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2023 (3) TMI 176

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....opal Jain, Sr. Advocate with Mr. V.P. Singh, Ms. Anindita Roychoudhury, Mr. Bharat Makkar, Mr. Sushrat Garg, Advocates for R-2 Mr. Dr. Abhishek Manu Singhvi, Sr. Advocate with Mr. Mahesh Agrwal, Mr. Manu Krishnan, Ms. Niyati Kohli, Mr. Pratham Vir Agarwal, Ms. Manavi Aggarwala and Mr. Anwesh, Advocates for R-9 For Appellant: Mr. Dr. Abhishek Manu Singhvi, Sr. Advocate with Mr. Mahesh Agrwal, Mr. Manu Krishnan, Ms. Niyati Kohli, Mr. Pratham Vir Agarwal, Ms. Manavi Aggarwala and Mr. Anwesh, Advocates For Respondent: Mr. Mukul Rohatgi, Mr. Ramji Srinivasan, Mr. Arun Kathpalia, Sr. Advocates with Mr. Anoop Rawat, Ms. Shally Bhasin, Mr. Vaijayant Paliwal, Mr. Rishabh Jaisani, Mr. Sagar Dhawan, Mr. Rishabh Jaiswani, Mr. Nikhil Mathur, Ms. Shruti Pandey, Mr. Harit Lakhani, Mr. Daksh Kadian, Mr. Ahkam Khan, Ms. Samidha Mathur, Mr. Udbhav Nanda, Mr. Sagar Dhawan, Advocate for R-1 Mr. Gopal Jain, Sr. Advocate with Mr. V.P. Singh, Ms. Anindita Roychoudhury, Mr. Bharat Makkar, Mr. Sushrat Garg, Advocates for R-2 Mr. Kapil Sibal, Sr. Advocate with Ms. Pooja Dhar, Mr. Piyush Mishra, Mr. Sanjeev Kumar, Mr. Anshul Sehgal, Ms. Anusha Nagrajan, Mr. Divyanshu Jain, Mr. Partul Pratap Singh, Advoca....

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....echanism with final NPV of Rs.8110 Crores and Torrent Investments Pvt. Ltd. submitted bid till fourth round with final NPV of Rs.8640 Crores, each as self-certified by them subject to verification by CoC Advisors. The Administrator, on the same day, sent an email to the Resolution Applicants that highest NPV is INR 8640 Crore. (x) On 23.12.2022, 29th CoC meeting conducted on the submission of Revised Draft Resolution Plan as per Challenge Mechanism. Covering email of IIHL included additional payments totaling to Rs.9000 Crores which was in deviation from the final bid submitted by IIHL. In the minutes of the meeting, it was noted that the CoC Advisors will evaluate and compare both the plans and will share the presentation and evaluation by 28.12.2022. (xi) The Torrent sent an objection to the Administrator citing media reports with reference to revision in bid by IIHL. On 31.12.2022, Torrent filed I.A. No. 1/MB/C-I/2023 in C.P. (IB) No.1231/MB/CI/ 2021 before the Adjudicating Authority praying for various reliefs. (xii) On 03.01.2023, the Adjudicating Authority allowed prayer (E) of the I.A. No. 1/MB/C-I/2023 and directed the Administrator not to submit any non-compliant pla....

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....g Authority heard the parties. (xxiii) On 18.01.2023, the CoC made a statement that it will not hold the extended Challenge Mechanism till 23.01.2023. (xxiv) On 23.01.2023, the Adjudicating Authority after hearing the parties reserved the order and continued the interim order. (xxv) A Company Appeal (AT) (Ins.) No. 87-88 of 2023 was filed by Vistra ITCL (India) Ltd. against order dated 23.01.2023 which was withdrawn on 25.01.2023 noticing that order of Adjudicating Authority shall be pronounced in the week commencing 30.01.2023. (xxvi) On 31.01.2023, the Adjudicating Authority granted further exclusion of 90 days according to which last date for conclusion of CIRP comes by 17.03.2023. (xxvii) On 02.02.2023, final orders were pronounced by the Adjudicating Authority allowing the I.A. No. 1/MB/C-I/2023 and I.A. No. 99/MB/C-I/2023. The Administrator was directed to take the resolution process of the Corporate Debtor to its logical conclusion and the Administrator and the CoC were not to allow deviation in the highest NPV financial proposal of INR 8110 Crore of IIHL and the highest NPV financial proposal of INR 8640 Crore of the Applicant - Torrent. Order is contained in Para....

