Resolution applicant cannot resubmit plan after initial withdrawal and CIRP timeline expiry

The NCLAT Chennai set aside the NCLT Bengaluru order that directed the Resolution Professional to place respondents' resolution plan before the Committee of Creditors. The respondents had initially expressed inability to submit their resolution plan in November 2019 but attempted to resubmit after five months, well beyond the prescribed CIRP timeline. The NCLAT held that respondents cannot be considered as Prospective Resolution Applicants since they backed out initially and sought belated entry beyond the CIRP period. The tribunal found the adjudicating authority exceeded jurisdiction by interfering with the Committee of Creditors' commercial wisdom without establishing any material irregularity or law violation. The company appeal was allowed.

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Issues Involved:
1. Whether the Respondents' resolution plan should be considered despite being submitted after the prescribed timeline.
2. Whether the Adjudicating Authority exceeded its jurisdiction by directing the RP to place the Respondents' resolution plan before the CoC.
3. Whether the Respondents were justified in submitting their resolution plan late due to the pandemic and lockdown.
4. Whether the commercial wisdom of the CoC can be interfered with by the Adjudicating Authority.

Issue-wise Detailed Analysis:

1. Whether the Respondents' resolution plan should be considered despite being submitted after the prescribed timeline:
The Appellant argued that the Respondents' resolution plan should not be considered as it was submitted after the prescribed timeline. The Respondents had initially shown interest but later backed out citing the non-availability of audited financial statements. The last date for submission of plans was extended to 07.12.2019, but the Respondents submitted their plan on 27.05.2020, which was more than five months late. The RP rejected this plan, stating that the CIRP period had already expired on 16.03.2020, and the plan was not submitted within the stipulated timeline.

2. Whether the Adjudicating Authority exceeded its jurisdiction by directing the RP to place the Respondents' resolution plan before the CoC:
The Appellant contended that the Adjudicating Authority exceeded its jurisdiction by directing the RP to place the Respondents' resolution plan before the CoC. The Adjudicating Authority's role is limited to ensuring compliance with Section 30(2) of the IBC and cannot interfere with the commercial decisions of the CoC. The Supreme Court in "Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. (2020) 8 SCC 531" held that the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the CoC. The Tribunal found that the Adjudicating Authority misinterpreted the Supreme Court's judgment and unjustly directed the RP to consider the Respondents' plan.

3. Whether the Respondents were justified in submitting their resolution plan late due to the pandemic and lockdown:
The Respondents argued that their delay in submitting the resolution plan was justified due to the pandemic and lockdown. They cited the Supreme Court's order extending the limitation period post 14.03.2020 and Regulation 40C of the CIRP Regulations, which excluded the lockdown period from the CIRP timeline. However, the Tribunal referred to the Supreme Court's judgment in "Ebix Singapore Pvt. Ltd. Vs. Committee of Creditors of Educom Solutions Ltd. & Anr. (2021) SCC Online SC 707," which clarified that the delay in CIRP due to lockdown cannot be condoned. The Tribunal held that the Respondents were not justified in submitting their plan late.

4. Whether the commercial wisdom of the CoC can be interfered with by the Adjudicating Authority:
The Appellant argued that the Adjudicating Authority's direction to reconsider the Respondents' resolution plan amounted to judicial review of the CoC's commercial wisdom. The Supreme Court in "K. Sashidhar Vs. Indian Overseas Bank (2019) 12 SCC 150" and "Pratap Technocrats (P) Ltd v Monitoring Committee of Reliance Infratel Ltd (2021) SCC Online SC 569" held that the commercial decisions of the CoC are not open to judicial review by the Adjudicating Authority. The Tribunal found that the Adjudicating Authority's order interfered with the CoC's commercial wisdom and was thus unsustainable.

Conclusion:
The Tribunal concluded that the Adjudicating Authority exceeded its jurisdiction by directing the RP to place the Respondents' resolution plan before the CoC. The Respondents' delay in submitting their plan was not justified, and the commercial wisdom of the CoC should not be interfered with. The Tribunal set aside the Adjudicating Authority's order and upheld the RP's decision to reject the Respondents' plan. The appeal was allowed, and the interim stay granted by the Tribunal was made absolute.

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