The National Company Law Appellate Tribunal has clarified that a promoter’s informal restructuring proposal, even if approved by the Committee of Creditors, cannot be treated as a Resolution Plan under the Insolvency and Bankruptcy Code unless it strictly complies with the statutory framework of the Corporate Insolvency Resolution Process. This ruling reinforces the procedural rigour required under the Code and closes the door to backdoor attempts at control by defaulting promoters.
Background & Facts
The Dispute
The appellant, Mr. Vijay Kumar Penmetsa, was the erstwhile Managing Director and shareholder of Veda Biofuel Limited, a corporate debtor undergoing Corporate Insolvency Resolution Process (CIRP). After the initiation of CIRP, the appellant submitted a restructuring plan aimed at reviving the company. This plan was presented to the Committee of Creditors (CoC) and was approved in its 20th meeting held on 03.03.2020. The appellant sought approval of this plan before the National Company Law Tribunal (NCLT) through IA No.64/2020, arguing that it met the intent of the Insolvency and Bankruptcy Code, 2016 (IBC).
Key Facts
- The appellant was the promoter and former Managing Director of Veda Biofuel Limited
- CIRP was initiated against the corporate debtor on account of default
- The Resolution Professional invited expressions of interest from potential resolution applicants
- The appellant did not submit a formal Resolution Plan under Section 30(2) of the IBC
- Instead, he submitted a "restructuring plan" directly to the CoC, which was approved on 03.03.2020
- The CoC’s approval was based on an understanding that the plan would allow the promoter to retain control without undergoing the eligibility scrutiny under Section 29A
- IA No.64/2020 was filed before the NCLT seeking approval of this plan
- IA Nos.66, 67, and 68/2020 were filed seeking interim relief and clarification on the plan’s validity
- The NCLT, by order dated 26.05.2020, rejected all applications, holding that the proposal was not a Resolution Plan under the IBC
- The NCLT ordered liquidation under Section 33(1)(b) and appointed Mr. Sisir Kumar Appikatle as Liquidator
- The sale of corporate assets was completed on 03.12.2024, with a sale certificate issued to the buyer
Procedural History
- Date of CIRP initiation: Not specified in judgment, but assumed prior to 03.03.2020
- 03.03.2020: 20th CoC meeting approved appellant’s restructuring plan
- 04.02.2020: NCLT order directing consideration of the plan (cited by appellant)
- 26.05.2020: NCLT order rejecting IA Nos.64, 66, 67, 68/2020 and ordering liquidation
- 20.07.2020: Appeal filed by respondents against the NCLT order was dismissed
- 26.05.2020: Order impugned in present appeal
- 03.12.2024: Sale of corporate assets completed; sale certificate issued
- 2021: Appeal filed before NCLAT (TA(AT) No.247/2021)
- 02.04.2026: NCLAT delivered oral judgment
The Parties' Positions
Appellant (Mr. Vijay Kumar Penmetsa): Argued that he was not barred under Section 29A of the IBC and that his restructuring plan, having been approved by the CoC, should be treated as a valid Resolution Plan. He contended that the NCLT erred in rejecting the plan on grounds of "backdoor entry" without examining his eligibility.
Respondents (Resolution Professional and Creditors): Contended that the proposal was not a Resolution Plan as defined under Section 30(2) of the IBC. It lacked mandatory disclosures, financial details, and was not submitted in response to a formal invitation by the Resolution Professional. The CoC’s approval could not override statutory requirements.
Relief Sought
The appellant sought: (1) setting aside of the NCLT order dated 26.05.2020; (2) approval of his restructuring plan as a Resolution Plan; (3) stay on liquidation; and (4) restoration of his position as promoter. He also sought a declaration that he was not disqualified under Section 29A.
The Legal Issue
The central question was whether a restructuring proposal submitted by a promoter, even if approved by the Committee of Creditors, qualifies as a Resolution Plan under Section 30(2) of the Insolvency and Bankruptcy Code, 2016, in the absence of compliance with the formal CIRP process and the requirements of the CIRP Regulations, 2016.