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....9(1A). The settled legal principle of 'Quando aliquid prohibetur ex directo, prohibetur et per obliquum' dictates that one cannot do indirectly what one cannot do directly. Applying this principle in the present case, consideration of the revised financial proposal of the IIHL (revised after the conclusion of the challenge mechanism), being in gross violation of the challenge mechanism as well as Regulation 39(1A) & 39(18) of CIRP Regulations, cannot be done indirectly under the garb of declaring the result of the challenge mechanism as sub-optimal and resetting the clock back to Regulation 36B in derogation of the regulatory intent, especially when the final financial proposal of the Applicant was much above the minimum threshold set in the challenge mechanism. The proposed second round of the challenge mechanism is nothing but an act to indirectly achieve what could not have been achieved by adhering to the challenge mechanism in terms of the challenge process note. 133. In view of our above observations and for the reasons stated above, we hereby allow Application bearing No. 1 of 2023 and declare that the challenge mechanism for financial bids with respect to the Corporate D....

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....hich was continued till passing of the final order which effectively prohibited the CoC to exercise its jurisdiction vested in it regarding consideration of the draft resolution plans which were submitted to the Administrator consequent to the Challenge Mechanism held on 21.12.2022. It is submitted that even after conclusion of Challenge Mechanism on 21.12.2022, the jurisdiction and power of the CoC to direct for extended Challenge Mechanism or to negotiate with both the Resolution Applicants to enhance their plan value is not prohibited. Learned counsel for the Appellant has relied on Clauses, 3.17.17, 4.2.4, 4.2.9, 4.3.7, 4.4.4 and 4.4.7 of the RFRP dated 26.04.2022 in support of his submission that jurisdiction and power of CoC to discuss the resolution plans and to take any further negotiation or any further steps is fully protected by the aforesaid clauses of the RFRP in exercise of which jurisdiction CoC resolved on 06.01.2023 that plan value of both the resolution plans is sub optimal and not satisfactory. It is submitted that debt of the Corporate Debtor is Rs.25,000 Crores and liquidation value being Rs.13,000 Crores both the plans were much below the liquidation value als....

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.... Mechanism. In any case, jurisdiction of CoC is in no manner is fettered by Regulation 39(1A) (b). It is submitted that within a span of 24 days, Torrent has increased value of bid from Rs.1100 Crore upfront to Rs.3750 Crore upfront and then within further two weeks from Rs.3750 Crore upfront to Rs.8640 Crore upfront, which clearly indicate that there is more value to discover and same cannot be interdicted by judicial intervention at this stage. Shri Sibal submitted that the relevant clauses of RFRP were relied and submitted before the Adjudicating Authority which has not been considered. It is submitted that value maximization is a dynamic process and when no plan is satisfactory, negotiation and discussion for discovery of price can be done until unless CoC is satisfied. It is further submitted that as per the Challenge Mechanism Process, CoC is the sole authority to determine the NPV which determination is binding on the Resolution Applicants. The self-certification by Torrent that it's NPV is Rs.8640 Crores does not prohibit the Administrator and the CoC to find out the correct NPV submitted by Torrent. There can be no dispute that in the CIRP Process timelines have to be give....

