The NCLAT, Principal Bench New Delhi expounded that the approval of the plan submitted in the Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) is in the domain of the Committee of Creditors (hereinafter referred to as “CoC”). The Bench observed that in the present case, CoC did not take any final decision regarding permitting Respondent No.2 to revise its offer after the closure of the Challenge Process. Instead of undoing the Process, CoC had decided to go for voting on the final plans after the Challenge Process.
The Appellate Authority opined that the CoC’s power to cancel or modify the negotiation with the Resolution Application cannot be curtailed but it is the wisdom of the CoC to take a decision. In the present case, no such decision was made by the CoC, instead, it decided to go for the voting process. Further, the NCLT did not even provide any reasons for allowing Respondent No.2 to modify its offer. Thus, the NCLT’s order interfering with the voting process was set aside by the Appellate Authority.
Brief Facts:
A CIRP was issued against “Mittal Corp Limited” (hereinafter referred to as “Corporate Debtor”) by the NCLT. The Resolution Professional issued a request for Resolution Plan and the last day to submit was 31.05.2022. Both Appellant and Respondent No.2 submitted the plans.
Thereafter, the CoC decided to undertake a Challenge Process to provide an opportunity for the Resolution Applicants to improve their plans. By the end of the process, there was only one competing Resolution Applicant. Respondent No.1 vide an email wrote that it is willing to submit the entire NPV offered as an upfront payment within 30 days.
An interim Application was filed by Respondent No.2 seeking directions that the offer by him must be placed before the Committee and that Resolution Professional be restrained from continuing with CIRP. In the said application, only the Resolution Professional was impleaded as Respondent. The NCLT passed an order vide which directed the revised resolution plan of the Respondent No.2 to be placed before the committee. Thereafter, the voting process was stopped. It is against the said order that the Appellant has preferred the present appeal.
Contentions of the Appellant:
It was contended that after the Challenge Process culminated with the participation of both Appellant and Respondent No.2, no further revision in the plan could have been allowed as the same violates the rules of the Challenge Process as approved by the CoC. It was contended that in the said Application, neither the CoC nor any of the Resolution Applicants (including the Appellant) were made the party.
Contentions of the CoC:
It was argued that liberty should have been given to all Resolution Applicants to revise their plans. Regulation 39(1A)(b) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as “2016 Regulations”) is a directory regulation and hence, CoC had full jurisdiction to decide on permitting the Resolution Applicants to revise their plans.
Contentions of the Respondent No.2:
It was contended that the revised offer of the Respondent No.2 must have been placed before the CoC as the object is to maximize the assets of the Corporate Debtor.
Contentions of the Resolution Professional:
It was argued that Regulation 39(1A)(b) of the 2016 Regulations does not permit the Resolution Professional to allow revision of the plan more than once.
Observations of the Tribunal:
It was noted that Regulation 39(1A) of the 2016 Regulations was added vide the 2021 amendment. Before the said amendment, there was no provision for a challenge mechanism. The intent behind introducing this swiss Challenge was to enable CoC to negotiate with the Applicants by an alternative mechanism to come up with the best Resolution Plan.
In the present case, the voting process was hindered due to the order of the NCLT. Further, the application filed by Respondent No.2 was part of the Challenge Process. It was explicitly mentioned in Clause 7 of the Challenge Process that no bid/commercial offer could be revised after the conclusion of the Challenge Process. Also, CoC had an unconditional right to cancel/modify/abandon/amend the process at any stage.
It was opined that the approval of the plan submitted in CIRP is in the domain of the CoC.
The Bench observed that in the present case, CoC did not take any final decision regarding permitting Respondent No.2 to revise its offer after the closure of the Challenge Process. Instead of undoing the Process, CoC had decided to go for voting on the final plans after the Challenge Process.
The Appellate Authority opined that the CoC’s power to cancel or modify the negotiation with the Resolution Application cannot be curtailed but it is the wisdom of the CoC to take a decision. In the present case, no such decision was made by the CoC, instead, it decided to go for the voting process. Further, the NCLT did not even provide any reasons for allowing Respondent No.2 to modify its offer.
The decision of the Tribunal:
Based on the abovementioned reasons, the Tribunal held that the order of the NCLT was unsustainable in law and hence, was set aside. Accordingly, the Appeal was allowed.
Case Title: Jindal Stainless Ltd. V. Mr. Shailendra Ajmera & Ors.
Coram: Justice Ashok Bhushan, Barun Mitra (Technical Member)
Case No: Comp. App. (AT)(Ins.) No. 1058 of 2022
Advocates for Appellant: Advs. Mr. Ramji Srinivasan, Mr. Rahul Kumar, Mr. Bishwajit Dubey, Ms. Neha, Ms. Madhvi Divan, Mr. Vikas Mehta, Mr. Sahil Monga, Mr. Apoorv Khator, Ms. Rashi Rampal.
Advocates for Respondents: Advs. Mr. Sumesh Dhawan, Ms. Shweta Dubey, Ms. Kanishka Prasad, Mr. Abhijit Sinha, Mr. Anuj Tiwari, Mr. Kaustubh Rai, Mr. Rahul Kumar, Mr. Saurabh Kumar Mishra, Mr. Aditya Shukla, Ms. Tuhina Mishra, Mr. Gaurav Mitra, Mr. Piyush Beriwal, Ms. Ankit Raj, Mr. Ritin Rai, Mr. Udit Mendiratta, Ms. Niharika Sharma, Mr. Tejas Jha, Mr. Shivkrit Rai.
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