Copy Of Other Prospective Resolution Applicants' Plans Cannot Be Shared When Suspended Management Is Also A Resolution Applicant: NCLAT

Brief Facts

The present appeal has been filed by the suspended management of the corporate debtor against an order passed by the Adjudicating Authority (NCLT, Jaipur Bench) by which the Resolution Plan filed by the Trufalir Buildwell LLP was approved.

The appellant argued that the CIRP of the corporate debtor was marred by the irregularities as the RP did not provide the copy of the resolution plan to both the CoC and the suspended management of the corporate debtor in advance.

It was further submitted that the CoC had approved the resolution plan without the resolution plan in its final form being available before it and hence impermissible as held by the Hon'ble Supreme Court in the M.K Rajagopalan Vs Dr. Perisamy Palani Gounder (2024)

The appellant submitted that the SRA's resolution plan was in the form of an unsigned document and was screen shared which hindered meaningful deliberations about its feasibility. It was argued that there was a significant discrepancy between the estimates of the two valuers which the RP failed to take into consideration thereby leading a plan with a significant haircut for secured creditors and nil payment for other creditors.

Relying on the Supreme Court judgment in Greater Noida Industrial Development Authority vs. Prabhjit Singh Soni (2023), it was submitted that plans involving third party land requires close examination the plan's feasibility.

Finally, it was submitted that the CoC had rejected the settlement proposal of the promoters which settlement proposal aimed at maximizing the value of the Corporate Debtor and exceeded the plan value of the SRA. The failure of the CoC to consider the offer of settlement of the promoters is arbitrary. I

On the other hand, the respondent submitted that the appellant participated as a competing party in the CIRP therefore it cannot now be allowed to challenge the plans of others when its plan was rejected on the ground that it failed to deposit the EMD and not filing EOI within the time period specified in the CIRP Regulations.

Finally, it was added that on the issue of prior approval the Adjudicating Authority has observed that the obligation under the resolution plan of the SRA is not contingent or conditional upon continuation of occupation of the said land or resumption of lease by the RICCO.

Observations:

The tribunal at the outset rejected the contention of the appellant that the CoC had wrongly adopted the swiss challenge method and observed that Regulation 39(1A) permits the use of such method as an option while seeking resolution plans.

The tribunal while reproducing the said Regulation observed that “the Challenge Mechanism in the said Regulation 39(1A) envisages multiple rounds of challenge so as to enable Resolution Applicants to improve their Plans. It does not prohibit CoC from negotiating with Resolution Applicants or asking Resolution Applicants to further increase the Plan value. Any such step taken by the CoC to follow the Swiss Challenge Method cannot be said to be arbitrary or in violation of any statutory provisions of the IBC.”

It further noted that the RP took the roll call of all the participants including the Financial Creditors and suspended directors who attended the CoC meeting. Wherever required the PRAs were also invited to the meetings and admitted for discussion with CoC members. In the given circumstances, the appellant's contention that there was violation of the CIRP Regulations 21 and 24 was rejected.

It further added that “this is a case where the revised resolution plan of the SRA was duly considered, evaluated and approved by the CoC before the RP placed the same for the approval of the Adjudicating Authority and hence the ratio of the judgement of the Hon'ble Supreme Court in M.K Rajagopalan supra is clearly not applicable in the present factual matrix.”

It also added that the resolution plans received from PRAs other than the anchor bidder were opened up during the first session of the 54th meeting and was displayed through shared screen during the said meeting. Thereafter the resolution plan submitted by the anchor bidder for approval of CoC was also shared on screen by the RP and then the same was thoroughly evaluated by COC.

“When the CoC, inspite of being the stakeholder whose interests were most critically affected, had evinced no complaints about the fairness and transparency of the process which had been followed by the RP, we do not find much force in the contention of the Appellant that there were irregularities in the process followed by the RP” the tribunal observed.

The tribunal also noted that in the present case, when it is an admitted fact that the Appellant was also a competing Resolution Applicant, no copy of the resolution plan of other PRAs could have been shared in advance with the Appellant as it would have triggered conflict of interest therefore the law laid down by the Supreme Court in Vijay Kumar Jain is not applicable in this case.

Further,the RP had sought views of the CoC members on the scores allotted to each Resolution Applicant. Further, in accordance with Regulation 39(3) of CIRP Regulations, the CoC evaluated the resolution plan with respect to the evaluation matrix and other parameters and recorded their views on the feasibility and viability of the Resolution Plan of the SRA which had scored 95 out of 100 on qualitative parameters of resolution plan, the bench observed.

In PNC Infratech Limited Vs Deepak Maini in CA(AT)(Ins)No. 143 of 2020, it has been held that there is no such mechanism under the IBC that gives the right to the Unsuccessful Resolution Applicant to challenge the score granted as per the evaluation matrix prepared by the CoC and the RP, the tribunal noted.

In light of the above discussion, the bench observed that “CoC is the best judge to decide on how the evaluation matrix contained in the RFRP can be applied. The Appellant therefore cannot go into the technical issues with regard to evaluation and score matrix which is in the exclusive domain of the CoC. This is clearly a business decision of the CoC and unless there is any clear violation of Section 30(2) of the IBC, this decision of the CoC cannot be lightly challenged.”

Finally, the tribunal observed that it has been held that the opinion expressed by the CoC after due deliberations in the meetings through voting, as per voting shares, is the collective business decision and that the decision of the CoC's commercial wisdom is non-justiciable, except on limited grounds as are available for challenge under Section 30(2) or Section 61(3) of IBC.

Accordingly, the present appeal was dismissed.

Case Title: Yashdeep Sharma Suspended Director Versus Tara Chand Meenia, Resolution Professional and Ors.

Case Number:Company Appeal (AT) (Insolvency) No. 1906

Judgment Date: 11/12/2024

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