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....vised offer given by the IIHL. Shri Mukul Rohatgi further submitted that the CoC has not chosen to file an Appeal against the order dated 02.02.2023. The Appellant - Vistra ITCL (India) Ltd. is not the CoC nor any authority has been annexed to file the present appeal. Appellant being an authorized representative of Bondholders forming part of the CoC there has to be written instructions of the Financial Creditors it represents in favour of the Appellant, hence, the appeal is not competent at the instance of Vistra ITCL (India) Ltd. and deserves to be dismissed on this count. Learned senior counsel relied on provisions of Section 25A to support his submission. It is submitted that after 03.01.2023, CoC started helping IIHL which again is unlawful. The increase of the offer made by IIHL from Rs.8110 Crore to Rs.9000 Crores is contrary to the Challenge Mechanism process. The CoC has no jurisdiction to resort to another Challenge Mechanism. No mantra of maximization can be applied after insertion of Regulation 39(1A). Regulation 39(1A) is peremptory in nature and no discretion is left in the CoC thereafter. The best bid value which is obtained under Regulation 39(1A) is nothing but neg....

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.... Adjudicating Authority has only directed that it is for the CoC to exercise its jurisdiction as required by CIRP Regulation. The power reserved to the CoC in RFRP is subject to the CIRP Regulation. The CoC did not reserve power to negotiate. The CoC adopted the Challenge Mechanism Method as negotiation mechanism. The CoC cannot go back to old negotiation, toppling bid received from IIHL of Rs.9000 Crores, has to be ignored. IIHL in the Challenge Mechanism elected not to go any higher from Rs.8110 Crores. Timelines and certainty are two most important factors in the insolvency resolution process. No increase in the final bid is permissible after conclusion of the Challenge Mechanism. The CoC cannot go endlessly to find out the maximum value of the Corporate Debtor. Regulation 39(1A) prohibit the CoC to take another course. The Regulation 39(1A) was introduced to end the uncertainty and delay in the process. The Challenge Mechanism is multiple opportunity to negotiate. The Process Paper shall prevail over RFRP as mentioned in the Process Paper itself. Challenge Mechanism itself contemplate multiple challenges, nobody came to bid more than Rs.8640 Crores which was offered by Torrent ....

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....missions of learned counsel for the parties and materials on the record following issues arise for consideration in these appeals: I. Whether the Appellant - Vistra ITCL (India) Ltd. has no appropriate authority to pursue the present Appeal and the Appeal is not competent at its instance? II. Whether after completion of Challenge Mechanism on 21.12.2022, the Committee of Creditors was obliged to put the draft plans submitted by the Resolution Applicants on 22.12.2022 to vote without it having any other option? III. Whether after the result of Challenge Mechanism held on 21.12.2022 under Regulation 39(1A) (b) value maximization was achieved and Committee of Creditors was prohibited to take any further steps towards value maximization? IV. Whether clauses 4.2.4, 4.2.9, 4.3.7 and 4.4.7 of the RFRP permit the Committee of Creditors to negotiate, enter into discussion with the Resolution Applicants to increase their plan value, amend their plan or to tweak any other Challenge Mechanism, before completion of voting and if Committee of Creditors chooses so or the clauses permits so, they are ultravires under Regulation 39(1A) (b)? V. Whether the decision of the Committee of Cred....

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.... SERVICES LIMITED, having its office at Asian Building, Ground Floor, 17, R. Kamani Marg, Ballard Estate, Mumbai, Maharashtra-400001 ... Proposed Respondent No.4 INDUSIND BANK LIMITED, having its office at 2401, General Thimayya Road, East St, Pune, Maharashtra - 411001. ... Proposed Respondent No.5 YES BANK LIMITED, having its office at Yes Bank House, Off Western Express Highway, Santacruz East, Mumbai, Maharashtra - 400055. ... Proposed Respondent No.6 MAZSON BUILDERS AND DEVELOPERS PRIVATE LIMITED, having its office at 70, Nagindas Master Road, Fort, Mumbai, Maharashtra - 400023. ... Proposed Respondent No.7 ARVUTAM ENTERPRISES PRIVATE LIMITED, having its office at Sun Paradise Business Plaza, 7th Floor, Tulsi Pipe Road, Lower Parel (West), Mumbai, Maharashtra - 400013. ... Proposed Respondent No.8" 13. The prayer in the application was to amend I.A. No.1/MB/C-I/2023 as detailed in Schedule A. Para 2 of Schedule A stated: "II. Add the following paragraphs after paragraph no.2 in the Interlocutory Application No.1 of 2023: 2A Respondent Nos. 2 to 8 are the members of the Committee of Creditors of the Corporate Debtor ("CoC")." 14. Vide order dated 18.01.2023....

