subject to there being no change in the Total Resolution Amount. 2.13.3. The Resolution Applicant ascribes value of INR 1 in respect of any transactions that may be avoided/set aside by the NCLT in terms of section 66 of the IBC. Accordingly, any positive recovery as a result of reversal of transactions avoided or set aside by the NCLT in terms of section 66 of the IBC would accrue to the sole benefit of the Resolution Applicant. All the costs and expenses incurred or to be incurred towards litigation pertaining to section 66 of the IBC shall be to the account of the Resolution Applicant. "

71.The Chart juxtaposing the Provisions of RFRP dated 16.9.2020 and the Provisions of the RP dated 22.12.2020 in respect of treatment of avoidance transactions produced at Annexure-A/7 in C.A. No.1632-1634 of 2022 may be reproduced as under:-Provisions of the RFRP dated Provisions of the Resolution Plan 16 September 2020 3.13.2.[…] 2.13.1. The Administrator shall submit to the CoC, details of the … (w) In the event any transactions avoided or set aside by transaction is avoided/set aside the NCLT in terms of Section 43, 45, by the Adjudicating Authority in 47, 49 and 50 of the IBC (Avoidance terms of Sections Transactions), if any, observed, 43,45,47,49,50 of the IBC, and found or determined by him and the any amount is received by the orders, if any, of the NCLT in respect Administrator or the Resolution of such transactions. Applicant/Corporate Debtor (as the case may be) in accordance 2.13.2. The Resolution Applicant with such decision of the intends to pursue, on a best efforts Adjudicating Authority, such basis, the application(s) filed by the sums shall be for the benefit of Administrator before the NCLT in the CoC and shall be a pass respect of these Avoidance through amount to the Transactions. Any positive monetary creditors, subject to clause (x) recovery received by the Company below. as a result of orders passed in relation to the Avoidance Transactions shall be distributed, net of costs and expenses (including taxes), to the Financial Creditors pro rata to the extent the Financial Debt for Financial Creditors, provided that, the CoC may in its discretion adopt a different manner of distribution (which may take into account the order of priority amongst Financial Creditors as laid down in Section 53(1) of the IBC) and such decision of the CoC shall be accepted by the Resolution Applicant, subject to there being no change in the Total Resolution Amount. 3.13.2. […] 2.13.3. The Resolution Applicant ascribes value of INR 1 in respect of …(x) In respect of any any transactions that may be transactions that may be avoided/set aside by the NCLT in avoided/set aside by the terms of Section 66 of the IBC. Adjudicating Authority in terms Accordingly, any positive recovery of Section 66 of the IBC, the as a result of reversal of transactions Resolution Applicant shall avoided or set aside by the NCLT in ascribe a value under the terms of Section 66 of the IBC would Resolution Plan to any accrue to the sole benefit of the recoveries that are likely to be Resolution Applicant. All the costs made in respect of such and expenses incurred or to be transactions and shall propose incurred towards litigation pertaining the manner of continuing and to Section 66 of the IBC shall be to dealing with any legal action the account of the Resolution initiated and the proposed Applicant. manner of treatment of any proceeds arising therefrom which the CoC may evaluate as per its discretion.

72.As stated hereinabove, the CoC approved the RP submitted by the Piramal Capital under Option I for the entire assets of the CD offering aggregate amount of Rs.37,250 crores, by majority with 93.65% votes.

73.As can be seen from the record, the 18th Meeting of CoC was convened on 24.12.2020-25.12.2020, and all legally Compliant RPs received by the Administrator were presented for consideration and were put to vote during the voting window 30.12.2020 - 15.01.2021. The NCD Holder - 63 Moons also voted in favour of the RP within its class of Debenture Holders, and the RP was approved by a majority of 98.94% votes of the Debenture Holders. The Authorized Representative of the class of Debenture Holders (M/s. Catalyst Trusteeship Limited) also voted in favour of the RP before the CoC. As a result thereof, the RP was approved by the majority of CoC with 93.65% votes exercising their commercial wisdom. It is also very pertinent to note that the said 18th meeting of CoC was attended not only by the Financial Creditors and the Administrator/Resolution Professional, but also by the representatives of the Financial Creditors, the Advisory Committee of the Administrator, the Legal Counsels of CoC, 29A Consultants, Valuers etc.

