After Submission Of Final Revised Resolution Plan Within Stipulated Time Frame, Resolution Applicant Cannot Be Permitted To Modify It: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) has held that After submission of the final revised Resolution Plan within the stipulated timeframe, the Resolution Applicant cannot be permitted to modify it. Brief Facts: On an Application filed by State Bank of India (“SBI”) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Code) against the Corporate Debtor (“CD”) – M/s Metenere Ltd., CIRP commenced by an order dated 03.10.2020. The Resolution Professional (RP) issued a fresh Form G inviting Expressions of Interest (EoI) in pursuance of directions issued by the Adjudicating Authority. The RP initially included the M/s. Findoc Finvest Private Limited (Appellant) in the list of Prospective Resolution Applicants (PRAs) but later excluded the Appellant and two others from the final list. On 08.07.2024, the RP wrote to the Appellant that revised compliant Resolution Plan, with no changes to the financial proposal outlined in Findoc's Resolution Plan dated 24.06.2024, be submitted by 08.07.2024, failing which the original Resolution Plan dated 24.06.2024 will be evaluated and considered by Committee of Creditors (CoC). The Plan of the Appellant and Orissa Metaliks were put to vote in the 35th CoC Meeting held on 11.07.2024. The voting lines were opened from 16.07.2024 to 23.07.2024, which was extended to 24.07.2024. The CoC after voting, approved the Resolution Plan of Orissa Metaliks by majority of 98.95% vote shares. The Adjudicating Authority heard IA No.37 of 2024 and by impugned order approved the Resolution Plan of the Orissa Metaliks. The Appellant aggrieved by the approval of the Resolution Plan by the order dated 04.10.2024 has filed this Appeal. Contentions: The Appellant submitted that Request for Resolution Plans (RFRP) having contemplated holding of the challenge mechanism, it was necessary for the CoC and the RP to conduct Swiss Challenge Mechanism, so as to maximize the value of the CD. It was also argued that Had the Appellant been permitted to increase his bid, it would have offered the higher amount. The Resolution Plan entails a huge tax advantage to Orissa Metaliks. The Resolution Plan appears to have been approved in haste. Per contra, the Respondents submitted that Holding of Swiss Challenge Mechanism is not compulsory and it was in the discretion of CoC to take a decision to hold Swiss Challenge Mechanism. The CoC took its commercial decision to evaluate the Resolution Plans, including the Resolution Plan of the Appellant and the SRA. Lastly, it was submitted that the Appellant, who is a Resolution Applicant, has had right only to the extent of consideration of his Plan, which was duly considered. The commercial wisdom of the CoC, cannot be questioned or interfered with by the Adjudicating Authority. Observations: The Tribunal observed that the expression used in Clause 16.8 of the RFRP is “The CoC, in its discretion, may decide to adopt Swiss Challenge Mechanism to ascertain the Successful Resolution Applicant after receipt of all resolution plans”. It added that the above Clause gives discretion to the CoC to adopt Swiss Challenge Mechanism. Thus, the submission of the Appellant that there is a breach of procedure by CoC in not adopting Swiss Challenge Mechanism, was rejected. The Tribunal noted that after the submission of final Resolution Plans by all the Resolution Applicants by 24 June 2024, there was no occasion to permit the Resolution Applicant to enhance its financial offer. It further added that the Resolution Plan was submitted by the Appellant on 24.06.2024 and all Resolution Applicants were permitted to submit their revised Resolution Plan within the time allowed. After revised Resolution Plans have been submitted by Resolution Applicants, no Applicant can be permitted to enhance its financial offer. The Tribunal said that The Appellant's Resolution Plan was deliberated and compared with the Resolution Plan of the Orissa Metalliks. The plan of the Orissa Metalliks was later approved by the CoC with 98 percent vote shares. Once a Resolution Plan is approved by the CoC in its commercial wisdom, such a decision cannot be interfered with by the Adjudicating Authority unless the plan is found to be in contravention of section 30(2) of the code. The Tribunal concluded that Regulation 39A(1) of the Corporate Insolvency Resolution Process (CIRP) Regulations, 2016 is an enabling Regulation and does not cast any obligation to permit modification of a Resolution Plan. Based on the above, the Tribunal observed that in present case all Resolution Applicants were permitted to submit revised Resolution Plan. The CoC having not instructed the RP to permit any modification in Plan, RP cannot be said to have faulted in ...

After Submission Of Final Revised Resolution Plan Within Stipulated Time Frame, Resolution Applicant Cannot Be Permitted To Modify It: NCLAT

Mohd Malik Chauhan

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