Arguments Presented
For the Appellant
The appellant’s counsel argued that the CoC’s approval on 03.03.2020 constituted sufficient validation of the plan. He relied on the principle of commercial wisdom of creditors and contended that the NCLT overstepped by substituting its judgment for that of the CoC. He emphasized that he was not a defaulting promoter under Section 29A and that rejecting the plan on procedural grounds without examining eligibility was unjust. He further submitted that the assets had been sold only after the interim stay was vacated, and that the appeal should be allowed to restore fairness.
For the Respondent
The respondents’ counsel argued that the IBC is a statutory regime with mandatory procedural requirements. A Resolution Plan must be submitted in response to an invitation by the Resolution Professional, contain all disclosures under Regulation 37 of the CIRP Regulations, and meet the criteria under Section 30(2). The appellant’s proposal was an informal, non-compliant submission that bypassed these safeguards. The CoC’s approval, even if unanimous, cannot override statutory mandates. The NCLT correctly held that the proposal was not a Resolution Plan and that liquidation was the only lawful outcome.
The Court's Analysis
The NCLAT examined the nature of the appellant’s submission and the statutory framework under the IBC. It noted that while the CoC may exercise commercial wisdom, its powers are not unfettered and must operate within the boundaries of the Code.
"The restructuring plan, which is given by the promoter, can at best be the proposal to the Financial Creditor to accept the proposal for permitting withdrawal under Section 12A of the I & B Code, 2016, for a plan to be treated as a Resolution Plan. Necessary statutory compliances as provided in the I & B Code, as well as the CIRP Regulations, 2016, are to be complied with."
The Tribunal emphasized that Section 30(2) prescribes exhaustive requirements for a Resolution Plan, including details of repayment, management changes, and compliance with Section 29A. The appellant’s proposal lacked these elements and was never formally submitted through the Resolution Professional. The CoC’s approval, therefore, could not transform an informal proposal into a statutory Resolution Plan.
The Court further held that the NCLT did not err in rejecting the plan and ordering liquidation under Section 33(1)(b). The appellant’s argument regarding Section 29A eligibility was irrelevant because the plan never reached the stage of formal submission or scrutiny under the Code. The Tribunal also noted that the corporate assets had already been sold on 03.12.2024, rendering any relief on the plan moot.
The judgment reaffirmed that the IBC is not a negotiation forum for promoters to circumvent disqualification or procedural compliance. The statutory process is non-negotiable.
The Verdict
The appeal was dismissed. The NCLAT upheld the NCLT’s order dated 26.05.2020, confirming that the appellant’s proposal did not qualify as a Resolution Plan under Section 30(2) of the IBC. The liquidation process was validated, and the sale of assets on 03.12.2024 was recognized as final. No relief was granted to the appellant. The Court held that the appeal had become infructuous due to the completion of liquidation.
What This Means For Similar Cases
Formal Submission Is Mandatory
- Practitioners must ensure that any Resolution Plan is formally submitted by the Resolution Professional in response to an invitation under Regulation 36A of the CIRP Regulations
- Informal proposals, even if supported by creditors, cannot substitute for statutory compliance
- Any attempt to bypass the formal process will be treated as non-compliant and grounds for liquidation
Section 29A Cannot Be Debated in Absentia
- Eligibility under Section 29A is only adjudicated when a formal Resolution Plan is submitted
- A promoter cannot claim eligibility as a standalone argument without a compliant plan
- Courts will not entertain eligibility challenges in the absence of a validly submitted plan
Liquidation Becomes Inevitable Without a Valid Plan
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If no Resolution Plan meets Section 30(2) requirements, liquidation under Section 33(1)(b) is the only lawful outcome
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The completion of asset sale renders appeals on plan approval infructuous
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Practitioners must act swiftly to file compliant plans before asset disposal
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Always verify that a proposed plan includes all mandatory disclosures under Regulation 37 of the CIRP Regulations
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Never rely on CoC approval alone - statutory compliance is non-negotiable
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Document every step of plan submission to avoid procedural defects
