2026 (3) TMI 1252 - AT - IBC

Mandatory bid compliance and value maximisation govern resolution plans; belated deposit and flawed scoring justified setting aside approval.

Mandatory bid conditions for a resolution plan were not complied with where the earnest money deposit was credited only after the stipulated deadline; ... Rejection of resolution plan - non-submission of earnest money deposit within the stipulated time - commercial wisdom of the committee of creditors - non-responsive under the request for resolution plan - Locus of dissenting financial creditor - Value maximisation in CIRP - violation of regulation 36B of CIRP regulations, 2016. Resolution plan responsiveness - Earnest money deposit compliance - HELD THAT:- The Tribunal held that Clause 12 of the RFRP required the earnest money deposit to accompany the resolution plan within the stipulated time. Actual credit of the amount to the corporate debtor's account after the deadline could not be treated as timely submission merely because the bidder's account had been debited on the due date. In the absence of any contrary stipulation in the RFRP, late credit rendered the plan non-responsive. Acceptance of that bid by the Resolution Professional was therefore contrary to the RFRP, and the Resolution Professional's conduct in treating the bid as valid was found to be a serious error. [Paras 20, 21] The bid of Valentis was held non-responsive and its resolution plan was declared invalid. Locus of dissenting financial creditor - HELD THAT: - The Tribunal held that a dissenting financial creditor with a stake in the revival of the corporate debtor and in value maximisation is entitled to question the process where, in its perception, the principles of the Code are being violated. The appellant had not raised the objections for the first time before the Adjudicating Authority; the same objections had been raised in the CoC meetings and, on not receiving an effective response, were pursued before the Adjudicating Authority. In those circumstances, the appellant had the locus to maintain the challenge. [Paras 27] The appellant was held to have the locus to raise the challenge before the Adjudicating Authority. Value maximisation in CIRP - Duties of resolution professional - HELD THAT: - The Tribunal found that the majority lenders had continued to drive the process of the corporate guarantor even after being assured full recovery under the principal borrower's resolution plan, without demonstrating how such continuation served the objective of value maximisation of the corporate debtor. It also found that the Resolution Professional, being aware of the position in both CIRPs, ought either to have advised the CoC to await finality of the principal borrower's plan or to have sought directions from the Adjudicating Authority. Instead, the process was carried forward without adequate regard to the position of the corporate guarantor and the interests of other stakeholders. In that background, the Tribunal directed a fresh examination of whether the CIRP against the corporate debtor still subsisted in law. [Paras 23, 25, 28] The Resolution Professional was directed to evaluate the remaining resolution plans and to examine, in accordance with law, whether the CIRP against the corporate debtor still subsisted, and to seek appropriate directions from the Adjudicating Authority. Final Conclusion: The impugned order was set aside. The resolution plan of Valentis was declared invalid, and the Resolution Professional was directed to evaluate the remaining resolution plans and to examine, in accordance with law, whether the CIRP against the corporate debtor still subsisted and to seek appropriate directions from the Adjudicating Authority. Issues: (i) Whether the resolution plan was liable to be rejected for non-submission of earnest money deposit within the stipulated time and for being treated as non-responsive under the request for resolution plan. (ii) Whether the approval of the resolution plan and the scoring process were sustainable in the light of the objective of value maximisation and the treatment of secured and unsecured creditors. (iii) Whether the dissenting financial creditor had locus to challenge the approval of the resolution plan.Issue (i): Whether the resolution plan was liable to be rejected for non-submission of earnest money deposit within the stipulated time and for being treated as non-responsive under the request for resolution plan.Analysis: The request for resolution plan required the earnest money deposit to accompany the resolution plan within the stipulated time, and expressly provided that non-submission would render the plan non-responsive and liable to rejection or non-evaluation. Mere debit from the bidder's bank account on the due date did not amount to compliance when the amount was actually credited to the corporate debtor only after the deadline. The acceptance of the belated deposit was therefore contrary to the stipulated bid conditions.Conclusion: The plan was non-responsive and ought not to have been accepted.Issue (ii): Whether the approval of the resolution plan and the scoring process were sustainable in the light of the objective of value maximisation and the treatment of secured and unsecured creditors.Analysis: The record showed that the majority committee relied heavily on faster recovery for secured creditors and gave inadequate consideration to unsecured and operational creditors. The deliberations did not sufficiently explain why higher-value plans were not preferred or why the evaluation matrix resulted in anomalous scoring that elevated the selected applicant. In the circumstances, the decision-making process did not reflect a proper application of value maximisation consistent with the insolvency framework.Conclusion: The approval process was unsustainable.Issue (iii): Whether the dissenting financial creditor had locus to challenge the approval of the resolution plan.Analysis: A dissenting financial creditor with a stake in the insolvency process is not barred from raising grievances where alleged illegality, non-compliance, and procedural unfairness are asserted. The objections had been raised before the committee and were not mere afterthoughts. The challenge was therefore maintainable.Conclusion: The appellant had locus to maintain the challenge.Final Conclusion: The impugned order was set aside, the approved resolution plan was invalidated, and the matter was directed to proceed afresh in accordance with law with consideration of the remaining resolution plans.Ratio Decidendi: A resolution plan that does not comply with mandatory bid conditions and is accepted in disregard of the prescribed eligibility requirements cannot be sustained merely on the basis of majority approval or commercial wisdom; where the process also fails to properly address creditor treatment and value maximisation, the plan and its approval are liable to be interfered with.