74.When the Administrator/Resolution Professional filed an application being I.A. No.449 of 2021 (Plan Approval Application) before the NCLT seeking approval under Section 31 of IBC on 24.02.2021, the 63 Moons filed an I.A. being No. 623 of 2021 on 05.03.2021, challenging the provisions of RP which provided that the Recoveries under Section 66 would go to the benefit of SRA. The NCLT vide order dated 07.06.2021 granted its approval to the Plan Approval Application filed by the Administrator, and by separate order dismissed the I.A. No. 623 of 2021 filed by the 63 Moons, holding that the CoC comprising of 77 Financial Creditors had decided in its commercial wisdom to give away the Section 66 Recoveries to the SRA after a hard bargain in exchange of a lumpsum resolution amount of INR 37,250 crores.

75.The NCLAT however entertained the Appeals at the instance of the Appellants – 63 Moons and Roopjyot Engineering Private on the ground that the SRA could not have appropriated the Recoveries from the Avoidance Applications under Section 66 IBC, and that the NCLT while approving the RP had not decided whether the recoveries in respect of the Avoidance transactions vested with the CD, should be applied for the benefit of the Creditors of CD, SRA or other Stakeholders. In our opinion, such an approach on the part of NCLAT was not only ex facie fallacious and erroneous but also in utter disregard of the legal position settled by this Court in catena of decisions.

76.It is interesting to note that the Appellants before the NCLAT, i.e. – 63 Moons Technologies Limited, Roopjyot Engineering Private Limited, Magico Exports and Consultants Limited, Richmond Traders Private Limited and Sunshine Fibre Private Limited, were the NCD Holders, belonging to different subclasses. They were represented in CoC by a Debenture Trustee – M/s. Catalyst Trusteeship Private Limited (CTPL). The details of these NCD Holders including their Voting Pattern and Payout were submitted in tabular form before the Court by the learned counsel appearing for the SRA, which is reproduced as under: -Creditor Share in Voting Payout Other CoC Pattern Information 63 Moons 0.2% Voted in Received No other favour of about 40% justification Belonged Held the Plan. of their provided for to the NCDs of admitted voting in class: face As a claims favour of the Catalyst value class, without plan Trusteeship INR 200 these any Limited Crores. NCD protest or (Secured holders demur. Public approved Issue – 2) the plan by 98.94 % majority. Roopjyot & Less Abstained Received They did not Ors. than from payments raise any .01% voting. under the grievance Belonged Resolution before the to the Held As a Plan CoC or the class: NCDs of class, without NCLT and Catalyst purchase these any challenged Trusteeship value NCD protest or the Limited INR 49.4 holders demur. Resolution (Secured Crores. approved Plan for the Public the plan first time Issue – I) by 94.67 only before % the NCLAT. majority

