1. Statutory Framework for Challenge

A. At NCLT Level - Sec 30(2) + Sec 31
Adjudicating Authority can only check if Resolution Plan approved by CoC:

• Sec 30(2)(a) - provides for payment of CIRP costs
• Sec 30(2)(b) - provides for payment to Operational Creditors and dissenting Financial Creditors not less than liquidation value as per Sec 53 - This is your main challenge right
• Sec 30(2)(c) - provides for management of affairs
• Sec 30(2)(d) - implementation feasible
• Sec 30(2)(e) - does not contravene any law
• Sec 30(2)(f) - conforms to Regulations

If plan fails any of these, NCLT can reject under Sec 31. Otherwise it must approve.

B. At NCLAT Level - Sec 61(3)
Any aggrieved person (creditor, even shareholder) can file appeal within 30 days. Grounds under 61(3):

• (i) Approved plan is in contravention of law
• (ii) Material irregularity by RP in CoC exercise
• (iii) Debts owed to Operational Creditors not provided for
• (iv) Dissenting Financial Creditor not provided minimum liquidation value
• (v) Approval of CoC was not by 66% voting share

C. Sec 60(5) - Jurisdiction
NCLT has residuary jurisdiction to decide any question arising in CIRP. Creditors file IA under 60(5) to challenge CoC decision like rejection of claim, classification as related party, etc.

2. Nature of Rights by Creditor Class

1. Financial Creditor in CoC (Assenting): Can challenge CoC internal procedure only if voting was vitiated by fraud, coercion, or non-compliance with Reg 39(3). Cannot challenge commercial wisdom after voting yes.

2. Dissenting Financial Creditor (Voted No):
Right under Sec 30(2)(b)(ii) - entitled to minimum liquidation value and payment in priority over assenting FCs as per Reg 38(1)(b) - 30 days. But cannot demand higher amount based on security value.

3. Operational Creditor (Not in CoC):
Biggest challenge right - but limited to liquidation value under Sec 30(2)(b)(i). If liquidation value for OC is NIL, they can get NIL. They can challenge if:

• They were not paid minimum liquidation value
• Plan discriminates unfairly (but Supreme Court says equity is CoC domain)

4. Secured vs Unsecured Creditor within FCs: Secured cannot insist on value of its security.

3. Leading Case Laws - The Doctrine of Non-Justiciability

1. K. Sashidhar vs Indian Overseas Bank (2019) 12 SCC 150 - The Foundation
Supreme Court held:

"Commercial wisdom of CoC is non-justiciable. Limited judicial review within four corners of Sec 30(2) for NCLT and Sec 61(3) for NCLAT. Court cannot trespass upon business decision."

NCLT/NCLAT cannot sit in appeal over whether haircut is 90% or 10% is correct.

2. Committee of Creditors of Essar Steel India Ltd vs Satish Kumar Gupta (2019) 16 SCC 659 - The Bible for Creditor Challenge
SC clarified creditor rights:

• Sec 30(2)(b) only mandates minimum - not equitable treatment. Distribution can be unequal based on CoC commercial wisdom.
• Dissenting FC entitled only to liquidation value, not security value.
• OC challenge: If OC gets not less than liquidation value, plan is compliant even if OC gets 5% and FC gets 90%. Fair and equitable dealing is not a ground under 61(3).

This killed most OC challenges.

3. India Resurgence ARC Pvt Ltd vs Amit Metaliks Ltd (2021) SCC 1700/2021
SC answered: Can secured dissenting creditor challenge saying my security was worth more?

"No. Dissenting secured creditor cannot challenge approved resolution plan insisting higher amount based on its security interest. Its only right is liquidation value under Sec 53."

4. Kalpraj Dharamshi vs Kotak Investment Advisors (2021) 10 SCC 401
Challenge on CoC approval process - Two resolution plans. SC held NCLT cannot interfere if CoC approved plan by 66% after due deliberation, even if other plan was better commercially. Only material irregularity under 61(3)(ii) can be challenged.

5. Jaypee Kensington Boulevard Apartments Welfare Assn vs NBCC (India) Ltd (2021) 10 SCC 401
Homebuyers as FCs challenged plan reducing their rights. SC held CoC can approve modification but must not contravene law - RERA rights to be protected.

6. Recent - NCLAT 2024-25: Kalyani Transco vs Bhushan Power & Steel Ltd
NCLAT reiterated:

"Tribunals cannot hold an appeal against CoC-approved resolution plan unless grounds specified under IBC are satisfied. Commercial wisdom cannot be challenged."

7. Noida Special Economic Zone Authority vs NCLT (SC 2023) - Operational Creditor losing full dues claim
NSEZ claimed 100% as govt authority. SC rejected, holding valuation is question of fact, IBC overrides special acts under Sec 238, and CoC wisdom prevails.

8. Reliance Infratel Ltd (SC 2024) - Operational Creditor Challenge Dismissed
SC upheld plan approved unanimously by CoC even though OC alleged inadequate recovery and exclusion of preference share value. Plan compliant with Sec 30(2).

4. What Can You Actually Challenge Successfully?

You cannot win on: Haircut is too high, Other bidder gave more, My security valuation ignored, Plan is not fair.

You can win on:

• Non-payment of liquidation value: File IA under 60(5) with valuation reports. E.g., If Liquidation value for your class is Rs. 10 Cr but plan gives Rs. 2 Cr.
• Contravention of law: Plan violates Sec 29A (ineligible RA), violates Sec 30(2)(e) - e.g., ignores PF/Gratuity dues which are outside Sec 53 per SC in Sunil Kumar Jain vs Sundaresh Bhatt 2022.
• Material irregularity: RP did not share all plans with CoC, CoC meeting not convened with 5 days notice, voting not by 66%.
• CCI Approval missing: SC in Independent Sugar Corp Ltd vs Girish Sriram Juneja 2023 held if plan proposes combination, CCI approval under Sec 31(4) must come BEFORE CoC approval. Failure = challengeable.

Limitation: Must file within 30 days of approval under Sec 61(1). NCLAT can condone only 15 days extra under Sec 61(2).