Committee of Creditors' rejection of resolution plan cannot be challenged directly - NCLT has exclusive jurisdiction

Gateway Investment Management Services Ltd. Versus Reserve Bank Of India & Ors.

Gateway Investment Management Services Ltd. Versus Reserve Bank Of India & Ors. - 2024:DHC:7320 Issues Involved:
1. Jurisdiction of the High Court under Article 226 of the Constitution of India.
2. Validity of the CoC's decision under the IBC framework.
3. Alternative remedy before the NCLT.
4. Code of conduct for the CoC.
5. Commercial wisdom of the CoC.

Detailed Analysis:

1. Jurisdiction of the High Court under Article 226 of the Constitution of India:
The petitioner invoked the writ jurisdiction of the High Court under Article 226, seeking several reliefs, including the development of a framework under the Banking Regulation Act, 1949, and the initiation of a fresh voting process on the Resolution Plan. The Court, however, emphasized that the petitioner has an alternative and efficacious remedy before the NCLT, which is the appropriate forum to address grievances related to the CoC's decision.

2. Validity of the CoC's decision under the IBC framework:
The petitioner claimed that its bid, being the highest in terms of monetary value and net present value, was arbitrarily rejected by the CoC. The petitioner argued that the CoC exhibited a complete lack of 'commercial wisdom' by not accepting its bid, which offered a higher value compared to the Successful Resolution Applicant (SRA). The petitioner relied on the decision in Kunwar Sachdev v. IDBI Bank & Ors., highlighting the fiduciary duties of the CoC and the need for a code of conduct ensuring fairness and objectivity in decision-making.

3. Alternative remedy before the NCLT:
The Court reiterated that the Adjudicating Authority (NCLT) alone has the jurisdiction to regulate the conduct of the CoC and adjudicate upon the resolution plan. The NCLT maintains a supervisory role over the entire CIRP proceedings and is empowered under Section 60 of the IBC to take action on any issue relating to insolvency proceedings. The Court emphasized that the petitioner should approach the NCLT to challenge the CoC's decision.

4. Code of conduct for the CoC:
The petitioner argued for the necessity of an effective code of conduct for the CoC, based on principles of integrity, objectivity, professional competence, due care, and confidentiality. The Court referred to the guidelines for the CoC framed by the IBBI, which require CoC members to follow relevant provisions of the Code, maintain integrity and objectivity, and disclose any potential conflicts of interest.

5. Commercial wisdom of the CoC:
The respondents contended that the CoC's decision, taken in its 'commercial wisdom,' should not be interfered with by the Court. They argued that the IBC is a complete Code, and the CoC's decision, after thorough deliberations, favored the SRA's plan, which envisaged a total payment of Rs. 99 crores within 30 days. The Court referred to the Supreme Court's decision in M.K. Rajagopalan v. Dr. Periasamy Palani Gounder, which upheld the primacy of the CoC's commercial wisdom, provided the decision is well-considered and based on all relevant information.

Conclusion:
The High Court dismissed the writ petition, granting the petitioner liberty to approach the NCLT. The Court underscored that the NCLT is the appropriate forum to address the petitioner's grievances and ensure that the CoC functions according to the legislative mandate of the IBC. The Court also noted that the CoC's decision would be considered by the NCLT in a just and expedient manner, potentially allowing "Open Court Bidding" if deemed fit.