2025 (1) TMI 228 - AT - IBC

Resolution applicant loses rights after failing to challenge revaluation order for intangible assets

The NCLAT dismissed an appeal where the appellant sought reconsideration of their revised resolution plan after fresh valuation of intangible assets was ... Direction for fresh valuation of intangible assets after the approval of a Resolution Plan - seeking direction to permit the revised Resolution Plan to be reconsidered which has been rightly rejected by the Adjudicating Authority noticing the submissions of the Resolution Professional that it is open for the Appellant to submit Resolution Plan in pursuance of fresh Form G - HELD THAT:- There is no dispute between the parties that initially Resolution Plan filed by the Appellant was approved on 30.12.2019 and Resolution Professional has also filed IA No.102 of 2020 for approval of the Resolution Plan. Unsecured financial creditor filed an IA No.1434 of 2020 seeking direction for valuation of intangible assets of the corporate debtor. It was also prayed that the Resolution Plan be sent back to the CoC for reconsideration. IA No.1434 of 2020 was allowed by the Adjudicating Authority on 04.08.2023 copy of which has been filed as Annexure A-6. Adjudicating Authority issued direction for valuation of intangible assets. It is relevant to notice that the order dated 11.03.2024 was not challenged by any stakeholders including the Appellant. The order dated 11.03.2024 dismissing IA No.102 of 2020 for approval of the Resolution Plan as infructuous and the Adjudicating Authority having directed for issuance of Form G and the said order having not been challenged, the order dated 11.03.2024 has become final and it is not open for the Appellant to now claim any right on the basis of its earlier Resolution Plan. The order impugned noticing the statement of Resolution Professional that Appellant can very well participate in the process has rightly observed that the grievance of the Appellant stands addressed and the IA has become meaningless. As noted above, the orders passed by the Adjudicating Authority dated 04.08.2023 directing for revaluation and placing the plan of the Appellant for voting was never challenged. After the order dated 04.08.2023, Appellant has submitted its revised Resolution Plan which was considered and was not approved by the CoC which is clear from 22nd CoC meeting. Direction to issue fresh Form G was in consequence of non-approval of the Resolution Plan of the Appellant - Appellant was free to participate in the fresh process initiated by issuance of Form G on 11.04.2024. Conclusion - i) The Intangible Assets of the Corporate Debtor shall be valued and categorized separately. ii) The CoC's commercial wisdom in rejecting the revised offer was upheld as a legitimate exercise of its discretion. Appeal dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:- Whether the Adjudicating Authority erred in directing a fresh valuation of intangible assets after the approval of a Resolution Plan.- Whether the Appellant was entitled to have its revised Resolution Plan reconsidered by the Committee of Creditors (CoC) after the revaluation.- Whether the Adjudicating Authority exceeded its jurisdiction by directing the issuance of a fresh Form G and dismissing the IA for approval of the Resolution Plan as infructuous.- Whether the Appellant's rights were infringed when the CoC rejected its revised offer and the Adjudicating Authority dismissed its application for reconsideration.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Fresh Valuation of Intangible Assets- Relevant legal framework and precedents: The Insolvency and Bankruptcy Code (IBC) provides the framework for the Corporate Insolvency Resolution Process (CIRP), including the valuation of assets. The Code requires a fair and accurate valuation to ensure equitable treatment of creditors.- Court's interpretation and reasoning: The court noted that the initial valuation did not separately account for intangible assets, which necessitated a revaluation to ensure a fair process.- Key evidence and findings: The Adjudicating Authority observed that intangible assets were not valued separately, leading to the decision to engage a valuer for this purpose.- Application of law to facts: The court found that the revaluation was justified to correct the oversight and meet the ends of justice.- Treatment of competing arguments: The Appellant argued that the revaluation was impermissible post-approval, but the court held that it was necessary for a fair process.- Conclusions: The court upheld the revaluation as a necessary corrective measure.Issue 2: Reconsideration of Revised Resolution Plan- Relevant legal framework and precedents: The IBC allows the CoC to consider and vote on Resolution Plans based on their commercial wisdom.- Court's interpretation and reasoning: The court found that the CoC had the discretion to reject the revised offer, as it did not find a substantial increase in the plan value.- Key evidence and findings: The CoC minutes indicated that the revised offer was not substantial enough to warrant a vote.- Application of law to facts: The court applied the principle that the CoC's commercial wisdom is paramount in such decisions.- Treatment of competing arguments: The Appellant claimed its revised plan should have been reconsidered, but the court deferred to the CoC's decision.- Conclusions: The court concluded that the CoC acted within its rights in rejecting the revised offer.Issue 3: Issuance of Fresh Form G and Dismissal of IA- Relevant legal framework and precedents: The IBC allows for the issuance of Form G to invite new Expressions of Interest (EoI) if a Resolution Plan is not approved.- Court's interpretation and reasoning: The court found that the issuance of fresh Form G was a logical step following the CoC's rejection of the Appellant's plan.- Key evidence and findings: The Adjudicating Authority's order for fresh Form G was not challenged by the Appellant, indicating acceptance of the process.- Application of law to facts: The court applied the IBC provisions allowing for a fresh CIRP process.- Treatment of competing arguments: The Appellant argued against the dismissal of its IA, but the court held that the process had moved on with the issuance of Form G.- Conclusions: The court upheld the dismissal of the IA and the issuance of Form G as procedurally correct.Issue 4: Appellant's Rights in the CIRP- Relevant legal framework and precedents: The rights of Resolution Applicants are subject to the decisions of the CoC and the Adjudicating Authority under the IBC.- Court's interpretation and reasoning: The court found no infringement of the Appellant's rights, as it was allowed to participate in the new process.- Key evidence and findings: The statement from the Resolution Professional that the Appellant could participate in the new process addressed its concerns.- Application of law to facts: The court applied the IBC provisions ensuring fair participation in the CIRP.- Treatment of competing arguments: The Appellant's claim of rights infringement was countered by the opportunity to participate in the fresh process.- Conclusions: The court concluded that the Appellant's rights were not infringed, as it could participate in the new EoI process.3. SIGNIFICANT HOLDINGS- 'The Intangible Assets of the Corporate Debtor shall be valued and categorized separately. Hence Ordered.'- The CoC's commercial wisdom in rejecting the revised offer was upheld as a legitimate exercise of its discretion.- The issuance of fresh Form G was deemed appropriate following the CoC's decision, and the Appellant's IA was dismissed as infructuous.- The court affirmed that the Appellant could participate in the new process, ensuring no rights were infringed.- The Appeal was dismissed, upholding the decisions of the Adjudicating Authority and the CoC.