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....on behalf of Vistra ITCL (India) Ltd. including initiation of legal proceedings. When the Board has authorised filing of the appeal through authorised representative, the submission cannot be accepted that Appellant is not authorised by the shareholders. Interests of the shareholders are looked by the Board of Directors of the Vistra and Board having been authorized, the preliminary objection raised by Respondent No.1 cannot be accepted. The Appeal by financial creditor who is member of the Coc and as per learned senior counsel for the Appellant, holds 90% vote share in the CoC, there is sufficient locus with the Appellant to challenge the impugned order dated 02.02.2023. Appellant being Financial Creditor in the CoC which is admitted fact, there is no lack of jurisdiction in the Appellant to file this appeal. Question No. II to V 16. Questions II to V being interrelated are being considered together. Before we enter into the rival submissions of learned counsel for the parties, we need to notice relevant statutory provisions governing the CIRP and relevant clauses of RFRP, Process Document and Challenge Mechanism Process Steps. 17. Section 30 of the I&B Code provides for submi....

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....l not require any non-refundable deposit for submission of or along with resolution plan. 2[(4A) The request for resolution plans shall require the resolution applicant, in case its resolution plan is approved under sub-section (4) of section 30, to provide a performance security within the time specified therein and such performance security shall stand forfeited if the resolution applicant of such plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule. Explanation I. - For the purposes of this subregulation, "performance security" shall mean security of such nature, value, duration and source, as may be specified in the request for resolution plans with the approval of the committee, having regard to the nature of resolution plan and business of the corporate debtor. Explanation II. - A performance security may be specified in absolute terms such as guarantee from a bank for Rs. X for Y years or in relation to one or more variables such as the term of the resolution plan, amount payable to creditors under the resolution....

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....der any resolution plan- (a) received after the time as specified by the committee under regulation 36B; or (b) received from a person who does not appear in the final list of prospective resolution applicants; or (c) does not comply with the provisions of sub-section (2) of section 30 and subregulation (1).]] 4[(2) The resolution professional shall submit to the committee all resolution plans which comply with the requirements of the Code and regulations made thereunder along with the details of following transactions, if any, observed, found or determined by him: - (a) preferential transactions under section 43; (b) undervalued transactions under section 45; (c) extortionate credit transactions under section 50; and (d) fraudulent transactions under section 66, and the orders, if any, of the adjudicating authority in respect of such transactions.] 1[(3) The committee shall- (a) evaluate the resolution plans received under sub-regulation (2) as per evaluation matrix; (b) record its deliberations on the feasibility and viability of each resolution plan; and (c) vote on all such resolution plans simultaneously. (3A) Where only one resolution....

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....or Combined Resolution Plan; (c) annul the Resolution Plan process and reject all Resolution Plans and/or Combined Resolution Plans and call for submission of new Resolution Plans from any Person; (d) select or approve any proposal or Resolution Plan or Combined Resolution Plan, as it may deem fit; (e) call upon the Resolution Applicant and/or the Resolution Bidder to make modifications to the plan and/or submit a revised Resolution Plan and or revised Resolution Bid and/or Combined Resolution Plan; (f) aggregate the Resolution Plans and/or Resolution Bids or any part thereof to achieve successful resolution of the Corporate Debtor. It is clarified that the Successful Resolution Applicant shall be responsible for implementation of such Resolution Plan and the CoC/Administrator or any of their respective professional or legal advisors shall have no liability in respect thereof; (g) allow one or more Resolution Applicants and/or Resolution Bidders to jointly submit a Resolution Plan; (h) call for submission of revised Resolution Plan and/or Resolution Bids from the Resolution Applicants and/or Resolution Bidders who have already submitted Resolution Plans and/or Res....

