Consideration And Subsequent Rejection Of Resolution Plan By Committee Of Creditors Submitted After Due Date Cannot Be Questioned: NCLAT
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member) has held that the consideration and subsequent rejection of a resolution plan by the Committee of Creditors submitted after the due date cannot be questioned. Brief Facts: Corporate Insolvency Resolution Process (CIRP) of the...
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member) has held that the consideration and subsequent rejection of a resolution plan by the Committee of Creditors submitted after the due date cannot be questioned.
Brief Facts:
Corporate Insolvency Resolution Process (CIRP) of the corporate debtor, AA Estate Private Limited, commenced by order dated 06.12.2022.
Resolution Professional (RP) issued publication inviting the Expression of Interest (EoI) from Prospective Resolution Applicant (PRA). EoIs were received and list of PRA was issued, which included the name of the appellant as well as the Respondent No. 1.
Respondent No. 1 has sent his plan on 15.02.2024 to the RP i.e., after expiry of the last date. The CoC in its meeting held on 16.02.2024 decided not to accept the resolution plan of Respondent No. 1, which was filed after expiry of the last date for receipt of the resolution plan.
I.A.1143/2024 was filed by Respondent No. 1 before the Adjudicating Authority seeking a direction to the RP to condone the 1 day delay in filing the plan and further resolution plan of the Respondent No. 1 be directed to be considered by the CoC.
Adjudicating Authority after hearing the parties on I.A.1143/2024 allowed the IA vide order 29.07.2024 and directed the plan to be considered by the CoC/RP.
Appellant submitted his resolution plan after the challenge process on 15.06.2024 and the plans were under consideration before the CoC when the impugned order was passed on 29.07.2024.
Contentions:
The Appellant submitted that the Adjudicating Authority has committed an error in allowing the application directing the consideration of resolution plan which having been received after timeline could not be considered.
It was also argued that CoC in its commercial wisdom decided not to accept and consider the plan of Respondent No. 1. The Adjudicating Authority could not have interfered with the said commercial wisdom and overturn the decision of the CoC.
Per contra, the Respondent No. 1 submitted that the plan was sent by the Respondent No. 1 on next date i.e., 15.02.2024 and the plan were to be considered on 16.02.2024, hence the plan was sent prior to date when plans were to be considered and hence there was no reason for non-consideration of the plan by the CoC.
It was further submitted that maximisation of the value of the corporate debtor is one of the objectives of the CIRP and consideration of the plan of Respondent No. 1 is towards that object and Adjudicating Authority has rightly passed an order directing for consideration of the plan.
Observations:
The Tribunal observed that Regulation 36B(6) of the Corporate Insolvency Resolution Process (CIRP) Regulations, 2016 provides the RP with the approval of the committee extend the timeline for submission of the plan, which pre-suppose that the CoC has to agree for extension of timeline. The present is a case where the timeline was extended from 05.02.2024 to 14.02.2024, and all PRAs were informed that 14.02.2024 is the last date for the last extension.
It further observed that The CoC had already considered the Resolution Plan submitted by the Respondent No. 1 and rejected it while deciding to proceed with the CIRP process.
It further added that present is not a case for RP and CoC failing to exercise jurisdiction under Regulation 36B (6) rather the CoC deliberated on extension of timeline and refused to extend the timeline. The Adjudicating Authority in the impugned order has not returned any finding that the decision of the CoC dated 16.02.2024 was arbitrary or not in accordance with the regulation.
The Tribunal noted that the Supreme Court judgment in 'Kalparaj Dharamshi' Vs. 'Kotak Investment Advisors Ltd. & Anr.' (2021) can not come to the aid of Respondent No. 1 since in this case CoC had resolved to accept the plan which was submitted after expiry of last date, whereas in the present case CoC resolved not to accept the plan of Respondent No. 1 which was received after last date.
The Tribunal further noted that after the CoC decision on February 16 and 17 2024, a challenge process was conducted from 23.04.2024 to 29.04.2024 where the Appellant was declared H-1 bidder. Respondent No. 1 was neither invited nor eligible to participate as their plan had already been rejected. However, their application was still allowed after the challenge process.
The Tribunal concluded that there was no sufficient ground on basis of which the Adjudicating Authority could have allowed the application filed by Respondent No. 1 and issued direction to the CoC. Regulation 39(1B) of the CIRP Regulations, 2016, prohibits consideration of resolution plan which is received after a timeline under Regulation 39(1B).
Accordingly, the present appeal was allowed.
Case Title: Authum Investment and Infrastructure Limited The Ruby Versus Ashdan Properties Private Limited and Ors.
Case Number: Company Appeal (AT) (Insolvency) No. 1566 of 2024 & I.A. No. 5973, 6380 of 2024
Judgment Date: 17/03/2025
For Appellant : Mr. Arun Kathpalia, Sr. Advocate with Mr. Mahesh Agarwal, Ms. Geetika Sharma and Mr. Shivam Shukla, Advocates.
Applicant : Mr. Sumesh Dhawan, Ms. Pragya Choudhary and Mr. Shaurya Shyam, Advocates in I.A.6380/2024.
For Respondents : Mr. Abhinav Vashisht, Sr. Advocate with Mr. Ritesh Kumar, Ms. Mallika Kamal, Mr. Adithya Devarayan and Ms. Akshita Sachdeva Jaitly, Advocates for R-1.
Mr. Abhijeet Sinha, Sr. Advocate with Ms. Joshua Borges, Advocates for R-2/RP.
