2019 (12) TMI 1311 - Tri - Insolvency and Bankruptcy

Tribunal Orders Re-Bidding Process, Emphasizes Fairness and Transparency

The Tribunal dismissed objections by PHIL and H3 bidder, finding them lacking merit. It noted lack of transparency in the bidding process and directed a ... Bidding Process - Approval of Resolution Plan - initiation of CIRP - common negotiations between parties - HELD THAT:- Since the provisions of Section 12 have now been amended, and as per 2nd proviso CIRP is mandatorily be completed within period of 330 days and the said 330 days only would expire in the case in hand only on 21st January,2020, it appears to us that this is a fit case to issue direction to COC to reconsider all the three resolution plans by giving a reasonable opportunity to revise their respective bidding offers so as to ensure maximization of the value of the assets of the corporate debtor. The offer found accepted by the COC is 89.86 crores. The liquidation value is 76.37 crores. On the other hand fair value assessed is 136.12 crores. So an offer enhancing 102 crore cannot be ignored. It cannot be ruled out if an open bidding is permitted it may go high beyond ₹ 102 Crores. In the set of circumstances brought before us and considering the fair value assessed as to the assets of the corporate debtor which is a leading mall in the city in operation, we hope it would fetch more value if the COC have had an open bidding among the resolution applicants - It is settled position of law as to the discretionary power of the COC to take the best decision in the interest of maximisation of asset value. We are also unable to see the recording of deliberations regarding the feasibility and viability of the plan selected among the three Plans in the minutes. The plan before us is not adhering to the object of the Code i.e. maximising the value of assets and balancing the interests of the stakeholders. There is unjust discrimination in regard to choosing one out of Three Resolution Applicants. In view of the above said factors, the plan submitted for approval is to be returned for submitting a revised plan enhancing the resolution bid amount if the resolution applicant wishes to improve its bid. Since the 330 period of CIRP would expire on 21.01.2020 in the instant case, the COC has to complete the process within a short span of period. The resolution plan of HI bidder Shrawan Kumar Agarwal is to be returned to RP forthwith. Issues Involved:1. Approval of the Resolution Plan by the Committee of Creditors (CoC).2. Objections by M/S. PHIL Mineral Benefication & Energy Pvt. Ltd. (PHIL).3. Objections by M/S. Rituraj Steel Private Limited (H3 bidder).4. Compliance with the Insolvency and Bankruptcy Code (I&B Code) and CIRP Regulations.5. Transparency and fairness in the bidding process.Detailed Analysis:1. Approval of the Resolution Plan by the Committee of Creditors (CoC):The Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor by Punjab National Bank. The Resolution Plan submitted by Mr. Amresh Shukla, the Interim Resolution Professional (IRP), was approved by the CoC with 84.7% voting shares. The Resolution Plan was claimed to comply with all provisions of the I&B Code, 2016, and CIRP Regulations.2. Objections by M/S. PHIL Mineral Benefication & Energy Pvt. Ltd. (PHIL):PHIL objected to the approval of the Resolution Plan on three grounds:a. Discrimination in the resolution bid of the H1 bidder.b. Non-compliance with the process by the Resolution Professional and CoC.c. Non-compliance with Regulation 36E regarding the invitation of Expression of Interest (EOI).PHIL claimed to be an associate of Rare Asset Reconstruction Limited (RARL) and participated in the resolution bid. However, the Tribunal found that PHIL had no locus standi as it did not submit any independent resolution plan or offer. The objections raised by PHIL were dismissed.3. Objections by M/S. Rituraj Steel Private Limited (H3 bidder):H3 objected on two main grounds:a. Lack of access to the data room and inspection of the Corporate Debtor's premises.b. Insertion of new points in the Resolution Plan, constituting a modification in violation of Regulation 36B(5).The Tribunal found these objections to be devoid of merit, noting that H3 had accessed the data room and the modifications requested were not substantial changes. The Tribunal concluded that the RP completed the CIRP in compliance with the Code and Regulations.4. Compliance with the Insolvency and Bankruptcy Code (I&B Code) and CIRP Regulations:The Tribunal examined whether the Resolution Plan complied with Section 30(2) of the Code and found that the process followed by the RP and CoC was not transparent. The Tribunal noted that the negotiations were conducted in a closed-door manner, lacking transparency and fairness, which is against the principles of natural justice.5. Transparency and fairness in the bidding process:The Tribunal observed that the bidding process lacked transparency, with one-to-one negotiations held in closed doors. There was no clear record of the final bid amounts being disclosed to all bidders. The Tribunal emphasized the need for a fair and transparent bidding process to ensure the maximization of the value of the Corporate Debtor's assets.Orders:1. The resolution plan of the H1 bidder, Shrawan Kumar Agarwal, is to be returned to the RP.2. The RP is directed to conduct a re-bidding process within 15 days and file the re-approved resolution plan by 31st December 2019.3. All three resolution applicants (H1, H2, and H3) are directed to submit revised bids in sealed covers within 5 days.4. The RP must convene a special CoC meeting to open the sealed bids in the presence of the resolution applicants and conduct open negotiations.5. If the highest bid does not exceed Rs. 102 Crores, the CoC may choose the best offer considering feasibility and viability.6. If H3 does not submit a revised bid at or exceeding Rs. 102 Crores, it is liable to pay a cost of Rs. 20 lakhs.7. C.A. (IB) No. 1577/KB/2019 is disposed of, and C.A.(IB) No. 1650/KB/2019 is dismissed with no order as to cost.8. The revised plan approved by the CoC must be filed by 1st January 2020.9. Free copies of the order to be served via email to all resolution applicants and the RP.10. Urgent certified copies of the order to be issued upon compliance with requisite formalities.