77.As can be seen from the above table, the said Appellants’ respective classes had voted overwhelmingly in favour of the RP of SRA. Neither the 63 Moons nor Roopjyot & Ors. had voted against the RP nor any justification was offered by them for not voting against the RP. Under the circumstances the said Appellants – NCD Holders before the NCLAT were bound by the decision of their classes in approving the RP, and were estopped from raising any objection against the RP approved by the CoC. Indubitably, as per sub-section 3A of Section 25A, the Authorized Representative under sub-section 6A of Section 21 has a right to cast his vote on behalf of all the Financial Creditors he represents, in accordance with the decision taken by a vote of more than 50% of voting share of the Financial Creditors he represents, who have cast their vote. The vote cast by the Authorized Representative of the class of Financial Creditors, is a vote on behalf of each Financial Creditor to the extent of his voting share. Once the said process is carried out and the Authorized Representative is handed down a particular decision by the requisite majority of voting share, he has to vote accordingly, and his vote would bind all the Financial Creditors he represented. The individual Financial Creditor would thereafter be estopped from raising objection against the decision taken by the majority of the Financial Creditors. As observed in Jaypee Kensington Boulevard Apartments Welfare Association & Others vs. NBCC (India) Limited & Others,10 in the larger benefit and for common good, the democratic principles of the determinative role of the opinion of majority have been duly incorporated in the scheme of the Code, particularly in the provisions relating to voting on RP and binding nature of the vote of Authorized Representative, on the entire class of the Financial Creditors he represents. If the finality and binding force is not provided to the votes cast by the Authorized Representatives of a class of Financial Creditors, a plan of resolution involving large number of parties may never fructify. In the instant case, the vote cast by the Authorized Representative - M/s. Catalyst Trusteeship on behalf of the class of Financial Creditors he represented, was binding on the 63 Moons and other Appellants before the NCLAT, and therefore they were estopped from 10 2021 SCC Online SC 253 (Para. 424) raising any objection before the NCLT or NCLAT against the RP approved by the requisite majority of CoC.

78.The NCLAT has also erroneously placed reliance on the decision of the Single Bench of the Delhi High Court in Venus Recruiter (supra). Apart from the fact that the said judgment of Single Bench was set aside by the Division of the said High Court in LPA No. 37 of 2021 (Tata Steel BSL Limited vs. Venus Recruiter Private Limited and Others) decided on 13.01.2023, the whole reliance on the said decision was thoroughly misconceived and misplaced. In the said case, the question for consideration was whether an Avoidance Application under Section 43 of IBC could survive after the approval of RP. The question of considering the treatment of the proceeds of the Avoidance Applications was not involved as involved in the instant case.

79.The reliance on the Regulation 37A of the Liquidation Regulations by the NCLAT was also thoroughly misplaced for holding that the said Regulation empowered a Liquidator to assign or transfer a nonrealisable asset during the liquidation of a CD, however such provision is absent in CIRP Regulations, 2016. In our opinion, when Section 26 specifically states that the filing of an Avoidance Application under Section 25(2)(j) by the Resolution Professional shall not affect the proceedings of CIRP, and when the Regulation 37(a) of the CIRP Regulations 2016 also permits a provision to be made in the RP for transfer of all or part of the assets of Corporate Debtor to one or more persons, the reference of Regulation 37A of Liquidation Process Regulations in the impugned order was absolutely unwarranted and ex-facie fallacious.

80.Similarly, the NCLAT has also misdirected itself by relying on the foreign texts and jurisprudence, which could not be made applicable to the insolvency regime of India. Apart from the fact that such foreign texts and precedents relied upon by the NCLAT merely indicated that the proceeds from the Avoidance Applications may be for the benefit of the creditors in a situation when the RP does not deal with its treatment, it is well settled by this Court that the Court should be wary of transplanting international doctrines, which might have been evolved as responses to the specific needs of the jurisdictional regimes.

81.The submission, with regard to the notional value of INR 1 ascribed to Section 66 Applications under the RP, made by the learned counsel appearing for the Respondents in the Appeals filed by the Piramal Capital deserves to be considered only for its rejection. As transpiring from the record of the case, notional valuation of Section 66 Applications was made in response to the provision of RFRP issued by the Administrator. In the valuation reports submitted by the Valuers appointed by the Administrator, NIL value was ascribed to the Avoidance Applications filed by the Administrator, and accordingly the other compliant RAs had also ascribed NIL value to the said Applications. However, according to the SRA, since clause 3.13.2(x) of RFRP required the RAs to ascribe a value to Section 66 applications and then propose a manner of treatment of recoveries from such applications, the SRA had ascribed INR 1 as a notional valuation of the applications under Section 66.

