IBC| NCLT's Power To Direct Modification Of Repayment Plan Is Discretionary, Requires Material On Record: NCLAT

The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, has held that the power of the Adjudicating Authority under Section 114(3) of the Insolvency and Bankruptcy Code, 2016 to direct modification of a repayment plan is not obligatory and can be exercised only when supported by material on record.

The tribunal dismissed an appeal filed by a personal guarantor to loans availed by the Nithin Group of Companies from Bank of India, challenging the order of the National Company Law Tribunal, Amaravati Bench at Mangalagiri, which had accepted the Resolution Professional's report recording rejection of his repayment plan by the Committee of Creditors.

A bench of Chairperson Ashok Bhushan, Judicial Member Justice Sharad Kumar Sharma and Technical Member Jatindranath Swain observed,

“Section 114(3) of the I & B Code, 2016, although it is an enabling provision for the Learned Adjudicating Authority to exercise its discretion but there have to be circumstances apparent on the record to enable the Learned Adjudicating Authority to exercise such power,” the bench observed.

The appellant, promoter of the Nithin Group of Companies, had availed loan facilities from Bank of India and furnished a personal guarantee for the loans.

The appellant initiated insolvency proceedings against himself as a personal guarantor under the IBC, following which he placed a repayment plan of Rs 68.84 lakh before the creditors.

When the plan came up for consideration at the meeting of creditors on March 31, 2022, it did not find favour. Bank of India, which held a dominant 71.22% voting share, voted against it, leading to its rejection.

In appeal, the appellant argued that the amount offered under the plan was higher than the assessed value of his assets, pegged at Rs 36.93 lakh. On that basis, he contended that the Adjudicating Authority should have exercised its discretion under Section 114(3) of the IBC to direct reconsideration of the plan.

Opposing the plea, the bank submitted that the outstanding dues exceeded Rs106 crore and that the repayment plan of Rs. 68.84 lakh was not acceptable. It argued that the plan had been duly considered and rejected by the creditors, and no interference was warranted.

The NCLAT held that while Section 114(3) confers discretion on the Adjudicating Authority, such discretion is conditional upon forming an opinion, based on sufficient material, that the repayment plan requires modification. In the absence of such material, the Adjudicating Authority is not obliged to direct reconsideration.

Finding no ground to interfere with the NCLT's order, the tribunal dismissed the appeal