AI Drafter 
TaxTMI 
TaxTMI 
2025 (11) TMI 1345
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....ppeal (AT) (Ins) No.273 and 275 of 2025) was appointed. He had shortlisted four PRAs and had invited them to submit their resolution plans. However, just two days before the closure date for submitting the resolution plan, a certain Dorni Vinimoy Pvt. Ltd., (henceforth would be termed as Dorni) joined the other four, apparently pursuant to an Order of the Adjudicating Authority (understanding the true import of this order itself is an aspect involved in the appeals). With barely two days to go from the date of the said Order, Dorni submitted its EoI on the next day, and submitted the plan on the second day, and deposited the EMD two days later, since according to Dorni banks were closed in the intervening two days as public holidays. Eventually Dorni's plan was approved by the CoC, following which the RP moved the Adjudicating Authority for the latter's approval. As this is pending, two of the unsuccessful resolution applicants namely, M/s Yaana Apparels Pvt. Ltd., and Krishna Wax (would be referred to as Yaana and Krishna respectively in this Order), intervened the same with two separate applications and challenged the legality of the process by which Dorni was admitted in the res....
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....uant to the Order of the Adjudicating Authority in IA 86 of 2023. f) On 02.03.2023, the 6th meeting of the CoC was convened and as per the evaluation matrix, Yaana was placed second whereas Krishna was placed at the 4th place. The RP informed both Yaana and Krishna to submit a modified plan latest by 06.03.2023, if they are desirous. On 06.03.2023, both of them submitted their respective modified resolution plans. g) In the 7th meeting of CoC that took place on 10.03.2023 (and continued on 13.03.2023) all the resolution plans were placed before the CoC and were discussed. Voting lines were soon opened and on 11.05.2023, the CoC approved the Resolution Plan of Dorni by a majority of 99.87% votes. On the same day RP e-mailed all the unsuccessful resolution applicants about the rejection of their plans. h) Subsequently, on 19.05.2023, RP took out IA IBC 1003 of 2023 for the approval of the Resolution Plan by the Adjudicating Authority. Both Yaana and Krishna would now take out separate intervener Petition in I.A.20 of 2023 and I.A.1 of 2024, alleging illegalities involving violation of few CIRP Regulations in approving Dorni's resolution plan by the CoC and ....
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....ould be rejected. But RP had received it, which positively proscribes reception of any EoI after the date stipulated for it. • In accommodating Dorni, the RP had ignored Regulation 36A(8) and (10) to (12). The other PRAs who were already in the fray did not get an opportunity to raise an objection against Dorni. • Despite the fact that Dorni's name did not figure in the final list of PRA, CoC chose to consider its resolution plan. However, Regulation 39(1-B)(b) lays an embargo on the CoC from considering any resolution plan of the one whose name does not figure in the final list of PRAs. • Even the EoI as submitted by Dorni is faulty since it was not accompanied by the requisite EMD as insisted in Form-G but was deposited only on 25.02.2023. • The EoI of Dorni was not accompanied by necessary refundable deposit and so was the EMD amount as its deposit did not accompany Dorni's resolution plan. The plan was submitted on 22.01.2023, whereas the EMD was deposited only on 25.01.2022. This is in breach of Regulation 36B(4) and (4A). 5. The RP and the SRA resisted the I.A. preferred by Yaana apparels and Krishna Wax, inter alia on th....
