Scope of word “Material Irregularity”
Supreme Court has held that the ‘commercial  wisdom’  of  the  CoC has  been  given  paramount  status  without  any  judicial intervention,   for
ensuring   completion   of   the   processes within  the  timelines  prescribed  by  the  IBC.    It  has  been consistently  held  that  it  is  not  open
to  the  Adjudicating Authority  (the  NCLT)  or  the  Appellate  Authority  (the  NCLAT) to  take  into  consideration  any  other  factor  other
than  the one  specified  in  Section  30(2)  or  Section  61(3)  of  the  IBC.  It has  been  held  that  the  opinion  expressed  by  the  CoC  after due  deliberations  in  the  meetings  through  voting,  as  per voting  shares,  is  the  collective  business  decision  and  that the   decision  of   the CoC’s ‘commercial wisdom’ is non justiciable, except on limited grounds as are available forchallenge under Section 30(2) or Section 61(3) of the IBC.This position of law has been consistently reiterated in a catena of judgments of this Court. No  doubt  that,  under  Section  61(3)(ii)  of  the  IBC, an  appeal  would  be  tenable  if  there  has  been  material irregularity  in  exercise  of  the  powers  by  the  RP  during  the corporate   insolvency   resolution   period.

The Hon’ble Supreme Court has made a refernce to the observation of the court citing the case of “Keshardeo Chamria vs. Radha kisan Chamria and Others, in dertermioning the scope of the word “Material irregularity” as per sic 115 of the Code of Civil procedure 1908, wherein it was held that the words illegality and material irregularity does not include within its scope errors of law or fact. They do not cover on the decision arruved at but to the manner adopted in reaching at the decision arrived.

Branch: Supreme Court

Link: https://pdf.caselaw.in/sc/2021/12/887/?_ga=2.77094037.1057101720.1639852076-2096510943.1639852076