Resolution applicant's bid need not match liquidation value under Clause 35 IBBI Regulations 2016

SC held that NCLAT exceeded jurisdiction by directing matching of liquidation value in resolution plan. Court ruled no provision in IBC or regulations requires resolution applicant's bid to match liquidation value under Clause 35 of IBBI Regulations 2016. Liquidation valuation assists Committee of Creditors' decision-making but once CoC approves resolution plan, Adjudicating Authority must only verify compliance with Section 30(2) and (4) requirements. Final resolution plan decisions remain within CoC's commercial wisdom. Adjudicating Authority's order dated 21st January 2019 was affirmed and appeal allowed.

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Issues Involved:
1. Approval of the resolution plan by the Adjudicating Authority.
2. Compliance with Section 30(2) of the Insolvency and Bankruptcy Code (IBC).
3. The requirement for the resolution plan to match the liquidation value.
4. The treatment of operational creditors in the resolution plan.
5. The jurisdiction of the NCLAT in modifying the resolution plan.
6. The applicability of Section 12-A of the IBC for withdrawal of the resolution plan by the successful Resolution Applicant.
7. Allegations of non-cooperation in asset handover by the Resolution Professional.

Issue-wise Detailed Analysis:

1. Approval of the resolution plan by the Adjudicating Authority:
The Adjudicating Authority (NCLT) approved the resolution plan submitted by Maharashtra Seamless Ltd. (MSL) on 21st January 2019. The resolution plan included an upfront payment of Rs. 477 crores and was deemed to meet all the requirements of Section 30(2) of the Insolvency and Bankruptcy Code (IBC). The plan was approved by the financial creditors with 87.10% voting shares.

2. Compliance with Section 30(2) of the Insolvency and Bankruptcy Code (IBC):
The NCLT found that the resolution plan complied with Section 30(2) of the IBC. The Resolution Professional certified that the plan was in conformity with the provisions of Section 30(2). The NCLT noted that the plan was approved by the Committee of Creditors (CoC) with a majority vote and that the revised liquidation value had no role in the approval process.

3. The requirement for the resolution plan to match the liquidation value:
The NCLAT directed MSL to increase the upfront payment to Rs. 597.54 crores to match the average liquidation value. However, the Supreme Court held that there is no requirement under the IBC or its regulations for the resolution plan to match the liquidation value. The Court emphasized that the commercial wisdom of the CoC should prevail, and the Adjudicating Authority should only ensure compliance with Section 30(2) of the IBC.

4. The treatment of operational creditors in the resolution plan:
The NCLAT found that the resolution plan discriminated against operational creditors by offering them a lower percentage of their dues compared to financial creditors. However, MSL agreed to pay operational creditors at the same percentage as financial creditors. The Supreme Court noted that the operational creditors had not challenged the resolution plan and that the issue was academic.

5. The jurisdiction of the NCLAT in modifying the resolution plan:
The Supreme Court held that the NCLAT exceeded its jurisdiction by directing MSL to increase the upfront payment. The Court reiterated that the Adjudicating Authority should not reassess a resolution plan approved by the CoC if it complies with Section 30(2) of the IBC. The commercial wisdom of the CoC should be respected.

6. The applicability of Section 12-A of the IBC for withdrawal of the resolution plan by the successful Resolution Applicant:
The Supreme Court held that Section 12-A of the IBC, which allows withdrawal of applications admitted under Sections 7, 9, or 10 with the approval of 90% of the CoC, does not apply to a successful Resolution Applicant. MSL's application for withdrawal of the resolution plan and refund of the deposited amount was dismissed.

7. Allegations of non-cooperation in asset handover by the Resolution Professional:
MSL alleged that the Resolution Professional failed to take possession of the assets of the corporate debtor and hand them over to MSL. The Supreme Court did not engage in determining this factual issue, as it was not addressed by the NCLAT. The Court directed the Resolution Professional to take physical possession of the assets and hand them over to MSL within four weeks, with assistance from police and administrative authorities if necessary.

Conclusion:
The Supreme Court allowed the appeal of MSL, set aside the NCLAT's order, and affirmed the NCLT's approval of the resolution plan. MSL was directed to remit an additional sum to the operational creditors. The Court dismissed MSL's application for withdrawal of the resolution plan and refund of the deposited amount. The Resolution Professional was directed to take possession of the assets and hand them over to MSL within four weeks.

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