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....a) Ltd., and others [Comp.A.(AT)(INS) 1178 of 2024]. Its consequence would be that the Order in I.A.86 of 2023 sands which validates the participation of Dorni in the resolution process. For Yaana and Krishna to sustain their objections, they should have challenged the Order in I.A.86 OF 2023, which they did not. c) So far as the allegation of material irregularity vis-à-vis receiving the EoI of Dorni without a fresh Form-G goes, it is supported by the ratio of NCLAT in Anil Kumar Vs Jayesh Sangharaka [Comp.A.(AT)(Insolvency) No.513 of 2023, dated 03.08.2023) and Ankit Patni Vs SBI (Comp.A.(AT)(Insolvency) No. 326 of 2022, dated 06.04.2022). As long as the window for receiving the resolution plan is open, reception of the resolution plan even from Dorni is not barred. d) It is wrong to say that Yaana and Krishna were kept in dark about the entry of Dorni. On 31.01.2023, the RP had e-mailed all the PRAs that all the plans would be opened by the CoC on 02.02.2023. And, on 02.02.2023, the 5th Meeting of the CoC took place. Each of the resolution plans were submitted by the respective resolution applicants in a sealed cover. It is a closed tender. As per the pr....
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.... show that they both had their earliest opportunity to challenge the participation of Dorni after the 5th meeting of the COC on 02.02.2023. They did not do it. 6.3 The learned counsel for the SRA (the appellant in Comp.A. 411 of 2025) would submit that the fundamental accusation directed against the resolution plan of Dorni is not that it is less attractive than the offer of these unsuccessful applicants, but Dorni had a back door entry and that they did not know about its participation. However, in its rejoinder filed to its I.A.20/2023 Yaana Apparels had admitted "that the PRAs including the applicants were aware of the participation of Dorni Vinimoy Pvt. Ltd. but did not raise objection", and this settles the issue. Again on 15.05.2023, the RP had informed Krishna Wax to collect its EMD and this was acknowledged by Krishna Wax with its reply. Necessarily both the doctrine of acquiescence and estoppel would apply to deny the interveners of their right to challenge the commercial wisdom of the COC in approving the resolution plan of Dorni. 7.1 Per contra, the learned counsel for the respondents, Yaana Apparel and Krishna Wax made the following submissions, which are but reit....
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....ontext, it is relevant to mention that the paid-up share capital of Dorni is less than that of Yaana Apparels. • After scrutinizing the EoI submitted before him, the RP is required to issue a provisional list of eligible PRAs. Any objections to the inclusion or exclusion of a PRA may be made to the provisional list of PRAs. However, the process as devised by the RP ensured that none of the PRAs in the provisional list published by the RP ever get an opportunity to object to the participation of Dorni. Regulation 39(1B)(b) imposes a statutory restriction on the CoC from considering any resolution plan received from any person whose name does not appear in the final list of PRAs. So far as Dorni is concerned, its name did not figure in any of the list-both provisional and final, and hence considering the Dorni's plan by the CoC is akin to Adam's sin in procedure. • The resolution applicant is required to make the EMD of Rs.50.0 lakhs to accompany the resolution plan, whereas Dorni, though had filed its plan on the last day, has not deposited the EMD required along with it but only on 25.01.2023. Dorni claims that because 23.01.2023 and 24.01.2023 where decla....
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.... of Dorni in submitting its EOI. It has provided a cover of legitimacy to what the RP and the CoC had done subsequently. So far as the Order in I.A.86 of 2023 goes, according to the appellant, in the impugned order, the Adjudicating Authority had reviewed the earlier Order and chose not to consider its effect. This has invited some arguments from both the sides on the Adjudicating Authority's power to review its own order. If the Order of the Adjudicating Authority is carefully read, it has observed in paragraph 36 as follows: "......The only reason the applicant could not challenge the order dated 20.01.2023 because the Applicant and other Resolution Applicants was not even informed by the Resolution Professional about the final list of the prospective resolution applicants and that Dorni was allowed by the Order dated 20 January, 2023 in violation of Regulation 36A(10) of CIRP Regulations, 2016." On the face of it, it does not show that the Adjudicating Authority has attempted to review its earlier Order in I.A.86 of 2023 but has only sidestepped the said Order as it felt that the very Order was passed against the Regulation. It therefore, does not require any investigation vis-&....