82.In our opinion, having regard to the Fraudulent trading and Wrongful trading allegedly made by the DHFL, any guess work done by the compliant RAs would have been a wild guess due to the uncertainties in recovery of the amount involved in such Fraudulent and Wrongful trading. The value of INR 1 being notional and the CoC having considered the fact that the potential recoveries from the Section 66 Applications was very uncertain had taken conscious decision in accepting the said clause in the RP submitted by the SRA. The relevant Clause 2.13.2 of RP provided that any positive monetary recovery received by the company (SRA) as a result of the orders passed in relation to avoidance transactions shall be distributed, net of costs and expenses (including taxes), to the Financial Creditors pro rata to the extent the financial debt for the Financial Creditors provided that the CoC may in its discretion adopt a different manner of distribution. Therefore, while ascribing a notional value of INR 1 to the Applications under Section 66, the SRA had agreed for the distribution of the recoveries that may be made under the Avoidance Applications filed under Sections 43, 45, 47, 49 and 50 for the benefit of the CoC.

83.During the course of hearing of these Appeals also, the learned Senior Advocate Mr. Abhishek Manu Singhvi for the SRA and the learned Senior Advocate Mr. Tushar Mehta appearing for the CoC had stated in no uncertain terms that the benefit of avoiding/setting aside of any transaction under Sections 43, 45, 47, 49 and 50 shall enure to the benefit of the Creditors of DHFL, whereas any recovery under Section 66 would be for the benefit of Piramal Capital. As discussed earlier, the SRA had raised its offer to the extent of Rs.37,250 crores, which had factored the potential recoveries from Section 66 Applications. Thus, the RP approved by the CoC was an outcome of the commercial bargain struck between the SRA and the CoC after several rounds of negotiations and deliberations. The said plan approved by the CoC was also further approved by the NCLT under Section 31(1) of IBC. In absence of any perversity, that was palpable on the face of the approved RP, and the CoC having taken a firm commercial decision with regard to the impugned clause of RP by voting overwhelmingly in favour of the RP, the NCLAT ought not to have interfered with the said clause of RP approved by the CoC and the NCLT.

84.As per the legislative intent and as per the broad contours of the provisions of IBC, the commercial wisdom of CoC has been given the prominent status, with the least judicial intervention, for ensuring the completion of Resolution Process within the prescribed timelines. As stated earlier, in Essar Steel (supra), this Court after discussing earlier judgments had observed that what is left to the majority decision of the CoC is the “feasibility and viability” of a RP, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of Creditors. The legislature has consciously not provided for a ground to challenge the justness of the commercial decision expressed by the Financial Creditors – be it to approve or reject the RP. Similar view is taken by the Three Judge Bench in Ghanashyam Mishra (supra) to the effect that the legislature has given paramount importance to the commercial wisdom of the CoC and the scope of judicial review by the Adjudicating Authority is limited to the extent provided under Section 31 and by the Appellate Authority limited to the extent provided under sub-section (3) of Section 61 of IBC.

85.The NCLAT therefore has clearly transgressed its jurisdiction under Section 61 IBC, by interfering with the clause pertaining to the treatment to the recoveries from the Fraudulent and Wrongful trading under Section 66.

86.It appears that the Administrator has filed common applications under Sections 43, 45 and 50 falling under Chapter III and the Applications pertaining to Fraudulent and Wrongful trading under Section 66 falling under Chapter VI before the NCLT. The Administrator, as such should have mentioned in the Applications the specific provisions under which such Applications were filed, however non-mentioning or wrong mentioning of provision of law in the Applications would not take away the jurisdiction of the NCLT in deciding the said Applications, as the NCLT being the Adjudicating Authority is competent and has jurisdiction to decide all such Applications. It is well settled proposition of law laid down by a ThreeJudge Bench of this Court in N. Mani v/s Sangeetha Theatre,11 that if an authority has a power under the law, merely because while exercising that power, the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself would not vitiate the exercise of power, so long as the power exists and can be traced to a source available in law. We have already elaborately discussed about the scope and powers of NCLT to pass orders in Avoidance Applications as circumscribed in Sections 44, 48, 49 and 51 and the powers of the NCLT to pass orders in the applications filed under Section 66. Hence, it is directed, for the sake of clarity, that the NCLT shall decide each of the Applications filed by the Administrator and pending before it after considering the relevant provisions applicable to such Applications, and shall pass the orders accordingly in terms of the provisions contained in Sections 44, 48, 49 and 51 falling under Chapter III and in terms of provisions contained in Section 66 falling under Chapter VI, as the case may be.

