NCLAT sets aside order directing resolution plan back to Committee of Creditors for reconsideration

NCLAT Principal Bench set aside the Adjudicating Authority's order directing matter back to Committee of Creditors (CoC) for reconsideration of resolution plans. The Tribunal held that remanding to CoC was contrary to its earlier direction dated 09.02.2023, which had disapproved sending matter to CoC and instead directed the Adjudicating Authority to examine plan approval application within three months. NCLAT ruled that prolonging proceedings by seeking CoC's opinion served no purpose and set aside all consequential actions including subsequent CoC meetings. Appeal was allowed.

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Issues Involved:
1. Approval of the Resolution Plan by the CoC.
2. Adjudicating Authority's direction to accept new Resolution Plans.
3. Impact of the Rainbow Papers judgment on the Resolution Plan.
4. Convening of the CoC meeting to discuss the implications of the Rainbow Papers judgment.
5. Adjudicating Authority's reconsideration of the Resolution Plan.

Summary:

1. Approval of the Resolution Plan by the CoC:
The Appellant, a Successful Resolution Applicant, had its Resolution Plan approved by the CoC on 05.11.2020, and a letter of intent was issued on 07.11.2020. The Resolution Professional filed an application for approval of the Resolution Plan on 26.11.2020.

2. Adjudicating Authority's direction to accept new Resolution Plans:
The Adjudicating Authority, on 06.09.2022, allowed the Resolution Professional to accept new Resolution Plans from unsuccessful applicants and previously non-participating entities. This order was challenged and set aside by the Tribunal on 09.02.2023, which held that after CoC's approval, the matter could not be reopened for fresh Resolution Plans.

3. Impact of the Rainbow Papers judgment on the Resolution Plan:
The Adjudicating Authority, on 28.11.2023, directed the Resolution Professional to convene a CoC meeting to appraise members of the Rainbow Papers judgment and its implications on the Resolution Plan. The Appellant contended that the impact of the Rainbow Judgment was already explained and that the Adjudicating Authority should have considered the application as directed by the Tribunal.

4. Convening of the CoC meeting to discuss the implications of the Rainbow Papers judgment:
The CoC meeting held on 13.12.2023 recorded the views of its members regarding the Rainbow Papers judgment. Most members agreed with the opinion given by the Resolution Professional's legal advisor, while some suggested fresh voting or inviting new plans.

5. Adjudicating Authority's reconsideration of the Resolution Plan:
The Tribunal noted that the Adjudicating Authority's direction to take the matter before the CoC was not approved and that it should decide the plan approval application in accordance with the law. The impugned order and all consequential actions, including the CoC meeting, were set aside. The Adjudicating Authority was directed to decide the application expeditiously, preferably within one month from the next fixed date.

Conclusion:
The appeal was allowed, setting aside the Adjudicating Authority's impugned order and subsequent actions. The matter was remitted to the Adjudicating Authority to decide the application I.A. No. 851 of 2020 in accordance with the law, without expressing any opinion on its merits.

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