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....r the negotiation shall be determined and/ or communicated, if necessary, at a later date. By submitting the Resolution Plan(s) and/or Resolution Bid(s), the Resolution Applicant and/or the Resolution Bidder, as the case may be, shall be deemed to have unequivocally agreed that any process of negotiation adopted by the CoC shall be binding on them and that they have no objection in following any such process. The Administrator (acting for the CoC) or the CoC shall not be bound to disclose the scores of any Resolution Applicant or disclose the methodology adopted in arriving at such scores. It is further clarified that the Resolution Applicant and/or the Resolution Bidder shall not have the right to request clarifications on the scoring made as per the Evaluation Criteria or seek information as regards the methodology adopted for the scoring of its Resolution Plan(s)." 24. Clause 4.4.4 deals with steps of negotiation/discussion with one or more Resolution Applicants. Clause 4.4.4 is to the following effect: "4.4.4 Step III- Negotiation/discussion with one or more Resolution Applicants), and Resolution Bidders) and Due Diligence of Resolution Applicant(s) and Resolution Bidders) ....

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....ecified by the Administrator (in consultation with the CoC)." 25. On 22.10.2022, Process Paper was issued. The process paper begins with following statement: "Date: October 22, 2022 RESOLUTION PLAN SUBMISSION PROCESS FOR RELIANCE CAPITAL LIMITED (to be read with the RFRP dated April 26, 2022 and other clarifications issued thereafter in the VDR) This is with reference to the Corporate Insolvency Resolution Process of Reliance Capital Limited ("RCL"). We refer to request for resolution plans ("RFRP") issued by the Administrator on April 26, 2022 and the clarifications issued in terms thereof from time to time. Further to consultations of the CoC, please see below the resolution plan finalisation process ("Process Paper"). This is a part of the RFRP. No other term of the RFRP shall be considered amended or modified and should any contradiction arise between the RFRP and this Process Paper, the Process Paper shall prevail. This Process Paper is being issued in furtherance to the RFRP and the provisions of the IBC and CIRP Regulations including Regulation 36B (7) of the CIRP Regulations to all Resolution Applicants identified in the Final List of Prospective Resolution ....

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....cial proposal contained in a resolution plan ("Highest NPV") at the end of each round will be disclosed. 4. The CoC is not obligated to approve the resolution plan which has the highest NPV or scared the highest as per the Evaluation Matrix and any resolution plan shall be approved solely on the basis of the commercial wisdom of the CoC. The CoC while approving a resolution plan will consider the feasibility and viability of each resolution plan and other factors. The Administrator/ CoC and their advisors reserve the right to evaluate compliance and the Resolution Applicants shall provide such modifications or clarifications as may be required by Administrator or CoC. Furthermore, all compliant Resolution Plans will be put to vote by the CoC as per the requirements of the IBC Code. 5. This Challenge Mechanism does not confer any rights on any Resolution Applicant including the Resolution Applicant with the Highest NPV. 6. The Resolution Applicants shall not make any modifications to their Resolution Plan (other than to incorporate the final proposal made by the Resolution Applicant in the Challenge Mechanism) unless otherwise requested by the Administrator and the CoC and ....

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....rrently, the CoCs have significant discretion in accepting late and unsolicited resolution plans. These unsolicited, late bids create tremendous procedural uncertainty. As a result genuine bidders are discouraged from bidding at the right time. The overall process is vitiated and there are significant delays leading to further value erosion. The Committee believes that the IBC needs to be amended so that no post hocbids are allowed during the resolution process. There should be sanctity in deadlines, so that value is protected and the process moves smoothly." 30. The third material, which has been relied is Discussion Paper dated 27th August, 2021 of Insolvency and Bankruptcy Board of India. In the Discussion Paper, it was noted that there was no cap on the number of revisions that may be allowed in a Resolution Plan, which has effect on delaying a resolution. In paragraphs 20, 21, 30 and 31, following have been captured. "20. Regulation 36B of the CIRP Regulations contain provision regarding request for resolution plans. It provides for a minimum of 30 days for prospective resolution applicants to submit the plans and allows for revision/ modification of the request for res....