87.In view of the aforesaid discussion and findings, all the Appeals in this category deserve to be allowed by setting aside the impugned order dated 27.01.2022 passed by the NCLAT and restoring the order dated 07.06.2021 passed by the NCLT in the Plan Approval Order. (VII) ANALYSIS IN THE SECOND CATEGORY OF

88.The Second category of Appeals cover the Appeals filed by several Fixed Deposit Holders and one NonConvertible Debenture Holder of the CD, challenging the RP dated 22.12.2020. The details of the said Appellants and the impugned judgments may be stated as under: -(1) Raghu KS and Ors. vs. Piramal Capital & Housing Finance Limited & Ors. (Diary No.6037 of 2022): This Civil Appeal has been filed by 41 individual FD Holders challenging the judgment dated Appeal No. 538 of 2021. PCHFL is Respondent No.1 in this appeal. (2) Vinay Kumar Mittal & Ors. vs. Dewan Housing Finance Corporation Ltd. & Ors. (Civil Appeal No.2413-2415 of 2022) (“V.K. Mittal”): These appeals have been filed by 14 individual FD Holders challenging the common judgment dated Appeal Nos.506, 507 and 516 of 2021. PCHFL is Respondent No.6 in these Appeals. (3) Uttar Pradesh State Power Sector Employees Trust vs. Dewan Housing Finance Corporation Ltd. & Anr. (Civil Appeal No.2396 of 2022): The Appellant in this Appeal was a FD Holder of the CD and has challenged the common judgment dated 27.01.2022 passed by the NCLAT in Company Appeal Nos.759, 760 of 2021. PCHFL is (4) Uttar Pradesh State Power Corporation Contributory Provident Fund Trust vs. Dewan Housing Finance Corporation Limited and Anr. (Civil Appeal No.2402 of 2022): The Appellant herein was a FD Holder of the CD and has challenged the common judgment dated Appeal Nos.759, 760 of 2021. PCHFL is (5) Senbagha Vivek A. & Anr. vs. Dewan Housing Finance Corporation Ltd. & Anr. (Civil Appeal No.8123-8125 of 2022): The Appellants herein were two individual FD Holders of the CD and have challenged the common judgment dated Appeal Nos. 506, 507 and 516 of 2021. PCHFL is (6) THDC India Limited Employee Fund vs. The Administrator, Dewan Housing Finance Corporation Ltd. (Civil Appeal No.6286 of 2022): Insofar as this Appeal is concerned, the Appellant herein (“THDC”) represents NCD Holders of the CD. THDC has challenged the judgment dated Appeal No.90 of 2022. In the CoC, the appellant’s class voted in favour of the RP. THDC did not raise any objection against the RP before the NCLT and filed the Appeal directly before the NCLAT against the order dated 07.06.2021 approving the Resolution Plan (“Plan Approval Order”).

89.Leave granted in the Diary No.6037 of 2022.

