NCLAT upholds Committee of Creditors' rejection of late resolution plan under Regulation 36B(6) and 39(1B)

The NCLAT allowed an appeal challenging the Adjudicating Authority's direction to the Committee of Creditors regarding a late-submitted resolution plan. The CoC had extended the submission deadline to 14.02.2024 as the final extension, but Respondent's plan was received and considered on 16.02.2024. The CoC properly rejected the late plan and conducted a challenge process on 23.04.2024, declaring the appellant as H1 bidder. The NCLAT held that the CoC acted within statutory regulations under Regulation 36B(6) and 39(1B) of IBBI Regulations 2016, exercising commercial wisdom in rejecting the late submission. The Adjudicating Authority erred in interfering with the CoC's decision without sufficient grounds.

---

---

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the Adjudicating Authority erred in directing the Committee of Creditors (CoC) to consider a resolution plan submitted after the specified deadline.
• Whether the CoC's decision not to accept a late-submitted resolution plan was within its commercial wisdom and in compliance with the applicable regulations.
• The applicability and interpretation of Regulation 36B(6) and Regulation 39(1B) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
• The role of the Adjudicating Authority in interfering with the commercial decisions of the CoC.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Consideration of a Late-Submitted Resolution Plan

Relevant Legal Framework and Precedents: The relevant legal framework includes Regulation 36B(6) and Regulation 39(1B) of the CIRP Regulations, 2016. Regulation 36B(6) allows the resolution professional (RP), with the CoC's approval, to extend the timeline for submission of resolution plans. Regulation 39(1B) prohibits the CoC from considering any resolution plan received after the specified timeline.

Court's Interpretation and Reasoning: The Tribunal noted that the CoC had extended the deadline for submission of resolution plans from 05.02.2024 to 14.02.2024. The Respondent No. 1 submitted the plan on 15.02.2024, which was after the extended deadline. The CoC, exercising its commercial wisdom, decided not to accept the late-submitted plan.

Key Evidence and Findings: The CoC's decision was based on the fact that the plan was submitted after the deadline, and the Earnest Money Deposit (EMD) was also received late. The Tribunal found that the CoC had deliberated on the issue and decided against accepting the late submission.

Application of Law to Facts: The Tribunal applied Regulation 39(1B), which prohibits consideration of plans received after the deadline, to uphold the CoC's decision. The Tribunal found that the CoC's decision was in compliance with the statutory regulation.

Treatment of Competing Arguments: The Respondent No. 1 argued that the delay was due to not receiving necessary documents in time, and that maximizing the value of the corporate debtor should allow for consideration of the plan. However, the Tribunal emphasized the CoC's commercial wisdom and the statutory prohibition against considering late submissions.

Conclusions: The Tribunal concluded that the CoC acted within its rights and commercial wisdom in deciding not to accept the late-submitted plan. The Adjudicating Authority's direction to consider the plan was set aside.

Issue 2: Interference with CoC's Commercial Wisdom

Relevant Legal Framework and Precedents: The Tribunal referenced the Supreme Court's decision in 'Kalparaj Dharamshi' and other relevant cases, which emphasize the limited scope of interference with the CoC's commercial decisions.

Court's Interpretation and Reasoning: The Tribunal reiterated that the CoC's commercial decisions should not be interfered with unless there is a clear violation of statutory provisions or arbitrariness.

Key Evidence and Findings: The CoC had considered the late submission and decided not to accept it, which was a decision based on its commercial wisdom. The Tribunal found no arbitrariness or statutory violation in the CoC's decision.

Application of Law to Facts: The Tribunal applied the principle of non-interference with the CoC's commercial decisions, as established in precedent, to uphold the CoC's decision.

Treatment of Competing Arguments: The Respondent No. 1's argument for considering the plan for value maximization was weighed against the statutory framework and the CoC's decision. The Tribunal sided with the statutory framework and the CoC's wisdom.

Conclusions: The Tribunal concluded that the Adjudicating Authority erred in interfering with the CoC's decision, which was within its commercial discretion and aligned with statutory regulations.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the I&B Code."

Core Principles Established: The Tribunal reinforced the principle that the CoC's commercial decisions, particularly regarding the acceptance of resolution plans, should not be interfered with by the Adjudicating Authority unless there is a clear statutory violation or arbitrariness.

Final Determinations on Each Issue: The Tribunal set aside the Adjudicating Authority's order directing the consideration of the late-submitted resolution plan by the CoC. The appeal was allowed, and the CoC's decision was upheld as compliant with the CIRP Regulations, 2016.

---