TaxTMI 
TaxTMI 
2026 (2) TMI 610
X X X X Extracts X X X X
X X X X Extracts X X X X
....National Company Law Tribunal, Allahabad Bench, in I.A. No. 358 of 2024 and I.A. No. 401 of 2024, arising out of Company Petition (IB) No. 31/ALD/2021 in the matter of M/s Mahavir Medicare (Operational Creditor) versus Rancom Healthcare Pvt. Ltd (Corporate Debtor/CD). 2. The first appeal CA AT Ins No. 2330 of 2024 has been filed against the order passed by the Adjudicating Authority (AA hereinafter) in IA No. 358 of 2024 on 12.11.2024. The AA, vide the said order, rejected the application filed by the Appellant seeking consideration of its Resolution Plan by the Committee of Creditors (CoC) and Resolution Professional (RP) which has been earlier rejected by the RP and CoC vide their order/communication dated 16.06.2024. 3. The second appeal CA AT Ins No. 2331 of 2024 has been filed by the same appellant against the order passed by the Adjudicating Authority in IA No. 401 of 2024 on 12.11.2024. The IA No. 401 had been filed by the RP seeking the approval of Resolution Plan submitted by the Operational Creditor, M/s Mahavir Medicare. The AA vide the aforesaid order approved the Resolution submitted by OC, the same order is under challenge here. The same parties are arrayed in b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inally stipulated period owing to non- availability of requisite information from the Resolution Professional, which was essential for preparing a viable and comprehensive plan. v. In these circumstances, the Appellant addressed an email communication to the Resolution Professional on 08.06.2024, requesting permission to submit its Resolution Plan, even though the original submission deadline had elapsed, while specifically expressing its intent to revive the Corporate Debtor and maximize value for stakeholders. vi. On the same day, the Resolution Professional responded by email dated 08.06.2024, expressing his inability to independently consider the Resolution Plan on account of the CIRP nearing its statutory timeline, while stating that the Appellant's request had been forwarded to the Committee of Creditors for consideration. vii. Subsequently, by an email communication received on 10.06.2024, the Appellant was informed that the Committee of Creditors had refused to grant any further time for submission of the Resolution Plan, and that the request made by the Appellant stood rejected, despite the CIRP period not having yet expired. viii. Notwi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntentions of the Appellant in I.A. No. 358 of 2024 and approved the Resolution Plan submitted by the Operational Creditor in I.A. No. 401 of 2024, without undertaking a comparative evaluation of the two plans or addressing the issue of conflict of interest. xvi. The Appellant being aggrieved by the rejection of its Resolution Plan and the approval of the plan submitted by the sole CoC member, has preferred the present appeals challenging the legality, fairness and correctness of the impugned orders. Submissions of the Appellant 6. Ld. Counsel for the Appellant submits that the Appellant's Resolution Plan was not considered by the Committee of Creditors despite a categorical direction issued by the Adjudicating Authority. It is submitted that I.A. No. 358 of 2024 filed by the Appellant was disposed of by the Learned NCLT vide order dated 10.09.2024, wherein the Resolution Professional undertook to consider both Resolution Plans, namely the plan already approved by the CoC and the plan submitted by the Appellant, in terms of the relevant parameters including the total plan value. In furtherance thereof, the Adjudicating Authority expressly directed the CoC of Rancom He....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 11. Ld. Counsel further submitted that the conduct of the Resolution Professional and the CoC is vitiated by violations of Regulation 39 of the CIRP Regulations. It is submitted that no evaluation of the Appellant's Resolution Plan was carried out and no evaluation matrix was presented to the CoC. The Appellant was not invited to the CoC meeting where its Resolution Plan was considered. Details of avoidance and fraudulent transactions were not shared with the Appellant, and simultaneous voting on both Resolution Plans was not undertaken. 12. It is the submission of the Ld. Counsel that the background facts reveal glaring misconduct. The Operational Creditor nominated the IRP, who was appointed by the Adjudicating Authority. The Operational Creditor was the sole claimant and the sole voting member of the CoC. There were no other creditors or claimants. The IRP was confirmed as RP by the CoC, and the Operational Creditor submitted its own Resolution Plan. Despite the Adjudicating Authority directing consideration of the Appellant's Resolution Plan, the same was not afforded due consideration. 13. Ld. Counsel submits that the actions of the IRP, RP, and CoC demonstrate bias a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the settled legal position laid down by the Hon'ble Supreme Court and this Hon'ble Appellate Tribunal. Reliance is placed on the judgment of the Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors., (2019) 16 SCC 479, wherein it has been held that while the commercial wisdom of the CoC is ordinarily non-justiciable, the decision-making process must conform to the objectives of the Insolvency and Bankruptcy Code, including value maximisation, fairness, and equitable treatment of stakeholders. It is submitted that arbitrariness, lack of transparency, or reliance on extraneous considerations vitiates the process itself. 