Resolution Professional Cannot Be Faulted To Revise Plans Multiple Times As Per Instructions Of CoC: NCLAT

The NCLAT New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Barun Mitra (Technical Member) has held that adverse remarks cannot be passed by the Adjudicating Authority against the RP for performing his duties in accordance with the commercial wisdom of the CoC. In this case, the Resolution Plans were revised multiple times for which the Adjudicating Authority found the RP responsible. Brief Facts These two appeals have been filed against an order passed by the Adjudicating Authority by which the CIRP of the corporate debtor was directed to be reinitiated and completed within 90 days from the date of the impugned order. One appeal has been preferred by the financial creditor and another one has been filed by the RP. The corporate debtor was admitted into the insolvency and in pursuance of which the CoC comprising of the financial creditor as secured creditor was constituted. Fintech Restructuring LLP was appointed as the RP. On the instructions of the CoC, draft bidding documents were shared by the RP with the CoC members and Prospective Resolution Applicants (PRAs). Thereafter, e-bidding process for negotiation in the resolution plan was conducted and completed. Consequently, the resolution plan submitted by the Parth was approved by the CoC with a majority of 84.52% via e-voting platform. Fintech issued the Letter of Intent to Parth. An IA was filed by the RP before the Adjudicating Authority seeking approval of the Resolution Plan under section 31 of the code. Another IA was filed by the Sanklecha in which the voting results of the 15th CoC meeting was sought to set aside. The Adjudicating Authority by the impugned order refused to approve the plan and directed to reinitiate the CIRP of the corporate debtor. Contentions: The appellant/ erstwhile RP submitted that when the CoC had decided to hold further negotiations and called for revised plans, the RP could not have come in the way of the CoC's exercise of commercial wisdom towards seeking revised plans and hence the RP cannot be faulted on this score for having committed any material irregularity in the conduct of CIRP. It was further submitted that the amended Regulation 25(5)(b) of CIRP Regulations clearly permits the RP to seek votes of those CoC members who are not physically present at the meeting by electronic means. It was also submitted that the amended Regulation 39(3)(B) makes it clear that the resolution plan which receives the highest vote is to be considered as approved. Thus, when there is no mandatory requirement to use the evaluation matrix to identify the best resolution plan and the resolution plan of Parth had been voted upon and approved with a majority of 84.52% vote share, it amounted to be the commercial wisdom of the CoC in which the RP could not have interfered. The Financial Creditor submitted that once CoC has approved the resolution plan by requisite majority, there was limited scope of interference by the Adjudicating Authority since commercial wisdom of CoC is not justiciable. In such circumstances, when the CoC had approved the resolution plan with majority share, the Adjudicating Authority erred in setting aside the entire CIRP proceedings and re-initiating fresh proceedings merely on the grounds of irregularities purportedly committed by the RP. Decision of the Tribunal: The tribunal, at the outset, noted that the RP had followed the procedure as laid down under the IBC and Regulations framed thereunder in conducting the CIRP of the corporate debtor till the stage of inviting resolution plans for resolution of the corporate debtor. No irregularity was also detected by the Adjudicating Authority till that stage. Thereafter, it was observed by the Adjudicating Authority that the RP had committed irregularity in revising plans multiple times. However, the tribunal disagreed with this observation of the AA and noted that the RP was merely following the instructions of the CoC as it was the CoC which was directing the RP to revise the plan. It also observed that the finding that the plan cannot be revised by the CoC is also erroneous as this tribunal in Vistra ITCL (India) Vs Torrent Investment Pvt. Ltd. has held that “Regulation 39(1A) cannot be read as a fetter on the powers of the CoC to discuss and deliberate and take further steps or negotiations with the Resolution Applicants, which resolutions are received after completion of Challenged Mechanism.” The relevant Regulation 25 was referred on which the RP has relied and contended that as per this even those members who are not present in the meeting can cast their votes by electronic means. The tribunal agreed with this contentions and observed that “the RP was allowed to seek votes of even those CoC members who are not physically present at the meeting by electronic means.” The tribunal further observed that In the given...

Resolution Professional Cannot Be Faulted To Revise Plans Multiple Times As Per Instructions Of CoC: NCLAT

Mohd Malik Chauhan

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