The Single Bench of Hon'ble National Company Law Tribunal, Mumbai bench ("Adjudicating Authority") in the matter of State Bank of India v. Ushdev International Limited (CP No.1790/IBC/NCLT/MB/MAH/2017) ("Ushdev International") decided on the following issues, vide order dated November 7, 2019

  • Whether the decision of Committee of Creditors ("CoC") to reject a technically qualified resolution plan and instead, resolve to liquidate the Corporate Debtor can be treated as a decision taken in the commercial wisdom of CoC?
  • Whether the Adjudicating Authority can suo moto approve the technically viable Resolution Plan, in spite of more than 66% of CoC rejecting the resolution plan and resolving to liquidate the corporate debtor?

Ruling of Adjudicating Authority:

The Adjudicating Authority held that the CoC has to exercise its commercial wisdom while approving or rejecting a resolution plan and, where the same has not been done, the Adjudicating Authority within its jurisdiction can neglect such an illogical, unreasoned, unfounded and unsound decision of CoC. The Adjudicating Authority, in view of the facts of this case, opined that the CoC, based upon mere colossal assumptions and presumptions, had non-judiciously exercised their commercial wisdom and hence had, prima facie, arrived on a non-profitable and non-economic decision.

While the Adjudicating Authority observed, in view of the Hon'ble Supreme Court of India ("Supreme Court") judgment in K Sashidhar1, that it may not be in a position to go into the nitty-gritty of the commercial aspects of the resolution plan, it held the rejection of the impugned resolution plan to be in contravention of the provisions of IBC since the same had been rejected on flimsy grounds. The Adjudicating Authority reversed the findings of CoC and approved the resolution plan of M/s. Taguda Pte. Ltd., Singapore ("Resolution Applicant") on the ground that there was no element of common prudence or basic 'commercial wisdom' present on part of CoC. The underlying ratio thereof was that where the commercial wisdom itself was not in existence, there can arise no question of tinkering with the impugned commercial wisdom.

Facts of the Case:

  • The Corporate Insolvency Resolution Process ("CIRP") of M/s. Ushdev International Limited ("Corporate Debtor") commenced on May 14, 2018 under the provisions of Insolvency and Bankruptcy Code, 2016 ("IBC"), and the 270 day period for completion of CIRP of the Corporate Debtor got over on February 7, 2019.
  • The resolution plan of the above-named Resolution Applicant provided for an upfront payment of INR 200 Crore i.e. INR 197 Crore payable to Financial Creditors and INR 3 Crore payable towards Operational Creditors/CIRP costs. The amount offered by the Resolution Applicant (₹200 Crores payable in 90 days) was almost 250% more than 'liquidation value' of the Corporate Debtor which was approximately INR 67 Crores.
  • The aforesaid resolution plan of the Resolution Applicant was rejected by CoC with 77.61% of voting share while 22.39% voted in favour of the Resolution Plan. Accordingly, the Resolution Professional for the Corporate Debtor filed an application before Adjudicating Authority for liquidation of the Corporate Debtor.


As per our understanding and knowledge, Ushdev International is the first matter after K Sashidhar where the Adjudicating Authority, after having duly considered the Supreme Court ruling therein, observed that both the preconditions, viz. existence of common prudence and/or existence of basic commercial wisdom, were missing.

As this order of the Adjudicating Authority is presently under challenge before Hon'ble National Company Law Appellate Tribunal ("NCLAT"), the issue revolving around the meaning of 'commercial wisdom of CoC' continues to be in question. Ushdev International however has opened a two-pronged debate of firstly, whether CoC, in the garb of commercial wisdom, decide to liquidate a company without attempting to resolve insolvency and secondly, whether the Adjudicating Authority can scrutinize the commercial wisdom of CoC.


[1] K. Sashidhar v. Indian Overseas Bank and Ors. [Civil Appeal No. 10673/2018] before the Hon'ble Supreme Court of India

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