NCLT rejects RP over unsubstantiated share valuation

The CoC had approved AKB Ventures' resolution plan for Paytail Commerce with an 83.97% vote, proposing a total resolution outlay of ₹6.68 crore against admitted claims of about ₹19.98 crore. 

A substantial part of the plan depended on converting creditor dues into shares or securities at ₹1,000 per share, followed by their acquisition by the Resolution Applicant at as little as ₹1 or ₹10. NCLT found that the ₹1,000 conversion value was not supported by any independent valuation or recognised valuation methodology and appeared to have been structured primarily for accounting and tax purposes. 

The Tribunal held that CoC commercial wisdom cannot override the statutory requirement that a resolution plan comply with applicable law. The plan was rejected and the Corporate Debtor ordered into liquidation.