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....tained is a competitive one and the maximum achievable given the market condition." 31. The insertion of Regulation 39(1A) was made in the Regulations with object to curtail submission of unsolicited Resolution Plan and number of revisions, which can be permitted in the Resolution Plan. The Swiss Challenge Method was also referred to as one of the option, which can be adopted by the CoC. The cap on number of extension in the RFRP was also with the same objective. Regulation 39(1A) has two parts, i.e. (a) and (b). For ready reference Regulation 39(1A) is extracted below: "39(1A) The resolution professional may, if envisaged in the request for resolution plan- (a) allow modification of the resolution plan received under sub-regulation (1), but not more than once; or (b) use a challenge mechanism to enable resolution applicants to improve their plans." 32. Sub-regulation (1A) begins with the expression "Resolution Professional may, if envisaged in the request for resolution plan -- (a) allow modification of resolution plan received under sub-regulation (1), but not more than once: or (b) use a Challenge Mechanism to enable resolution applicants to improve their plans". The....

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....e RFRP issued on 26.04.2022 is referable to Regulation 36B, sub-regulation (2). Hence, we need to look into detailed steps, which are contained in the RFRP with regard to resolution process. 36. We have noted in the foregoing paragraphs, the relevant clauses of RFRP on the strength of which, the learned Counsel for the Appellant submits that the right of CoC to negotiate with Resolution Applicants, even if Challenge Mechanism is intact and Regulation 39(1A) does not contain any fetter on the right of the CoC to proceed further after Challenge Mechanism. Clause 3.17.17 for ready reference is extracted below: "3.17.17 The Resolution Plan(s) that are in compliance with the provisions of the IBC shall be considered by the Coe in accordance with Regulations 39(3), 39(3A) and 39(3B) of the CIRP Regulations. The Administrator and the CoC {along with any person authorised by the CoC in this regard) reserve the right to negotiate with the Resolution Applicant(s) and/or the Resolution Bidder(s) prior to such plan(s) being put to vote for approval by the CoC in order to achieve a successful resolution of RCAP with the objective of maximising the value of the Corporate Debtor for all stakeh....

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....and compliance Resolution Plan must be submitted by 18.07.2022. The Appellant, Respondent No.1 and two other Resolution Applicants submitted their amended Resolution Plans by 18.07.2022. However, on 19.07.2022, Respondent No.1 sent an e-mail that he is willing to submit the entire NPV offered as upfront payment within 30 days. Respondent No.2 also sent an email on 19.07.2022, further improving its offer. The CoC on 03.08.2022 resolved to put all four Plans received by 18.07.2022 to vote. At that juncture, Respondent No.2 filed an IA before the Adjudicating Authority, in which IA, the Adjudicating Authority passed an order dated 11.08.2022, directing the CoC to consider the revised Resolution Plan submitted by Respondent No.2, which order came to be challenged in the Appeal before this Tribunal. This Tribunal in the said case has also referred to the Insolvency Law Committee Report dated May, 2022 as well as the Discussion Paper dated 27.08.2022 as noticed above. This Tribunal held that there can be no fetter on the power of CoC to cancel or modify any negotiation with the Resolution Applicant including a Challenge Process, but it is the wisdom of the CoC to take a decision in this ....

