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

NCLAT dismissed the appeal challenging the rejection of appellant's resolution plan and approval of another plan. The CoC had extended the timeline for submission of expressions of interest, but appellant's late submission on 23.07.2023 came after the CoC had already decided to vote on three existing plans on 11.07.2023. The CoC found appellant's offer of Rs.23 crores through Phoenix ARC had expired and questioned appellant's integrity, viewing the submission as an attempt to distract the ongoing resolution process. The approved resolution plan by Pinax received 97% vote share from CoC. NCLAT upheld the commercial wisdom of CoC and found no grounds for interference under Section 61(3) of IBC.

---

---

ISSUES PRESENTED and CONSIDERED

The 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 ANALYSIS

1. Extension of Timelines for EoI and Resolution Plans

Relevant 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 Appellant

Relevant 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 Group

Relevant 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 HOLDINGS

Preserve 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.

---