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....uty to disclose? And, do the other PRAs, Yaana and Krishna included, have a right to be informed? The CD and not the PRAs is central to the theme of resolution process. If the stage at which Dorni's EoI was received is considered (this aspect will echo at few places later in this judgement), Yaana and Krishna had merely responded to Form G inviting them to satisfy their eligibility to participate in the resolution process, and that they have been found to be eligible and the financial ability to move to the next the stage of the resolution process. Therefore, what is the right vested in them which was affected at that point of time by Dorni's 'belated' entry as to warrant a notice to Yaana and Krishna? d) Every PRA should remember that when the RP makes a RFRP, it is only an invitation to offer, and no PRA is under any compulsion to make an offer. A mere opportunity to make an offer does not create any vested right in any of the PRAs, more so when the closing date for the submission of the resolution plan is yet to arrive. Indeed R.K Industries (Unit-II) LLP Vs H.R Commercial Private Limited & others [2022 SCC OnLine SC 1124] has held in the context of liquidation that eve....
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....ority in I.A.86 of 2023 which paved the way for Dorni to submit its EOI and join the resolution process is kept aside, there is apparent merit in the contentions of Yaana and Krishna since the breach of these Regulations cannot be concealed. Understanding Material Irregularity 12. The bottom line of every legislation-driven action is that every action must be done in the manner prescribed, and no other. The instruction is to trek along the track which law has laid and not to lay any track, howsoever superior its convenience might be. Besides establishing the legitimacy of the action, this doctrine shuts the door on arbitrariness from seeping into erode the fairness which ought to associate with every action in law. Obedience to rule of law may be considered as non-negotiable, still law does not hurry to negate and nullify everything that is done in contravention of its prescription, nor does it become unduly anxious to restore status quo ante. Here steps in the rule of material irregularity. To explain, while every deviation from the manner prescribed by law necessarily constitutes an irregularity, yet law takes cognizance of only those which falls within the contours of mate....
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....ender every act done in violation thereof void, but requires an impact assessment of such violation on the resolution process, not superficially or subjectively, but most objectively. In other words, when a violation of Regulation is alleged, and is also found, there is hardly any need for a panic-response. An Adjudicating Authority is then required to undertake an impact assessment analysis of such violation on the resolution process. Indeed, if every statutory provision or rules (in the context of IBC, also the Regulation) is considered inviolable, then how to explain situations where the Court interprets what may apparently be seen as a mandatory provision as directory? It depends on the nature of provision, the objective sought to be achieved and whether any deviation therefrom has affected the objectives which the law-makers have conceived. For instance, notwithstanding the conscious prescription of a specific timeline for admitting a CIRP, the same is judicially declared to be directory as in Committee of Creditors of Essar Steel India Ltd., Vs Satish Kumar Gupta & Others [(2020)8 SCC 531], Surendra Trading Co., Vs Juggilal Kamlapat Jute Mills Co. Ltd [(2017)16 SCC 143]. But ....
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....irregularity, founded on any breach of a Regulation, but not amounting to material irregularity, is not a negation of rule of law, but part of it. Legal Character of Regulations 14. Turning to the facts of the present case, to provide narrative convenience, the core allegations of the respondents are now repeated: By accepting Dorni's EoI after the closure date for its submission, RP had avoided at least three stages as contemplated in Regulation 36A(10) to (12). While the Regulations require RP to publish a list of provisional PRAs, and then to invite objections mutually from the shortlisted PRAs and to publish a final list of PRAs, Dorni was given the privilege of a wild card entry into the resolution process. And the CoC committed a sin of considering Dorni's resolution plan when it is on an embargo not to consider any resolution plan submitted by one whose name does not figure in the final list as provided in Regulation 39(1B)(b). 15. Given the fact that allegation of material irregularity is associated with breach of certain specific CIRP Regulations, it is necessary to understand the character of the Regulations. CIRP Regulations are but a piece of delegated legislat....