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....etween Resolution Applicants. The present is not a case where CoC has decided to annul the Challenge Process conducted on 21.12.2022, but CoC has decided to proceed with extended challenge round between Resolution Applicants. 40. We need to notice the background facts and circumstances, which led the CoC to take a decision to embark on extended challenge method and to find out as to whether such decision can be said to be arbitrary and in violation of any statutory provisions of the Code. We have noticed above that RFRP was initially issued on 26.04.2022 and the Plans were invited in August 2022 and 28th November 2022 was the last date for submission of Resolution Plans. The Challenge Mechanism was concluded on 21.12.2022. The Adjudicating Authority in paragraph 101 itself has noticed the different amounts, which were offered by Respondent No.1 and IIHL during the span of few months. On 28.08.2022, Respondent No.1 offered an amount of Rs.4000/- crores with upfront amount of Rs.1000/- crores; on 28.11.2022, Respondent No.1 offered an amount of Rs.4500/- crores with upfront amount of Rs.1100/- crores and in the Challenge Mechanism it offered NPV of Rs.8640/- crores with upfront amou....

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....the same view the same can be discussed and put to vote in the next CoC meeting. The Chair requested the advisors and the COC members to endeavor to complete the process by the deadline of January 31, 2022. The Chair further apprised the CoC members on the discussion held with the RBI to updated on the CIR Process of Reliance Capital Limited." 41. The next meeting of the CoC was held on 03.01.2023 where at Agenda item No.4 - To Update on the Resolution Process of the Corporate Debtor, the CoC was informed about interim order passed by the Adjudicating Authority in the IA filed by Respondent No.1. It is also recorded in the Minutes of the Meeting that Process Advisor to the CoC updated the forum that NPV calculated based on the financial proposal (part of the revised draft resolution plan) of both applicants was different from the NPV submitted by the RAs in the Challenge Mechanism. Both the Resolution Applicants were required to be communicated to make corrections to the draft resolution plan submitted on 22.12.2022, to reflect the correct financial proposal that was finalized by them as part of the Challenge Mechanism process and re-submit the draft within 24 hours of the sai....

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....ifically contained provisions which enabled the CoC to improve resolution plans in such manner as it deems fit. Amongst other clauses, clause 3.17.17, clause 4.2.4, clause 4.2.9 clause 4.3.7, clause 4.4.4 and clause 4.4.7 specified that the CoC retained the right at all times to negotiate with bidders to improve the resolution plans. The challenge mechanism note had also specifically provided that the note will have to read along with the aforementioned provisions in the RFRP. The Administrator and his advisors gave their views on the way forward. However, in light of the above, the COC, in its commercial wisdom, proposed that a extended round of challenge mechanism with the existing bidders is conducted. In terms of incremental bids for the further rounds, SSG, Trust Capital and ACRE recommended increments of INR 500 crores each in the subsequent 2 rounds (from round 1) and INR 250 crores per round thereafter. Further, Deutsche Bank suggested recommended increments of INR 1,000 crores, INR 750 crores and INR 500 crores in the 3 subsequent rounds post Round 1 an INR 250 crores per round thereafter. As concurred by the CoC members it was agreed that the threshold bid amount fo....

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....ed with the NCLT. CoC members concurred with the same and accordingly the said agenda shall be put to vote." 42. As per Voting Agenda Item No.4(a), it was Resolved in the Meeting to hold extended round of challenge process which was approved with 98% of vote share. After 06.01.2023, the Advisor communicated to the Resolution Applicants about the Extended Challenge Mechanism, on which Respondent No.1 filed an IA No.99/MB/C-1/2023 to amend its prayer in IA No.1/MB/C-1/2023. The Minutes of CoC held on 06.01.2023 clearly recorded the dissatisfaction of the CoC with the outcome of the process and the events that have transpired thereafter. The CoC was of the view that it demonstrates that outcome of the Challenge Mechanism undertaken was sub optimal and not satisfactory. The CoC in its meeting has also referred the relevant Clauses of RFRP and it was clearly mentioned that CoC retained the right at all time to negotiate with bidders to improve the Resolution Plan. 43. Now we need to also look into findings, which has been returned by Adjudicating Authority in the impugned order. In paragraph 126, the Adjudicating Authority has come to the conclusion that decision on second Challen....

