Important judgment on Commercial Wisdom of Committee of Creditors(CoC) and its Judicial Review, decision of CoC for liquidation and Shareholders/Promoters legal right to oppose Liquidation order – Air Travel Enterprises India Ltd. and Anr. Vs. Mr. Lukose Joseph, Liquidator of Green Gateway Leisure Ltd. and Ors. – NCLAT Chennai
In this landmark judgment, Hon’ble NCLAT holds that:
(i) The commercial wisdom can be exercised only when all the relevant information is available before the CoC and is duly discussed/deliberated by all its members, who have a direct and substantial interest in the survival of the Corporate Debtor and in the whole CIRP.
(ii) The commercial wisdom of the CoC is to be respected subject to the limited judicial review, that was available to the Adjudicating Authority/Tribunal. Also that the commercial wisdom of CoC is beyond the ambit of challenge, pertaining to the decision taken for liquidation of the Corporate Debtor being essentially a ‘business decision’ based upon the commercial wisdom and keeping in view the ingredients of Section 33(2) of the Code, 2016 and the explanation thereto.
(iii) Merely because there were no assets and no option for revival of the Corporate Debtor an unanimous 100% decision was taken by the CoC in its commercial wisdom to liquidate the Corporate Debtor.
(iv) Undoubtedly, the Liquidation like an Insolvency is collective in character.
(v) The Code, 2016 does not any way spell out ‘any such opportunity’ being provided to the Appellants (Promoters/Shareholders), at the time of passing of the Liquidation order and they don’t have any semblance of any legal right or vested right to oppose the Liquidation order before the Adjudicating Authority/Tribunal in the considered opinion of this Tribunal.
(vi) Moreover, the Appellants/Shareholders/Promoters have no ‘Locus’ to even raise an objection or to be furnished with an opportunity to air their views, at the time of passing the Liquidation Order.