Mumbai: The National Company Law Tribunal (NCLT) has rejected the resolution plan submitted by Authum Investment and Infrastructure for debt-ridden Vas Infrastructure, holding that the corporate insolvency resolution process (CIRP) was vitiated by ‘material irregularities’, including alleged misrepresentation of assets and misleading disclosures by the resolution professional.
The Mumbai Bench of the tribunal held that while the commercial wisdom of the committee of creditors (CoC) is paramount, it is not immune from judicial scrutiny where the insolvency process violates provisions of the Insolvency and Bankruptcy Code.
The bench, comprising judicial member Ashish Kalia and technical member Sanjiv Dutt, observed that the resolution professional had incorrectly represented the corporate debtor as the owner of 3.5-acre land parcel in Borivali suburb of Mumbai in the information memorandum, whereas the company later admitted that it only possessed development rights over the property.
The tribunal said the incorrect description significantly distorted the valuation of the company and compromised the fairness and transparency of the CIRP.
The order noted that the resolution professional later admitted the ownership reference was an inadvertent error based on a SARFAESI notice issued by Canara Bank. However, the tribunal rejected the explanation, observing that such a fundamental error reflected gross negligence and failure to exercise due diligence under the IBC. It further held that the land had been factored into the valuation exercise despite the absence of ownership rights.
“It’s a very important order as bankers’ collusion with promoters has become rampant after decade of insolvency,” said Nipun Singhvi, managing partner of a law firm NSA Legal. “The strict action by the court makes it apparent that judicial review of commercial wisdom has to be the final verdict.” The tribunal also found that the successful resolution applicant, Authum Investment and Infrastructure, had prepared its resolution plan on the assumption that the disputed Borivali land formed part of the corporate debtor’s assets.
