2025 (2) TMI 806 - AT - IBC

NCLAT upholds CoC decision rejecting late resolution plan submission after voting deadline under Section 61(3) IBC

Sanjeev Agarwal & Anr. Versus Avishek Gupta & Ors.

NCLAT dismissed the appeal challenging the rejection of appellant's resolution plan and approval of another plan. The CoC had extended the timeline for ... Extension of timeline for submission of Expressions of Interest (EoI) and Resolution Plans by the Committee of Creditors (CoC) - violation of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - approval of Resolution Plan - HELD THAT:- The present is a case where after issuance of Form-G on 23.10.2022, it was noticed by the CoC that after submission of EoI, some person who had not submitted EoI, whether fresh Form-G be issued or timeline be extended, which was deliberated in the 11th CoC Meeting held on 30.01.2023. The discussion in the Meeting of the CoC clearly indicate that the proposal submitted by Appellant was discussed and considered on merits. It was noticed that a letter from Phoenix ARC is provided, which indicate that they are offering non-binding bid of Rs.23 crores for the acquisition of debt which has already expired on 15.03.2023. The CoC was also of the view that the action of Appellant was with the intention to distract the resolution in progress and raises enough doubt on his integrity and intentions of submitting a plan. Thus, the offer of the Appellant was not agreed to proceed with further. The Appellant’s submission that his Plan was not considered is not correct and against the records. The present is a case where CIRP period came to an end and the RP has taken extension in the CIRP and the decision was already taken by the CoC to vote on the three Resolution Plans in its Meeting dated 11.07.2023. The request by the Appellant was made on 13.07.2023 and thereafter the Plan was submitted on 23.07.2023. The CoC had deliberated and discussed the Resolution Plan of the Appellant and did not accept the request to proceed any further with the Plan of the Appellant. The submission of the Appellant that Plan submitted by the Appellant was not considered by the CoC, cannot be accepted. The CoC had already decided to vote on the Plans, which Plans were voted from 19.07.2023 to 11.08.2023 and Plan of Pinax having been approved with the majority of 97% vote share, there are no good ground to interfere with the commercial wisdom of the CoC approving the Resolution Plan. Conclusion - The Adjudicating Authority having noticed entire submissions and has found that there is no infirmity in the decision of the CoC in not accepting the Resolution Plan of the Appellant and deciding to vote on the Resolution Plans, there are no error in the order of the Adjudicating Authority rejecting IA No.1325/KB/2023. The Resolution Plan of Pinax, which was approved with 97% vote share of the CoC has been rightly approved by the Adjudicating Authority by order dated 20.12.2024, which order need no interference, since no ground has been made out within meaning of Section 61(3) of the IBC. Appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:1. Whether the process of extending the timeline for submission of Expressions of Interest (EoI) and Resolution Plans by the Committee of Creditors (CoC) was in violation of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.2. Whether the Appellant, a Suspended Director of the Corporate Debtor, was unfairly denied the opportunity to submit a Resolution Plan despite the Corporate Debtor being classified as a Micro, Small, and Medium Enterprise (MSME).3. Whether the Adjudicating Authority erred in rejecting the Appellant's application for setting aside the entire Corporate Insolvency Resolution Process (CIRP) and approving the Resolution Plan submitted by Pinax Group.ISSUE-WISE DETAILED ANALYSIS1. Extension of Timelines for EoI and Resolution PlansRelevant Legal Framework and Precedents: The Appellant argued that the CoC's decision to extend the timeline for submission of EoIs and Resolution Plans without issuing a fresh Form-G was contrary to Regulations 36A and 39(1B) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Regulation 36A outlines the procedure for inviting EoIs, while Regulation 39(1B) stipulates that Resolution Plans submitted after the specified timeline should not be considered.Court's Interpretation and Reasoning: The Tribunal found that the CoC had the right to extend timelines as per the clauses in the Invitation for Expression of Interest and Request for Resolution Plan, which allowed the Resolution Professional (RP) to extend the last date with the CoC's consent. The Tribunal referenced case law supporting the CoC's discretion to condone delays in submission of Resolution Plans.Key Evidence and Findings: The Tribunal noted that the CoC, in its meetings, had discussed and agreed upon extending the timeline to maximize value and expedite the process. This decision was made in the presence of the Appellant, who did not submit any EoI even after the timeline was extended.Application of Law to Facts: The Tribunal concluded that the extension of timelines was conducted within the legal framework and that the Appellant's failure to submit an EoI during the extended period negated any grievance regarding the process.Treatment of Competing Arguments: The Appellant's argument that the process was contrary to regulations was countered by the CoC's adherence to procedural clauses allowing timeline extensions.Conclusions: The Tribunal upheld the CoC's decision to extend the timeline, finding no violation of the Insolvency and Bankruptcy Code (IBC) regulations.2. Denial of Opportunity to Submit a Resolution Plan by the AppellantRelevant Legal Framework and Precedents: The Appellant contended that as a Suspended Director of an MSME, he was entitled to submit a Resolution Plan. The Tribunal considered the CoC's discretion in accepting or rejecting Resolution Plans based on commercial wisdom.Court's Interpretation and Reasoning: The Tribunal observed that the Appellant participated in CoC meetings and was aware of the process but did not express any interest in submitting a Resolution Plan until after the voting process had commenced.Key Evidence and Findings: The CoC meetings' minutes revealed that the Appellant's proposal was considered but found lacking in financial backing and was perceived as an attempt to delay the CIRP.Application of Law to Facts: The Tribunal noted that the CoC's decision not to accept the Appellant's proposal was based on valid concerns about the proposal's viability and timing.Treatment of Competing Arguments: The Tribunal acknowledged the Appellant's right to submit a plan but emphasized the CoC's authority to reject proposals not meeting their criteria.Conclusions: The Tribunal concluded that the Appellant's proposal was rightfully rejected by the CoC, which acted within its commercial discretion.3. Approval of the Resolution Plan by Pinax GroupRelevant Legal Framework and Precedents: The Appellant challenged the approval of the Resolution Plan by Pinax Group, arguing procedural irregularities in the CIRP.Court's Interpretation and Reasoning: The Tribunal found that the CoC's decision to approve the Resolution Plan was based on a 97% majority vote, reflecting their commercial wisdom.Key Evidence and Findings: The Tribunal highlighted that the CoC had thoroughly deliberated on the Resolution Plans and that the Appellant's proposal was considered but found inadequate.Application of Law to Facts: The Tribunal determined that the CoC's approval of the Pinax Group's Resolution Plan was consistent with the IBC's objectives and regulations.Treatment of Competing Arguments: The Tribunal dismissed the Appellant's claims of procedural impropriety, emphasizing the CoC's adherence to the legal process.Conclusions: The Tribunal upheld the Adjudicating Authority's approval of the Resolution Plan, finding no grounds for interference.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'The CoC was fully entitled to consider the Plan and it being not found viable, no error has been committed by the CoC.'Core Principles Established: The Tribunal reinforced the principle that the CoC's commercial wisdom in approving or rejecting Resolution Plans is paramount and should not be interfered with unless there is a material irregularity.Final Determinations on Each Issue: The Tribunal dismissed the Appellant's appeals, affirming the CoC's decisions and the Adjudicating Authority's orders. The Resolution Plan by Pinax Group was upheld as valid and compliant with the IBC.