Tribunal Rejects Deccan's Plan, Orders Fresh Bids to Prevent Liquidation

The Tribunal rejected Deccan's resolution plan due to misrepresentation, non-disclosure of material facts, and unviability based on new information. The Committee of Creditors (CoC) was upheld in invoking the Bid Bond Guarantee, but unable to compel Deccan to implement the plan. Fresh bids were ordered to prevent liquidation of the Corporate Debtor and explore other resolution options.

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Issues Involved:
1. Misrepresentation and/or mutual mistake of fact in the resolution plan.
2. Alleged non-disclosure of material facts by the Resolution Professional.
3. Viability and feasibility of the resolution plan based on new information.
4. Invocation of Bid Bond Guarantee by the Committee of Creditors (CoC).
5. Legal obligations and duties of the Resolution Professional.
6. The role of the Information Memorandum in the Corporate Insolvency Resolution Process (CIRP).
7. Impact of the non-availability of land for the installation of a 12,500-ton press.
8. The authority of the Adjudicating Authority under the Insolvency and Bankruptcy Code (IBC) to compel specific performance of a resolution plan.
9. The invocation of fresh bids and the potential liquidation of the Corporate Debtor.

Detailed Analysis:

1. Misrepresentation and/or mutual mistake of fact in the resolution plan:
Deccan Value Investors L.L.P. and D.V.I. PE (Mauritius) Ltd. (collectively ‘Deccan’) filed an application under section 60(5) of the IBC seeking cancellation of the resolution plan process due to alleged misrepresentation and/or mutual mistake of fact. Deccan claimed that the information provided in the virtual data room, particularly regarding the production capabilities of the Corporate Debtor, was significantly at variance from the actual data discovered during site visits and meetings with the Resolution Professional and the management of the Corporate Debtor.

2. Alleged non-disclosure of material facts by the Resolution Professional:
Deccan alleged that the Resolution Professional failed to disclose material facts, including the actual production capacity and the condition of the Corporate Debtor's machinery. Deccan argued that this non-disclosure vitiated the resolution plan due to fraud, non-disclosure, and misrepresentation of facts. The Resolution Professional contended that all information provided was based on the data available at the time and that it was the responsibility of Deccan to conduct due diligence.

3. Viability and feasibility of the resolution plan based on new information:
Deccan argued that the new information obtained post-submission of the resolution plan, including the actual production capacity being much lower than represented, rendered the resolution plan unviable and unfeasible. The Tribunal noted the significant discrepancy between the represented production capacity (210,747 MTPA), the projected capacity in the resolution plan (110,000 MTPA), and the actual capacity (approx. 66,000 MTPA). This discrepancy undermined the viability of the resolution plan.

4. Invocation of Bid Bond Guarantee by the Committee of Creditors (CoC):
The CoC invoked the Bid Bond Guarantee submitted by Deccan due to Deccan's failure to provide the performance guarantee within the stipulated time. The Tribunal upheld the CoC's right to invoke the Bid Bond Guarantee as per the terms of the Process Note, Bid Bond Guarantee, and Letter of Intent. However, the Tribunal also recognized that the invocation of the Bid Bond Guarantee was a penal action and that the CoC could not force Deccan to implement the resolution plan after such invocation.

5. Legal obligations and duties of the Resolution Professional:
The Tribunal emphasized the statutory duties of the Resolution Professional to act fairly, reasonably, and objectively, and to provide the most updated and accurate information to all stakeholders. The Tribunal referred to the Report of the Bankruptcy Law Reforms Committee, which outlines the role of the Resolution Professional in managing the negotiation process and ensuring equality of information among all participants.

6. The role of the Information Memorandum in the Corporate Insolvency Resolution Process (CIRP):
The Tribunal highlighted the importance of the Information Memorandum in providing accurate and comprehensive information to potential resolution applicants. The Tribunal found that the Resolution Professional failed to meet this obligation by uploading the misleading 2016 MM Report in the virtual data room, which was a key document relied upon by Deccan in formulating its resolution plan.

7. Impact of the non-availability of land for the installation of a 12,500-ton press:
The Tribunal noted that the non-availability of land for the installation of the 12,500-ton press, due to the initiation of CIRP against Clover Forgings and Machining Pvt. Ltd., further undermined the feasibility of Deccan's resolution plan. This issue compounded the problems arising from the misrepresented production capacity.

8. The authority of the Adjudicating Authority under the Insolvency and Bankruptcy Code (IBC) to compel specific performance of a resolution plan:
The Tribunal held that the IBC does not confer the power on the Adjudicating Authority to compel specific performance of a resolution plan by an unwilling resolution applicant. The Tribunal emphasized that only a viable and lawful resolution plan should be implemented by a willing resolution applicant.

9. The invocation of fresh bids and the potential liquidation of the Corporate Debtor:
Given the issues with the resolution plan and the unwillingness of Deccan to proceed, the Tribunal rejected the application for approval of the resolution plan and ordered the invitation of fresh bids. The Tribunal directed the Resolution Professional and the CoC to invite fresh offers within 21 days and to take a final decision within two weeks thereafter, to prevent the liquidation of the Corporate Debtor and to explore other potential resolution applicants.

Conclusion:
The Tribunal rejected the resolution plan of Deccan due to misrepresentation, non-disclosure of material facts, and the unviability of the plan based on new information. The Tribunal upheld the CoC's right to invoke the Bid Bond Guarantee but recognized that the CoC could not force Deccan to implement the resolution plan after such invocation. The Tribunal ordered the invitation of fresh bids to prevent the liquidation of the Corporate Debtor and to explore other potential resolution applicants.

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