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....agraph 78, which is to the following effect: "78. The process thus confers primacy upon the RFRP and renders the same an anchor document governing the process and which cannot be rendered otiose by the Applicant's misreading of the Challenge Mechanism Note. The RFRP empowers the CoC to call for revised bids from the PRAs, re-negotiate and take all such necessary steps for achieving the value maximization of the Corporate Debtor's assets. Reliance is placed on clauses 4.2.4, 4.2.9 and 4.3.7 of RFRP." 45. It is further relevant to notice that in the discussion by the Adjudicating Authority, which run from paragraph 125 to 133, there is no consideration of the relevant Clauses of RFRP and without adverting to relevant Clauses of RFRP, the Adjudicating Authority opined that the same run foul to Regulation 39(1A). The Adjudicating Authority further fell into error in coming to a conclusion that there is no power with the CoC to enter into negotiations with the Resolution Applicant, after the Challenge Mechanism and the exercise of the commercial wisdom is circumscribed by the framework for value maximization provided under the Code read with the Regulations. 46. Mr. Mukul Rohatgi h....

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....hin the period specified in that subsection]: Provided also that the eligibility criteria in section 29A as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 shall apply to the resolution applicant who has not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.] (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor. 49. Section 30, sub-section (4) statutorily contemplate approval of Resolution Plan by a vote, not less than sixty six per cent of voting share of the Financial Creditors "AFTER CONSIDERING ITS FEASIBILITY AND VIABILITY". Thus, voting has to be there after consideration, which clearly negates the submission that after receipt of the Plan, subsequent to Challenge Mechanism, the CoC is obliged to put the Plan to vote and it has no other option. 50. Regulation 39(1A) (a) and (b) uses two expressions, i.e.,....

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....ood faith, and without notice of conflicting title claims or defenses." 52. The concept of negotiation, thus, itself contemplate dialogue between one party with another party for the purpose of reaching an understanding or completing a bargain. The concept of negotiation and statutary scheme negate the submission of Shri Rohatgi that Regulation 39(1A) has substituted the earlier acts of negotiations, which used to be undertaken by the CoC. 53. There is one more reason due to which interpretation suggested by Mr. Rohatgi cannot be accepted. Reference to Regulation 39(1A) contemplate modification of Resolution Plan and improvement of Resolution Plan at the instance of Resolution Applicant. The above modification or improvement in the Plan cannot be confined only to Plan value, rather, it shall cover the entire Plan and if it is held that any modification or improvement is not permissible after conclusion of process under Regulation 39(1A), it shall become handicap in successful resolution of the Corporate Debtor, since CoC may opine that certain modification and improvement in Plan are necessary for successful resolution of the Corporate Debtor. Thus, we are of the considered opin....

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....for negotiating with the tenderers giving them equal opportunity to revise their bids with a view to obtain the highest available price. The inadequacy may be for several reasons known in the commercial field. Inadequacy of the price quoted in the highest tender would be a question of fact in each case. Retaining the option to accept the highest tender, in case the negotiations do not yield a significantly higher offer would be fair to the tenderers besides protecting the public interest. A procedure wherein resort is had to negotiations with the tenderers for obtaining a significantly higher bid during the period when the offers in the tenders remain open for acceptance and rejection of the tenders only in the event of a significant higher bid being obtained during negotiations would ordinarily satisfy this requirement. This procedure involves giving due weight to the legitimate expectation of the highest bidder to have his tender accepted unless outbid by a higher offer, in which case acceptance of the highest offer within the time the offers remain open would be a reasonable exercise of power for public good." 55. One more question needs to be answered is as to whether conclus....

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....Sashidhar vs. Indian Overseas Bank and Ors. - (2019) 12 SCC 150 has laid down following: "52. As aforesaid, upon receipt of a "rejected" resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. In the new approach, there is a calm period followed by a swift resolution process to be completed within 270 days (outer limit) failing which, initiation of liquidation process has been made inevitable and mandatory. In the earlier regime, the corporate debtor could indefinitely continue to enjoy the protection given under Section 22 of the Sick Industrial Companies Act, 1985 or under ....