90.The facts have already been narrated while dealing with the First Category of Appeals, and therefore are not repeated here. Suffice it to state that the CD was admitted into CIRP on 03.12.2019. The Piramal Capital had submitted the RP, which came to be approved by a majority of 93.65% of the CoC of the CD. The aggregate claim of FD Holders as a class was INR 5,375 Crore and their voting share was about 6.18%. The CoC in its 18th Meeting had passed two Resolutions which were placed for voting, one for approval of RP and second for approval of the Distribution mechanism for the disbursal of the total resolution amount amongst the creditors. The Distribution mechanism was approved by the majority of 86.95% of CoC. Under the Distribution mechanism, it was provided as under: -(i) FD Holders having an admitted claim of upto INR 2 lakhs were to be repaid their entire deposit amount; and (ii) FD Holders having an admitted claim of more than INR 2 lakhs would receive an amount equivalent to liquidation value of security created for the benefit of the Depositors for the additional aggregate claim above INR 2 lakhs.

91.Some of the FD Holders including the Appellants in this second category of Appeals, challenged the said RP before the NCLT on the ground that the RP had failed to provide for full repayment of their deposits.

92.The NCLT on 07.06.2021 approved the said RP by passing the Plan Approval Order. The NCLT also passed a separate order disposing of the Applications filed by the FD Holders recommending that CoC may reconsider the distribution of resolution amount keeping in view the interest of the FD Holders and other small investors. In the light of the said order, the CoC in its 20th Meeting put to vote a Resolution for maintaining parity between the FD Holders and other Secured Creditors. The said Resolution was rejected by approximately 89% of CoC. The aggrieved Appellants – FD Holders filed the Appeals before the NCLAT challenging the FD Holders order dated 07.06.2021, on the ground that the treatment to the FD Holders violated their rights under the RBI Act and NHB Act to receive full payment of their deposits. The NCLAT vide the impugned orders dismissed all the Appeals against which the present set of Appeals have been filed. (i) WHETHER THE RESOLUTION PLAN VIOLATED THE PROVISIONS OF RBI ACT OR NHB ACT?

93.The bone of contention raised by the learned Counsels for the Appellants – FD Holders in this set of Appeals was that the Distribution mechanism contained in the RP was in violation of Section 36(A) of NHB Act and Section 45(QA) of RBI Act, in as much as the FD Holders were entitled to the full payment of their deposits, in view of the said provisions. In this regard, it may be noted that the NHB Act has been enacted to establish a Bank to be known as “National Housing Bank” to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support to such institutions and for the matters connected therewith or incidental thereto. As per Section 2(d) of the said NHB Act, “Housing Finance Institution” includes every institution, whether incorporated or not, which primarily transacts or has any one of the principal objects, the transacting of the business of providing finance for housing, whether directly or indirectly. The Chapter V of the said NHB Act incorporates the provisions relating to the “Housing Finance Institutions.” Section 28 thereof states that in this Chapter the term ‘deposit’ shall have the meaning assigned to it in Section 45-I of the RBI Act. Further Section 36(A) of the NHB Act empowers the Officer authorized by the Central Government, to direct the housing finance institution, which fails to repay any deposit accepted by it in accordance with the terms and conditions of deposit, to make repayment of such deposit or part thereof, if he is satisfied that it is necessary to do so to safeguard the interest of the housing finance institution, the depositors or in the public interest.

94.The RBI Act has been enacted to regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to regulate to its advantage. The Chapter III(B) of the RBI Act incorporates the “Provisions relating to the Non-Banking Institutions receiving deposits and financial institutions.” Section 45-I(bb) defines “Deposit” and Section 45-I(f) defines “NonBanking Financial Company.” Section 45(QA) empowers the Company Law Board (CLB) to direct by order, the Non-Banking Financial Company which has failed to repay the deposit accepted by it in accordance with the terms and conditions of such deposit, to make repayment of such deposit or part thereof, if the CLB is satisfied that it is necessary to do so to safeguard the interest of the company, the depositors or in the public interest.

