He submitted two plans for the same hotel. The court said: you can't compete with yourself.

He wanted to buy the hotel. So he submitted two bids — one as himself, one as a trustee. The court said: that's not allowed.

Appu Hotels Limited ran the Le Meridian in Coimbatore. By May 2020, the company had defaulted on loans from a consortium of bankers. A financial creditor dragged it into insolvency under Section 7 of the Insolvency and Bankruptcy Code (the provision that lets a lender start reviving or liquidating a defaulting company). A resolution professional was appointed. The hunt for a buyer began.

One man stepped forward: M.K. Rajagopalan. He submitted a resolution plan — a proposal to take over the hotel and pay off its debts. The committee of creditors (the CoC — the bankers who decide who buys the company) voted. 87.39% approved his plan.

Then things got complicated.

When the bankers asked for changes

The bankers did not approve the plan as-is. They asked Rajagopalan to revise it. He did. But here is the catch: he never brought the revised plan back to the committee for a fresh vote. Instead, he went straight to the National Company Law Tribunal (NCLT — the special court that handles insolvency cases) and asked it to approve the plan. The NCLT said yes in July 2021.

Objections came from three corners: the promoter of Appu Hotels, a related party creditor, and an NRI shareholder. They all argued the plan was flawed. The NCLT dismissed their objections. They appealed to the National Company Law Appellate Tribunal (NCLAT — the appeals court for insolvency matters).

The NCLAT looked at the plan and found something the NCLT had missed: Rajagopalan had actually submitted two plans. One in his personal capacity. Another as the managing trustee of a trust. Both were bids for the same hotel — two documents that sat side by side on the table, each offering to take over the same Le Meridian property.

Why two bids broke the law

The Indian Trusts Act, 1882, has a rule in Section 88 that sounds simple but cuts deep: a trustee cannot use their position to gain an advantage at the expense of the beneficiary (the person for whose benefit the trust exists). If a trustee submits a bid as a trustee, they must act only for the trust's benefit. If they also submit a personal bid for the same asset, they are competing against the trust. That is a conflict of interest — and it is illegal.

The NCLAT held that Rajagopalan, by submitting two plans, had violated Section 88. He was ineligible to be a resolution applicant. The appellate tribunal also found that the revised plan had never been placed before the CoC for approval — a procedural failure so serious it could not be fixed later. The NCLAT rejected the plan entirely and sent the matter back to the committee of creditors.

Rajagopalan appealed to the Supreme Court.

The Supreme Court's two-part answer

The bench of Justice Dinesh Maheshwari and Justice Vikram Nath heard the case in May 2023. The courtroom fell silent as the judges began reading their order. They upheld the NCLAT's core findings but also clarified an important point about company law.

On the Trusts Act violation: The court agreed that a resolution applicant who submits two competing plans — one personally and one as a trustee — violates Section 88. The fiduciary (the person in a position of trust) cannot gain by bidding against his own beneficiary. The court said this was a clear conflict of interest that made Rajagopalan ineligible. The Supreme Court observed that Section 88 of the Indian Trusts Act "renders a resolution applicant ineligible when he submits two plans — one personally and one as managing trustee of a trust — as he gains advantage in a fiduciary capacity by competing with himself."

On the procedural failure: The court held that there is no such thing as post-facto approval of a resolution plan by the CoC. Any modification, no matter how minor, must be placed before the committee for a fresh vote before the plan can go to the NCLT. Skipping this step is an incurable material irregularity — a mistake so fundamental the plan cannot be saved. The stack of loan default notices that had triggered the whole process seemed to grow heavier with each procedural misstep.

On the Companies Act point: The NCLAT had also found Rajagopalan disqualified under Section 164(2)(b) of the Companies Act (a provision that bars someone from being a director if convicted of certain offences). The Supreme Court clarified: there is no "deemed disqualification" under this section. A person is disqualified only if a competent authority passes a categorical order. You cannot assume disqualification just because the facts look suspicious.

What the court said about commercial wisdom

The bankers argued that the CoC had approved the plan with 87.39% votes, and the court should respect that commercial wisdom. The Supreme Court rejected that argument. It said the principle of commercial wisdom cannot be used to brush aside shortcomings where the decision-making process itself contravened a law in force at the relevant time. Even if the creditors want to approve a plan, they cannot approve one that violates the law.

The procedural journey: how the case travelled through three courts

The case began in May 2020 when a financial creditor initiated insolvency proceedings against Appu Hotels Limited under Section 7 of the IBC before the NCLT, Chennai. The NCLT admitted the application and the corporate insolvency resolution process began.

By July 2021, the NCLT had approved Rajagopalan's resolution plan under Section 30(6) of the IBC (the provision that allows the adjudicating authority to approve a plan that meets all legal requirements), dismissing all objections from the promoter, the related party creditor, and the NRI shareholder.

The NCLAT, Chennai Bench, reversed that decision in February 2022. It found that Rajagopalan was ineligible under Section 88 of the Indian Trusts Act and Section 164(2)(b) of the Companies Act, and that the failure to place the revised plan before the CoC was a material irregularity. The NCLAT rejected the plan and remanded the matter back to the committee of creditors.

The Supreme Court heard the appeals in May 2023. It upheld the NCLAT's core findings on the Trusts Act violation and the procedural failure, while clarifying that there is no deemed disqualification under the Companies Act. The plan was rejected on twin grounds: ineligibility of the resolution applicant under Section 88 of the Indian Trusts Act, and the failure to place the revised plan before the CoC before seeking NCLT approval.

The legal provisions that shaped this case

Several provisions of law were engaged in this dispute. Section 7 of the IBC — the provision that allows a financial creditor to initiate insolvency proceedings — was the starting point. Section 30(2) of the IBC sets out the requirements a resolution plan must meet, while Section 30(6) empowers the adjudicating authority to approve a compliant plan.

Section 88 of the Indian Trusts Act was the primary provision that led to Rajagopalan's disqualification. It provides that a trustee who gains an advantage by using their fiduciary position must hold that advantage for the benefit of the beneficiary. By submitting a personal bid alongside a trust bid, Rajagopalan violated this principle.

Section 164(2)(b) of the Companies Act was also invoked, but the Supreme Court clarified that it does not create a deemed disqualification. A person can only be disqualified under this provision if a competent authority passes a specific order to that effect.

Why this matters for every resolution applicant

This judgment sends a clear message to anyone bidding for a distressed company: you cannot wear two hats. If you are a trustee, you act for the trust — not for yourself. Submitting a personal bid alongside a trust bid is a conflict that kills your eligibility.

Equally important: the CoC must approve every version of the plan. You cannot make changes after the vote and then ask the tribunal to approve the revised version. The committee's approval is the floor, not the ceiling. The Supreme Court was categorical: there is no concept of post-facto approval of a resolution plan by the CoC.

The judgment also clarifies an important point about director disqualification. Companies Act provisions that bar someone from being a director do not operate automatically. A specific order from a competent authority is required. This removes a layer of uncertainty for resolution applicants who might otherwise fear being disqualified on assumptions.

THE PLAY: If you submit a resolution plan as a fiduciary, you cannot also submit a personal plan for the same asset — and any modification to an approved plan must go back to the committee of creditors for a fresh vote before it reaches the tribunal.

The hotel stayed with the bankers. The bidder went home with a lesson in fiduciary duty — and the Supreme Court's order, dated May 3, 2023, became a reminder that in insolvency law, process matters as much as outcome.