Dissenting Financial Creditor Cannot Interfere Between SRA and RP After Plan Approval: NCLT Kochi

The National Company Law Tribunal (NCLT) at Kochi has held that a dissenting financial creditor cannot interfere in issues between the Successful Resolution Applicant (SRA) and the Resolution Professional after approval of a resolution plan.

The tribunal dismissed an impleadment application filed by Kerala Financial Corporation in proceedings relating to implementation of the approved plan for Samson and Sons Builders and Developers Pvt. Ltd.

Clarifying the limited rights of dissenting creditors, the tribunal observed:

“Once the Adjudicating Authority approves the resolution plan, the same is binding upon all stakeholders, including the dissenting Financial Creditor. Such creditors cannot enforce their original contractual rights outside the approved plan. The dissenting Financial Creditor has no right to question the commercial wisdom of the CoC. Though it has the right to appeal, such a right is available only on limited grounds.”

A coram of Judicial Member Vinay Goel observed that the applicant “intends to slow down the post-approval process under the IBC” and that such practice “cannot be appreciated.”

The Corporate Insolvency Resolution Process (CIRP) against the company was initiated on November 3, 2021. The petition was filed by Vijayakumaran J., proprietor of V.J. Constructions. A Resolution Professional was appointed on January 10, 2022.

Kerala Financial Corporation held a 19.48% voting share in the Committee of Creditors. It dissented to the resolution plan for the “Sharon Hills” project. The plan was approved with a 71.30% voting share. It was later approved by the Tribunal on December 20, 2024.

The Corporation has challenged the approval before the National Company Law Appellate Tribunal, Chennai. The appeal is pending and no stay has been granted.

The SRA later approached the NCLT seeking removal of impediments in implementing the plan. In those proceedings, the Corporation sought to be impleaded as a party.

The SRA opposed the plea. It said the application was an attempt to delay and obstruct implementation of the approved plan. It also pointed out that there was no stay on the approval order.

After examining the record, the Tribunal held:

"The Financial Creditor has no locus to interfere in any matter or issues between the SRA and the RP. The dissenting Financial Creditor cannot be allowed to place any hindrance"

The tribunal referred to the NCLAT ruling in Union of India v. Oriental Bank of Commerce. It reiterated that impleadment is a matter of judicial discretion.

The tribunal found that no necessity for impleadment was made out. It held that the Corporation was neither a necessary nor a proper party. The application was dismissed.

The tribunal also imposed costs of Rs 5,000. It directed that the amount be deposited with the National Defence Fund. The Corporation must file a compliance memo within 15 days.

For Applicant: Advocates A.C Venugopal

For Respondents: Advocates Liju V Stephen and Vinod P.V