95.It is not disputed that the CD – DHFL being a Housing Finance Institution and Non-Banking Financial Company, was governed by the NHB Act and RBI Act, however pertinently, neither Section 36(A) of NHB Act nor Section 45 (QA) of RBI Act mandates full payment of the deposits of the FD Holders, as sought to be contended by the learned counsels for the Appellants. Both the Sections 36(A) of NHB Act and 45(QA) of the RBI Act containing almost similar provisions, require the Housing Finance Institution or the Non-Banking Financial Company, as the case may be, to repay the deposits accepted by it in accordance with the terms and conditions of such deposit, however from the bare reading of the said provisions it clearly transpires that in case of nonpayment of such deposits, the authorized officer or the CLB as the case may be on being satisfied that it is necessary to safeguard the interest of the company, or of the depositors in the public interest may direct such institution or the company to make repayment of such deposit or part thereof. None of the said provisions mandates full payment of deposits or confers any right upon the depositors to have full payment of such deposits. There is also nothing on record to suggest that any authorized officer under the NHB Act or the CLB under the RBI Act has passed any order to make full payment of deposits to the Appellants. Hence, it could not be said, by any stretch of imagination, that the RP in question, providing for the Distribution mechanism, was contrary to any of the provisions of the RBI Act or of the NHB Act.

96.It is also pertinent to note that the Appellants – FD Holders were represented in the CoC by their Authorized Representative - Ms. Charu Desai and the NCD Holders were represented in the CoC by their Authorized Representative - M/s. Catalyst Trusteeship Limited, as permitted under Section 21 (6A) (b) of IBC readwith Regulation 16 (A) of the CIRP Regulations, 2016. Such Authorized Representatives are entitled to attend the meetings and vote in the CoC on behalf of the Group of Creditors that they represent, in accordance with the prior instructions they would have received from their respective groups. It is true that in the instant case, the FD Holders, as a class, had voted against the RP and the Distribution mechanism, and were thus classified as the “Dissenting Financial Creditors.” However, the said Distribution mechanism was approved by a majority of 86.95% of CoC. The Appellants – FD Holders therefore had filed applications before the NCLT. The NCLT vide the order dated 07.06.2021 approved the RP by passing Plan Approval Order, and by separate order disposed of the Applications filed by the FD Holders, recommending the CoC to reconsider the Distribution mechanism in the interest of various creditors viz. Public Depositors, FD Holders, NCD Holders, Small Investors, EPF Trust etc.

97.As stated earlier, the CoC rejected the said recommendation by approximately 89% of the CoC in its 20th Meeting, which decision came to be challenged before the NCLAT. The NCLAT also vide the impugned order dismissed the same by holding inter alia that the Administrator was under no obligation to ensure full payment of deposits to the FD Holders under the RBI Act or the NHB Act, and that the decision about the payments to the creditors fell within the commercial wisdom of CoC which was not amenable to judicial review, subject to fair and equitable play. We do not find any legal infirmity in the said impugned order passed by the NCLAT. We have already discussed in detail about the scope of judicial review by the NCLT under Section 31 and by NCLAT under Section 61 of the IBC, and the legal position settled by this Court in catena of decisions. Hence, the same is not reiterated herein.

98.We also do not find any substance in the submissions made by the learned counsels for the Appellants that the RP violated Rule 5(d)(i) of the Financial Service Providers and Application to Adjudicating Authority Rules, 2019 (FSP Rules). In this regard, it may be noted that the said Rule 5(d)(i) states that “the Resolution Plan shall include a statement explaining how the Resolution Applicant satisfies or intends to satisfy the requirements of engaging in the business of the Financial Service Provider, as per laws for the time being in force.” The learned Counsel appearing for the SRA – Piramal Capital had drawn the attention of the Court to the comprehensive statement included in “Part B – Business Plan” of the RP to the effect that the SRA had the expertise and experience in the financial sector and the ability to carry out the business of the CD as a Financial Service Provider. Such being the compliance of the said Rule 5(d)(i) of FSP Rules, it could not be said that there was any violation of any law for the time being in force as contemplated in Section 30(2)(e) of IBC and as sought to be contended by the learned counsels for the Appellants – FD Holders.

