2024 (10) TMI 295 - AT - IBC

NCLAT upholds resolution plan approval despite unsuccessful bidders alleging irregularities in clarification process under Section 61(3)(ii)

Vantage Point Asset Management Pte Versus Ashish Arjunkumar Rathi & Anr. And Torrent Power Ltd Versus Ashish Arjunkumar Rathi, RP of SKS Power Generation (Chhatishgarh) Ltd. & Ors. And Jindal Power Ltd Versus Ashish Arjunkumar Rathi & Ors.

The NCLAT dismissed appeals challenging approval of a resolution plan submitted by an energy company. Unsuccessful resolution applicants alleged material ... Approval of the Resolution Plan submitted by Sarda Energy and Minerals Ltd. - material irregularity in the process by the Resolution Professional and CoC - modification in the key commercial terms of the resolution plan by the SRA (allegedly) in the garb of clarification sought by RP from the Resolution Applicants and the perversity and discrimination emanating from the same - HELD THAT:- The present is the case where CoC and RP did not grant any opportunity to Sarda to modify or amend the terms of the Resolution Plan. Hon’ble Supreme Court in Ajay Gupta’ Vs. `Pramod Kumar Sharma [2022 (6) TMI 387 - SUPREME COURT] noticed that the above was a case where question of modification of the Resolution Plan was involved hence liberty was granted to other Resolution Applicant to modify its Plan which Order was maintained. In Paragraph 13 as noted above, observation of the Hon’ble Supreme Court is “this much is clear that certain key features/stipulations of the Resolution Plan were sought to be amended by the Appellant”. Thus, the Judgment of the `Ajay Gupta’ (Supra) was in the background when Appellant sought to amend the Resolution Plan hence the liberty was granted to other Resolution Applicants also to modify its Plan in Paragraph 10. In the present case by email dated 08.05.2023 sent by the RP clarifications was sought from Sarda. It is also noticed that clarifications were also sought form Torrent, Jindal and Vantage seeking clarification of different Clauses of their respective Resolution Plan, which clarifications were sought after the decision of the CoC taken in the CoC Meeting dated 06.05.2023. The clarification asked for by the RP which is already extracted, in no manner permitted the Sarda or any other Resolution Applicant to modify the Resolution Plan. Only clarifications were sought for and no Resolution Applicant was permitted to modify its Resolution Plan. The submission of the Appellant that under the guise of clarification dated 08.05.2024, the Sarda was permitted to modify its financial proposals which was given on 19.04.2024, is rejected. No sufficient grounds have been made out within meaning of Section 61(3)(ii) of the IBC to interfere with the decision of the Adjudicating Authority approving the Resolution Plan of Sarda, in these Appeals filed by Unsuccessful Resolution Applicant. Appeal dismissed. Issues Involved:1. Approval of the Resolution Plan by the CoC and the Adjudicating Authority.2. Allegations of material irregularity in the process by the Resolution Professional and CoC.3. Claims of discrimination and unfair treatment among Resolution Applicants.4. Evaluation of the commercial wisdom of the CoC.5. Consideration of additional offers and modifications post-bidding process.Detailed Analysis:1. Approval of the Resolution Plan by the CoC and the Adjudicating Authority:The judgment primarily revolves around the approval of the Resolution Plan submitted by Sarda Energy and Minerals Ltd. (SEML), which was challenged by unsuccessful Resolution Applicants. The National Company Law Appellate Tribunal (NCLAT) reviewed the process and decisions made by the Committee of Creditors (CoC) and the Adjudicating Authority. The CoC had approved SEML's plan with a 100% vote share, and the Adjudicating Authority subsequently approved the plan. The NCLAT upheld these approvals, emphasizing the commercial wisdom of the CoC and the adherence to the Insolvency and Bankruptcy Code (IBC) and related regulations.2. Allegations of Material Irregularity in the Process:The appellants alleged material irregularity in the process, claiming that the Resolution Professional (RP) and CoC selectively permitted SEML to modify its commercial offer after the conclusion of the negotiation process. The Tribunal examined the process and found that the CoC and RP acted within their rights as per the Request for Resolution Plan (RFRP) and Process Note. The Tribunal noted that the RP had sought clarifications from all Resolution Applicants, not just SEML, and that these clarifications were necessary for assessing the feasibility and viability of the plans. The Tribunal concluded that there was no material irregularity in the process.3. Claims of Discrimination and Unfair Treatment:The appellants argued that SEML was given preferential treatment, allowing it to modify its financial offer under the guise of clarifications, which was not extended to other applicants. The Tribunal found that the RP's email seeking clarifications was sent to all applicants, and the responses did not constitute modifications to the commercial terms. The Tribunal emphasized that the CoC's decision-making process was fair and transparent, and no discrimination occurred.4. Evaluation of the Commercial Wisdom of the CoC:The judgment reiterated the principle that the commercial wisdom of the CoC is paramount and should not be interfered with by the judiciary, except on limited grounds specified in the IBC. The Tribunal noted that the CoC, comprising experienced financial institutions, was fully informed about the viability and feasibility of the proposed plans. The CoC's decision to approve SEML's plan was based on a thorough examination of all relevant factors, including financial offers and the overall feasibility and viability of the plans.5. Consideration of Additional Offers and Modifications Post-Bidding Process:The appellants contended that additional offers and modifications post-bidding should have been considered. The Tribunal rejected this argument, stating that the process was conducted according to the RFRP and Process Note, which did not obligate the CoC to accept the highest financial offer. The Tribunal also noted that post-approval offers, such as Vantage's increased offer, were not permissible and were rightly rejected by the CoC.In conclusion, the Tribunal dismissed the appeals, affirming the decisions of the CoC and the Adjudicating Authority, and upheld the approval of SEML's Resolution Plan. The judgment emphasized adherence to the IBC framework and the limited scope of judicial intervention in the commercial decisions of the CoC.