CoC Can Invite Fresh Bids, Regulations Only Limit Modification Of Existing Bids: NCLT Kochi

The National Company Law Tribunal (NCLT), Kochi Bench, has recently clarified that the Insolvency and Bankruptcy Board of India Regulations, 2016, restrict only the modification of an already issued Expression of Interest and do not prevent the Committee of Creditors from issuing a fresh call for EOIs.

A coram of Judicial Member Vinay Goel and Technical Member Madhu Sinha dismissed an application filed by Resolution Applicant Sumit Khanna challenging the CoC's decision to invite fresh EOIs for Corporate Debtor-Kerala Chamber of Commerce and Industries after rejecting his plan.

The tribunal held that his interpretation of the regulations was “misconceived,” adding, “The Applicant's reliance on Regulation 36(4A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, is also misplaced. The said regulation restricts modification of an existing EOI to only once, but it does not curtail the power of the CoC to issue a fresh EOI.”

The proceedings arose from the Corporate Insolvency Resolution Process of Kerala Chamber of Commerce and Industries, initiated on February 21, 2022. Khanna had submitted a resolution plan for the company, whose sole asset is an office building called Chamber Corner, while most creditors are homebuyers in the stalled Kerala Trade Centre project represented through their association, which holds over 69 percent voting share in the CoC.

His plan was rejected after the valuation reports placed the liquidation value at over Rs 66 crore, far higher than the value he claimed to be realistic. He moved the tribunal seeking a third valuer, opposing the fresh EOI, and asking that his plan be put to vote after revising the liquidation value.

Khanna argued that the valuers had wrongly included assets not owned by the corporate debtor and that the RP ignored requests from creditors to appoint a third valuer. He claimed the CoC's rejection was not an exercise of commercial wisdom but a decision based on an inflated liquidation value, and that Regulation 36(4A) barred the CoC from issuing a fresh EOI.

The CoC countered that the plan was non-compliant with the regulations, that Khanna had assumed a nil liquidation value contrary to the valuation reports, and that he had himself submitted an EOI in response to the new bid and therefore could not legally challenge it.

The tribunal agreed with the CoC and found that Khanna's plan failed to meet mandatory statutory requirements.

It observed, “It is also clear from the record that the Applicant failed to comply with Section 30(2)(a) and 30(2)(b) of the Code, as the plan did not unconditionally provide for mandatory payments such as CIRP costs, dues of operational creditors including Government dues, and amounts payable to dissenting financial creditors. The unilateral assumption of NIL liquidation value is contrary to law, to the valuations communicated by the RP, and to the objectives of the Code.”

It also noted that Khanna, having participated in the fresh EOI process, could not “approbate and reprobate” by challenging it later, and that there was no evidence of arbitrariness or illegality in the CoC's decision. Finding the application devoid of merit, the tribunal dismissed it without costs.

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