Kerala High Court Refuses To Interfere With NCLT's Rejection Of Resolution Plan Despite 100% CoC Approval

The Kerala High Court has refused to interfere with the National Company Law Tribunal's rejection of a resolution plan for an insolvent company, even though it had received 100% approval from the Committee of Creditors.

A Division Bench of Chief Justice Soumen Sen and Justice Syam Kumar V.M. held that the NCLT was acting within its jurisdiction in examining the resolution plan and that writ jurisdiction could not be invoked merely because the tribunal disagreed with the Committee of Creditors.

“There is no inherent lack of jurisdiction insofar as the consideration of the Resolution Plan by the NCLT,” the court said.

The bench clarified that even if the tribunal had given erroneous reasons for rejecting the plan, that by itself would not justify writ interference.

“An error in the exercise of jurisdiction is clearly distinguishable from an order passed without jurisdiction,” it observed.

The case arose after the NCLT, Kochi Bench, rejected a resolution plan for Kasargod Power Corporation Limited that had secured unanimous approval from the Committee of Creditors. The rejection was challenged before a single judge of the High Court, who declined to interfere, leading to the present writ appeal.

MMS Steel and Power Private Limited, a financial creditor, argued that the tribunal had ignored the unanimous commercial decision of the Committee of Creditors and rejected the plan on irrelevant and extraneous considerations.

It was also contended that failure to approve the resolution plan within the timelines prescribed under the Insolvency and Bankruptcy Code, 2016 could deprive creditors of recovery, particularly since a prospective buyer had already been identified by the Resolution Professional.

Rejecting these submissions, the Division Bench reiterated that writ jurisdiction under Article 226 of the Constitution cannot be exercised when an efficacious statutory appellate remedy is available.

“It is trite that when an appellate remedy is available and is efficacious, the writ jurisdiction under Article 226 of the Constitution of India is not exercised,” the court said.

The bench noted that the limited exceptions permitting writ interference apply only in cases involving violation of fundamental rights, breach of natural justice, lack of jurisdiction, or a challenge to the vires of a statute, none of which were made out in the present case.

Accordingly, the High Court declined to interfere with the Single Judge's judgment and disposed of the appeal while granting liberty to MMS Steel to pursue the statutory appellate remedy. The court directed that if an appeal is filed within 30 days, the appellate authority may consider it in accordance with law and extended interim protection against consequential steps for the same period.

For Appellant: Advocate Isaac Thomas

For Respondents: Advocates Terry V James, Siby Chenappady, Ramkumar, Deepak Joy K