99.In that view of the matter, all the Appeals filed by the Appellants in this Second Category of Appeals being devoid of merits deserve to be dismissed. (VIII) ANALYSIS IN THE THIRD CATEGORY OF

100.In this Third category, following Appeals are covered: -(1) The Civil Appeal Nos. 1707-1712 of 2022 have been filed by the ex-promoter Kapil Wadhawan dated 14.02.2022 in Company Appeal No. 539 of 2021 passed by the NCLAT, dismissing the Appellants challenge to the RP of Piramal Capital, which was approved by the NCLT vide order dated 07.06.2021. (2) The Appellant Kapil Wadhawan has also challenged the common impugned judgment and order dated 27.01.2022 in Company Appeal No. 785 of 2020 and 674 of 2021 passed by the NCLAT holding that the Appellant, though was erstwhile Director, Promoter, Shareholder and Guarantor of DHFL, had no right to a copy of RP approved by the CoC. (3) The Appellant Kapil Wadhawan has also challenged the common impugned judgment and order dated 27.01.2022 in Company Appeal Nos. 370, 376-377 and 393 of 2021 passed by the NCLAT, whereby the NCLAT has set aside the order dated 19.05.2021 passed by the NCLT directing the CoC to consider and vote on 2nd Settlement Proposal of KW of the Appellant. (4) The Civil Appeal No. 2567 of 2022 has been filed by another ex-promoter Dheeraj Wadhawan challenging the common impugned judgment and order dated 27.01.2022 in Company Appeal No. 785 of 2020 and 647 of 2021 passed by the NCLAT, holding that the erstwhile Director, Promoter, Shareholder and Guarantor of DHFL was not entitled to participate in the meeting of CoC. (5) The Civil Appeal Nos. 2987-2988 of 2022 have been filed by the SRA – Piramal Capital dated 27.01.2022 in Company Appeal No. 785 of 2020 and 647 of 2021 passed by the NCLAT, in which it has been held that the erstwhile Directors who had vacated the offices were not entitled to share any document, however the copy of RP after the approval from Adjudicating Authority cannot be treated as a confidential document, and therefore a certified copy may be issued to the erstwhile Directors as per the Rules.

101.The core issue raised by learned Senior Counsel Mr. Kapil Sibal appearing for the erstwhile Directors KW and DW was that the Resolution Professional, that is the Administrator in this case, and the CoC had not undertaken any efforts for value maximization of DHFL’s assets and businesses, which is the underlying object of the IBC. According to him the Appellants – Ex-Promoters/ Directors were kept out of the entire CIRP proceedings and were not given any opportunity to participate in the said proceedings under the guise that the entire Board of Directors of DHFL was superseded under the RBI Act, and therefore the Ex-Directors did not have any right, which suspended Directors would have under the IBC. Mr. Sibal had strenuously taken the Court to the voluminous record and raised all possible issues, with regard to the Clause in question, with regard to the treatment to Recoveries under the Applications filed under Section 66 of the Code and the permissibility of ascribing INR 1 towards such transactions etc. In short, Mr. Sibal had vehemently challenged the commercial wisdom exercised by the CoC while approving the plan.

102.We have already discussed and dealt with, in the earlier part of this judgment, all the said issues including the scope of judicial review by the NCLT and NCLAT over the commercial wisdom exercised by the CoC, and also examined the legality of the clause in the RP with regard to the treatment of Recoveries from the Avoidance Applications. We have also examined in detail the issue with regard to the maximization of the value of assets of the CD. Hence, the same are not dealt with in this set of Appeals. Suffice it to say that when majority of the creditors in their wisdom, and after negotiations with the PRA as to how and in what manner the Corporate Resolution Process should be undertaken, had explored the feasibility and viability of the RP, while approving the same, and when the said Plan was also approved by the NCLT, the NCLAT ought not to have tinkered with a Clause of the said Plan with regard to the treatment of Recoveries from the Applications under Section 66 of the IBC.