19. Ld. Counsel further places reliance on Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17, wherein the Hon'ble Supreme Court categorically held that the Insolvency and Bankruptcy Code is not a mere recovery legislation, but a beneficial statute intended for resolution, revival, and preservation of the Corporate Debtor as a going concern. It was emphasised that the insolvency framework must operate with fairness, reasonableness, and non-discrimination. Counsel submits that exclusion of a bona fide Re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eguards governing a situation where the Petitioning Creditor is the sole claimant, sole CoC member, sole Resolution Applicant, and beneficiary, the Mischief Rule of statutory interpretation must be applied. Reliance is placed on Heydon's Case (1584) 76 ER 637, which propounds that statutes must be interpreted in a manner that suppresses the mischief and advances the remedy. Counsel submits that the mischief sought to be remedied by the IBC is precisely the abuse of insolvency proceedings for self-serving ends. 25. Ld. Counsel further relies upon Smith v. Hughes, [1960] 2 All ER 859, wherein the Court adopted a purposive interpretation to cure statutory defects and prevent abuse, holding that the focus must be on the mischief sought to be addressed rather than a narrow literal interpretation. It is submitted that similar purposive interpretation is warranted in the present case. Ld. Counsel also places reliance on Eastbourne Borough Council v. Stirling & Morley, [2000] EWHC Admin (Paragraph 19), wherein it was reiterated that courts must look at the substance and effect of conduct rather than its form, particularly where rigid literal interpretation would result in injustice. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... inviting Expressions of Interest was issued on 18.02.2024 and the final list of eligible Prospective Resolution Applicants, including the Appellant, was circulated on 30.03.2024. The last date for submission of Resolution Plans was initially fixed as 19.04.2024 and, at the specific request of the Appellant, the same was extended till 04.05.2024, thereby affording sufficient opportunity to the Appellant. 32. Ld. Counsel further submits that despite the extension being granted solely for the benefit of the Appellant, the Appellant failed to submit any Resolution Plan within the extended timeline. In contrast, Respondent No. 1 submitted its Resolution Plan on 04.05.2024, well within the permissible period. The Resolution Professional accordingly informed the CoC on 06.05.2024 that only one Resolution Plan had been received within time. 33. Respondent No. 1 further states that the 5th CoC meeting was convened on 07.06.2024 for consideration of the Resolution Plan submitted by Respondent No. 1, which was thereafter approved through e-voting on 11.06.2024. It was only on 08.06.2024, that the Appellant sought permission to submit its Resolution Plan belatedly, which request was rej....
X X X X Extracts X X X X
X X X X Extracts X X X X
....submitted on 13.06.2024, was far beyond the permissible timeline. 40. Ld. Counsel submits that despite this, and pursuant to the NCLT's order dated 10.09.2024, the Appellant's Resolution Plan was duly considered by the CoC in the 6th meeting and rejected on merits for lack of feasibility and viability, with reasons recorded in the minutes. Thus, no procedural or substantive prejudice has been caused to the Appellant. 41. Ld. Counsel further submits that the decision of the CoC to reject the Appellant's Resolution Plan is a pure commercial decision taken in exercise of its statutory commercial wisdom. The IBC does not contemplate adjudication of inter se rights between prospective resolution applicants, nor does it confer any vested right upon a belated applicant to demand reconsideration. 42. Ld. Counsel states that principles of natural justice cannot be invoked to override statutory timelines or to dilute the primacy accorded to commercial wisdom under the Code. 43. Respondent No. 1 further submits that the Resolution Plan submitted by the Appellant suffered from fundamental procedural and substantive infirmities. The Appellant disclosed an undisclosed co- applicant i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....use of action. 49. Ld. Counsel further submits that the allegation of conflict of interest is wholly misconceived. The Insolvency and Bankruptcy Code does not prohibit a sole CoC member from submitting a Resolution Plan. Counsel further states that the CIRP was conducted strictly in accordance with law, and Respondent No. 1, having over 36 years of experience in the same line of business, possesses the requisite expertise to revive the Corporate Debtor and has also proposed capital infusion, unlike the Appellant. 50. Ld. Counsel for the Respondent No. 1 further submits that the Resolution Plan of Respondent No. 1 aligns squarely with the legislative intent of the IBC, namely revival of the Corporate Debtor as a going concern and maximisation of value. The plan envisages capital infusion, operational synergy, and deployment of domain expertise, thereby ensuring sustainable revival rather than mere paper recovery. 