NCLAT upholds resolution plan approval despite equity allotment and NPV calculation challenges by unsuccessful bidder

NCLAT dismissed appeal challenging resolution plan approval. Appellant contested non-allocation of marks for equity allotment to financial creditors and alleged mis-calculation of successful bidder's NPV. NCLAT held appellant's equity offer of Rs.200 crores failed to meet minimum Rs.250 crores threshold per evaluation matrix, and CoC never accepted equity allotment option. Regarding NPV calculation, tribunal ruled CoC's commercial wisdom in evaluating resolution plans is paramount and cannot be challenged by other applicants absent Section 30(2) violations. Adjudicating Authority's approval of resolution plan upheld.

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Issues Involved:

1. Non-allocation of marks on equity allotment to Financial Creditors.
2. Mis-calculation of the Net Present Value (NPV) of the Respondent No.2's financial proposal.

Summary:

Issue 1: Non-allocation of marks on equity allotment to Financial Creditors

The Appellant contended that the Adjudicating Authority erred in rejecting IA No.413/KB/2023 by not allocating marks for equity allotment to Financial Creditors. The Appellant argued that their Resolution Plan dated 18.01.2023 offered equity allotment, entitling them to five marks, which would have made them the highest bidder. The Tribunal noted that the final Resolution Plan submitted by the Appellant initially on 14.01.2023 did not contain any clause of equity allotment. It was only on 18.01.2023 that a clause was added, providing for the CoC to elect for equity allotment. As per the Challenge Process Document, the financial proposal during the Challenge Process shall be unconditional and irrevocable and cannot be modified subsequently. Since the equity allotment clause was added after the Challenge Process, it could not be considered. Moreover, the CoC never opted to accept the equity allotment offered by the Appellant. Therefore, the non-allocation of marks for equity allotment was in accordance with the Process Document and evaluation matrix, and the Adjudicating Authority did not commit any error in rejecting IA No.413/KB/2023.

Issue 2: Mis-calculation of the NPV of the Respondent No.2's financial proposal

The Appellant argued that the NPV calculation of the Respondent No.2 was incorrect and not in accordance with the evaluation matrix. They contended that the security receipts submitted by Respondent No.2 should have been discounted at 60% as per the evaluation matrix. The Tribunal examined the financial proposal submitted by Respondent No.2, which included security receipts backed by committed NCDs. The Challenge Process Document stipulated that any instrument with a fixed committed repayment schedule shall be referred to as 'Identified Criteria' for the Challenge Process. The CoC and its advisors calculated the NPV of Respondent No.2, treating the security receipts as having a committed repayment schedule, thus not requiring a 60% discount rate. The determination of NPV by the CoC and its advisors was binding on the eligible RAs and could not be challenged. The Tribunal held that the CoC and its advisors did not commit any error in determining the NPV of Respondent No.2. The commercial wisdom of the CoC in approving the Resolution Plan is paramount and not justiciable. The Tribunal found no grounds to interfere with the decision of the Adjudicating Authority rejecting IA No.557/KB/2023.

Conclusion:

The Tribunal concluded that the non-allocation of marks for equity allotment to the Appellant was in accordance with the Process Document and evaluation matrix. The determination of the NPV of Respondent No.2 was correct and in line with the evaluation matrix and Process Document. The commercial wisdom of the CoC in approving the Resolution Plan is not subject to judicial review. The Appeal was dismissed.

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