NCLAT upholds resolution plan approval, rejects appeal seeking delay for studying modifications

The NCLAT dismissed an appeal challenging the approval of a resolution plan. The appellant sought additional time to study modifications to the resolution plan, but the tribunal found no procedural breach or manifest error warranting delay. The modifications were communicated before the CoC meeting and primarily affected home-buyers, not the appellant. The RP provided extended voting time (72 hours vs 24 hours) for financial creditors. The tribunal emphasized that unwarranted delays deplete corporate debtor assets and frustrate CIRP objectives. With the resolution plan approved by over 66% CoC vote share and no Section 30(2) IBC non-compliance found, the adjudicating authority's approval was upheld.

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Issues Involved:

1. Whether the Resolution Professional (RP) conducted the Corporate Insolvency Resolution Process (CIRP) in an arbitrary manner.
2. Whether the Adjudicating Authority erred in approving the resolution plan.
3. Whether the assignment of securities in the resolution plan is tenable and compliant with the law.

Summary:

1. Allegation of Arbitrary Conduct by RP:
The Appellant, Punjab National Bank (PNB), contended that the RP did not provide sufficient time or necessary documents to analyze the resolution plan submitted by D. Konda (DK). The RP published Form G and invited Expressions of Interest (EoI), receiving five EoIs. The RP extended the last date for submission of the resolution plan and sought a 90-day extension for the CIRP period, which was granted. DK submitted the resolution plan, which was approved by the Committee of Creditors (CoC) with a 71.75% vote share. The Appellant sought more time to analyze the plan, which was denied. The RP proceeded with the voting, and the plan was approved. The Appellant filed IA 2304/2022 seeking recall of the e-voting results, alleging that the plan was modified and required fresh consideration. This IA was dismissed by the Adjudicating Authority.

2. Approval of the Resolution Plan by Adjudicating Authority:
The Appellant argued that the resolution plan was approved in an arbitrary manner and violated Section 30(2) of the Insolvency and Bankruptcy Code (IBC). The Adjudicating Authority noted that the homebuyers, holding a majority vote share, did not want any further delay. The RP had communicated the minor modifications in the resolution plan to all CoC members before the 6th CoC meeting. The RP allowed more time for voting by financial creditors other than homebuyers. The Adjudicating Authority found no irregularity in the RP's conduct and approved the resolution plan, noting that it conformed to Section 30(2) of the IBC and Regulations 37 and 38 of the CIRP Regulations.

3. Tenability of Assignment of Securities in the Resolution Plan:
The Appellant contended that the assignment of securities in the resolution plan was contrary to Section 128 of the Indian Contract Act, 1872, and would adversely affect recovery proceedings from guarantors. Clause 6.5(ii) and (vii) of the resolution plan provided for the unconditional release and transfer of all securities to the Corporate Debtor. The Tribunal referred to the statutory construct of the IBC and Regulation 37 of the CIRP Regulations, which allows for the modification or satisfaction of any security interest in the resolution plan. The Tribunal found that the assignment of securities did not suffer from any infirmity or arbitrariness and was compliant with Section 30(2)(e) of the IBC. The Tribunal dismissed the appeal, finding no error in the Adjudicating Authority's decision to approve the resolution plan.

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