Resolution Applicants Can't Revise Offers Post Approval, CoC's 'Commercial Wisdom' Can't Be Faulted: NCLAT

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member), and Arun Baroka (Technical Member) has observed that the 'commercial wisdom' of the Committee of Creditors (CoC), which did not approve a Resolution Plan, which had given the highest money, cannot be questioned. The Tribunal went on to observe that after approval of the Resolution Plan, no Resolution Applicant is entitled to raise its offer or give any revised offer. Brief Facts: On 29.04.2022, the Adjudicating Authority initiated corporate insolvency resolution process (CIRP) against SKS Power Generation Chhattisgarh Ltd. (Corporate Debtor) on an application filed by Bank of Baroda under Section 7 of the Insolvency and Bankruptcy Code 2016 (IBC). Ashish Arjunkumar Rathi (Respondent No. 1), who was the Resolution Professional (RP) published Form-G to invite Expressions of Interest (EoI) from prospective Resolution Applicants. The Appellant(s) and Sarda Energy and Minerals Ltd. (SEML) filed their Resolution Plan. The CoC conducted an inter se bidding process. The Appellants and SEML submitted revised Resolution Plans by 28.04.2023. The CoC gave directions to the RP to seek clarification from all resolution applicants. All resolution applicants submitted clarifications in the form of an addendum to the Plan on 10.05.2023. At the 31st CoC meeting on May 16, 2023, 7 resolution plans were put to vote. SEML's Resolution Plan was approved with 100% vote share. On 8.06.2023, the RP issued a Letter of Intent (LoI) to SEML. Pursuant to it, SEML submitted a Performance Bank Guarantee (PBG) of INR 150 crores on 12.06.2023. Vantage Point Asset Management Pte. Ltd. later offered to increase its financial proposal. The CoC rejected this offer on 17.06.2023. On the same date, i.e. 17.06.2023, the RP filed an application before the Adjudicating Authority for approval of the Resolution Plan of SEML. On the Application filed by the RP, the period of CIRP was extended to 24.06.2023, prior to which date, the Application for approval of the Resolution Plan was filed by the RP. The Adjudicating Authority, on 6.10. 2023 remitted the resolution plan for reconsideration to the CoC. The CoC again deliberated on all the Resolution Plans and after deliberation, reiterated its earlier decision. Three appeals were filed challenging the 6.10.2023 order. The NCLAT on 10.05.2024 set aside the order, revived the Plan approval Application, and directed the Adjudicating Authority to dispose of the application within 60 days. The Adjudicating Authority approved the Resolution Plan filed by the RP by the impugned order dated 13.08.2024. The unsuccessful Resolution Applicants (Vantage Point Asset Management Pte. Ltd., Torrent Power Ltd. and Jindal Power Ltd.) filed the appeals aggrieved by the impugned order. Arguments: By Counsel for Appellants: The Adjudicating Authority committed an error in treating the remand order as a restricted remand. It did not consider all contentions raised afresh. The RP and CoC selectively allowed SEML to modify its commercial offer after the negotiation process was concluded on 19.04.2023. No applicant was entitled to modify its commercial offer after the negotiation process. Once the Negotiation Process concluded, the commercial offer stood frozen. Thereafter, no change was permissible. Thus, SEML had deviated from the Resolution Plan. The CoC and the Resolution Professional have permitted the SEML to change its commercial under the garb of seeking clarification. Such similar opportunities were not made to other Resolution Applicants. The preferential treatment meted out to SEML by the RP/CoC enabled it to leapfrog over the other RAs. Thus, the case fell within the ambit of Section 61(3) of the IBC which permits the Tribunal to interfere, since there is material irregularity in the process. Vantage Point was ready to increase its offer by INR 50 Crores and had given the highest offer in the plan. Its Resolution Plan deserved to be approved as the object of CIRP is to maximise the value of the assets of the Corporate Debtor. By Counsel for Respondent: The clarifications had been sought by the RP from all the Resolution Applicants. Such an act of seeking clarification was pursuant to the rights of the CoC categorically set out in the RFRP.The RFRP and the Process Note set out that the CoC could vote on any Resolution Plan in its commercial wisdom. The CoC is under no obligation to any of the Resolution Applicants to approve a Resolution Plan which has scored the highest. The CoC approves a Resolution Plan in its commercial wisdom by taking into account the overall feasibility and viability of the Resolution Plan. All Resolution Applicants got a level playing field and participated without demur till the conclusion of the process....

Resolution Applicants Can't Revise Offers Post Approval, CoC's 'Commercial Wisdom' Can't Be Faulted: NCLAT

Tazeen Ahmed

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