2026 (3) TMI 1378 - AT - IBC

Commercial wisdom in insolvency permits rejection of resolution plans and closure of the process under an express bid framework.

Where a bid framework expressly reserved power to accept, reject or annul the process, the Committee of Creditors could terminate the resolution process ... Effect of the Committee of Creditors for rejecting the resolution plans and annullying the resolution process without completing the challenge mechanism contemplated in the bid framework and the CIRP Regulations - Scope of interference with the commercial wisdom of the CoC - Value Maximisation - challenge mechanism under CIRP Regulations - judicial review of rejection of resolution plan - Whether the decision of the CoC to reject the plans of the PRAs including the Appellant and annulment of the resolution process was impermissible and violative of the RFRP stipulations and the relevant CIRP Regulations. Commercial wisdom of the Committee of Creditors - HELD THAT: - the CoC had undertaken voting on the resolution plans without following the route of challenge mechanism or negotiations and that their plans were rejected by the CoC without assigning any reason as the minutes of the relevant 17th CoC meeting was not shared with them. This was refuted by the RP by submitting that the 17th CoC meeting had deliberated on the issue before rejecting the plans. The RP however admitted that he had not placed on record the said minutes before this Tribunal and hence was allowed liberty by this Tribunal to quote the minutes of all relevant CoC meetings while submitting their short notes of submission. Alongwith relevant CoC minutes, the 17th CoC meeting minutes have been placed on record by the Respondent No.2 alongwith their short notes of submission wherein the reasons for rejecting the plans have been deliberated upon and duly reflected in the proceedings. The Tribunal held that, although the RFRP contemplated negotiations and a challenge mechanism, the RFRP also expressly reserved to the RP/CoC a general right to accept, reject or annul the bid process at any stage and without assigning reasons. Read conjointly, the RFRP did not create any mandatory embargo preventing the CoC from terminating the process before the challenge mechanism. The record further showed that the appellant had participated in the process, attended meetings through its representatives, and repeatedly revised its plan at the instance of the RP and CoC; hence, the complaint of denial of participation or opportunity was not made out. The minutes also showed that the plans were put to vote and that the CoC later recorded that all four plans were rejected as financially non-viable since they were below liquidation value. On that basis, the rejection of the plans and closure of the process constituted a business decision of the CoC. No cogent ground for the Appellant who is an unsuccessful resolution applicant to interfere with this decision of the CoC to annul the resolution process. Insofar as the process of approval or rejection of resolution plan is concerned, it is now beyond the pale of doubt that this lies within the purview of the commercial wisdom of CoC and the scope of judicial review remains circumscribed within the four corners of Section 30(2) of the IBC for the Adjudicating Authority. The scope of interference with the commercial wisdom of the CoC in approving or rejecting a resolution plan by the adjudicatory or appellate authority has been made minimal by law as laid down by the Supreme Court in a catena of judgments which have already been noted above. In such circumstances, the Adjudicating Authority with the limited powers of judicial review available to it has not committed any infirmity in interfering with the commercial wisdom of the CoC to reject the plan of the Appellant and annul the resolution process. We are of the considered view that the Adjudicating Authority has not committed any error in rejecting IA filed by the Appellant. Final Conclusion: The Appellate Tribunal held that the CoC acted within the framework of the RFRP and its commercial wisdom in rejecting all plans and annulling the process. Finding no procedural or statutory infirmity warranting appellate interference, it dismissed the appeal. Issues: (i) Whether the Committee of Creditors could reject the resolution plans and annul the resolution process without completing the challenge mechanism contemplated in the bid framework and the CIRP Regulations; (ii) Whether an unsuccessful resolution applicant could maintain a challenge to the rejection of its plan and the reissue of the bidding process.Issue (i): Whether the Committee of Creditors could reject the resolution plans and annul the resolution process without completing the challenge mechanism contemplated in the bid framework and the CIRP Regulations.Analysis: The bid framework contemplated negotiations and a challenge mechanism, but it also reserved an express right to the Resolution Professional and the Committee of Creditors to accept, reject, or annul the bid process and any or all resolution plans without assigning reasons. The record showed repeated participation by the resolution applicants, multiple rounds of revision of plans, and later deliberation by the Committee of Creditors, which recorded financial non-viability and values below liquidation value as the basis for rejection. In that setting, the challenge mechanism did not operate as an absolute embargo on the power to terminate the process, and the commercial decision of the Committee of Creditors remained within its domain.Conclusion: The rejection of the plans and annulment of the resolution process were held to be permissible and not contrary to the governing framework.Issue (ii): Whether an unsuccessful resolution applicant could maintain a challenge to the rejection of its plan and the reissue of the bidding process.Analysis: The resolution applicant had no vested right to insist that its plan be accepted or that the process be continued in a particular manner once the Committee of Creditors, acting within its commercial wisdom, decided otherwise. Judicial review over such decisions is narrow and is confined to limited statutory grounds. The applicant's participation in the process and opportunity to revise its bid also negatived the complaint of denial of participation or procedural unfairness of the kind that would justify interference.Conclusion: The challenge by the unsuccessful resolution applicant was held not maintainable on merits, and no interference was warranted.Final Conclusion: The appellate tribunal affirmed the rejection of the resolution plans and upheld the closure of the resolution process, resulting in dismissal of the appeal.Ratio Decidendi: Where the bid framework expressly reserves a power to reject or annul the process, the Committee of Creditors may do so in the exercise of its commercial wisdom, and such a decision is subject only to limited judicial review on the narrow statutory grounds governing resolution-plan approval.