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.... f. The plan shall be submitted in accordance with EOI conditions and that the Resolution Professional and COC will consider the plan strictly in accordance with law." If this Order is dissected, it shows that the Adjudicating Authority had not only condoned the delay of Dorni in submitting the EOI, but also had directed it to submit its resolution plan by 22.02.2023, the last date for submitting it and has added two riders to it: that the condonation of delay should not be construed as relaxation of conditions in the EOI; and (b) such resolution plan which Dorni might submit should be considered strictly in accordance with law. Impact Assessment - Preludial Statement 16.2 Has this Order of the Adjudicating Authority resulted in any consequence as to shock the senses of the right thinking vis-à-vis the working of the provision of the IBC and the Regulations? Here begins the impact assessment analysis and it will be soon undertaken. Before embarking on such analysis, it is necessary to bring to focus two associated aspects: a) Yaana or Krishna do not contend that neither the RP nor the CoC are bound by the Order of the Adjudicating Authority condoning the d....
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....fter constituted material irregularity? It commences with an assessment of the impact of the Order in I.A.86 of 2023: a) First, while passing the Order in I.A. 86 of 2023, the Adjudicating Authority did not enlarge the time for Dorni to submit its plan beyond the time which was stipulated for others. In that sense the integrity associated with the bidding process is preserved: it continues to be a closed bidding and no resolution plan has been opened by the CoC at that stage. b) Secondly, the Order did not purport to relax the conditions (which are mostly the pre-qualification conditions) stipulated in the EoI for Dorni. This implies that the uniform treatment, which is part of the fairness of the resolution process, to which other PRAs are entitled is not compromised. c) Thirdly, by underscoring that the resolution plan of Dorni must be considered only in accordance with law, the Adjudicating Authority has not suggested or directed that CoC should have to approve the plan of Dorni. It continued its emphasis on equal treatment of all the PRAs and an impartial assessment of all the plan-proposals by the CoC. Again, the fairness of the resolution process is....
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....uired pre-qualification criteria for submitting the resolution plan. Indeed, Regulation 36A(11) itself mandates that objection to the inclusion of a PRA in the provisional list must be accompanied by 'supporting documents'. Regulations 36A(10) to (12) in that sense are only part of a procedure on the way to achieve the legislative purpose behind a resolution process. They are means to an end and not an end in itself. If there are no evidentiary documents to demonstrate that Dorni was not eligible to be included in the resolution process, how can a mere loss of an opportunity to object to its inclusion become significant? It therefore, follows that when it is not established that Dorni has not satisfied the conditions stipulated for submitting the EoI or is otherwise disqualified, a mere late entry in submitting the EoI cannot cast a shadow on the fairness of the resolution process and consequently loss of an opportunity to object in terms of Regulation 36A(11) cannot be said to taint the resolution process with material irregularity. To state it differently but with an emphasis that receiving Dorni's EoI is not tainted in malafide for it is done thanks to the Order of the Adjudicat....
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....aana or Krishna. In other words, neither of them was treated unfairly as to affect the fairness of the resolution process. Necessarily there can never be an issue of material irregularity. d) The fourth aspect is that, after opening the resolution plans, both Yaana and Krishna were given opportunities to improve their offer, which they did. If only the CoC had intended to hijack the resolution process to confer a benefit on Dorni which it does not deserve in law, it need not have been charitable to Yaana and Krishna. Apparently both Yaana and Krishna were treated fairly when the resolution plans were considered for approval by the CoC, and hence there cannot be a case for material irregularity. 19. To sum it up, both Yaana and Krishna have merely engaged in an exercise to glorify their perceived inviolability of certain provisions of the Regulation but without understanding their contextual significance and the ultimate effect it has produced. The working of the Regulation may not lead to a situation where the Regulation triumphs and the Code prostrates. A case of missing the wood for the tree. It would therefore, be a plain disservice to the Code and what it aims to ac....