51. Respondent No. 1 further submits that decisions relating to timelines, feasibility, viability, and acceptance or rejection of Resolution Plans fall exclusively within the commercial domain of the Committee of Creditors. Ld. Counsel further states that neither t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the plan, and adherence to Section 29A eligibility conditions. 58. Ld. Counsel further submitted that no material irregularity has been committed by the Resolution Professional during the conduct of CIRP so as to attract Section 61(3) of the Code. The Appellant has failed to demonstrate any illegality, procedural impropriety or jurisdictional error on part of the Resolution Professional. Mere dissatisfaction with the commercial outcome of the process cannot be equated with material irregularity under law. 59. Ld. Counsel submits that it is a settled position of law that the commercial wisdom of the Committee of Creditors, while approving or rejecting a resolution plan, is non-justiciable. The Hon'ble Supreme Court has categorically held in Kalpraj Dharmashi and Anr. vs. Kotak Investment Advisors Limited and Anr., reported in (2021) 10 SCC 401 (para 158), that neither the Adjudicating Authority nor the Appellate Authority can interfere with the commercial decision taken by the CoC after due deliberation. 60. He further submitted that there is no provision under the Insolvency and Bankruptcy Code which mandates that the value of a resolution plan must necessarily be highe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ferential, undervalued, fraudulent and extortionate transactions (PUFE) shall be pursued by the Successful Resolution Applicant, and the benefits arising therefrom shall accrue to the CoC member itself. In this regard, IA No. 339 of 2024 under Section 45 of the Code involving Rs. 6.25 lakhs and IA No. 349 of 2024 under Section 66 of the Code involving Rs. 559.01 lakhs are pending and shall be pursued as per the approved plan. 66. Ld. Counsel submits that both the resolution plans, namely that of the Appellant and that of the Successful Resolution Applicant, provide for payment of CIRP costs in full. Therefore, CIRP costs ought not to be considered for the purpose of comparative evaluation between the two plans. It is further submitted that both plans also provide for infusion of funds by way of share capital for carrying on the business of the Corporate Debtor. Hence, this component equally does not warrant comparative analysis. 67. The principal distinguishing factor between the two plans lies in the amount offered to the sole creditor. Under the approved plan, the SRA offers Rs. 1,00,000/- plus CIRP costs on actuals, whereas under the Appellant's plan Rs. 10,00,000/- is off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claimant and the only member of the Committee of Creditors, holding 100% voting rights. The same Operational Creditor also submitted its own Resolution Plan and later on became the Successful Resolution Applicant. The Interim Resolution Professional initially appointed in the process was later confirmed as the Resolution Professional by the same sole-member CoC. Thus, the entire CIRP was effectively controlled by one stakeholder, who acted as the petitioning creditor; the only member of the CoC; the sole voting authority with 100% voting rights; the Resolution Applicant, and the sole beneficiary of the approved Resolution Plan. 75. In the above factual background, two important issues arise for our consideration. i. The first issue is whether a Resolution Applicant who is also a Operational Creditor of the CD and sole member of Committee of Creditors, holding 100% voting rights can approve its own Resolution Plan? ii. The second and linked issue is whether such a Committee of Creditors, consisting of only one member, who is also a Resolution Applicant and who is directly interested in the outcome of the resolution process in its own favour can fairly, objective....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thout approval of the CoC. It is further submitted that in compliance with the order dated 10.09.2024, the Appellant's Resolution Plan was placed before the CoC and considered in the 6th CoC meeting. According to Respondent No.2, the rejection of the Appellant's plan was based on commercial considerations recorded in the minutes, and therefore no illegality or unfairness can be attributed to the Resolution Professional. 79. We first examine Issue No. 1, and note that Section 30(5) of the Code provides an important statutory safeguard to ensure fairness in the decision-making process of the Committee of Creditors. The relevant Section 30(5) of the Code has been reproduced below: "Section 30: Submission of resolution plan. (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." 80. There are two parts to this section of IBC. The first part gives the Resolution Applicant discretion to attend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. Accordingly, Issue No. 1 is answered in negative. 83. We now proceed to examine Issue No. 2 by closely analysing the manner in which the 6th meeting of the Committee of Creditors was conducted. The proceedings of the said meeting are central to determining whether the Committee of Creditors fairly and objectively assessed the feasibility and viability of the Resolution Plans submitted by the Appellant and the Respondent. 84. The relevant portion of minutes of 6th CoC meeting held on 18.09.2024 are extracted below: 85. We note from the minutes of the 6th meeting of the Committee of Creditors that the Resolution Professional placed on record the stark difference between the competing Resolution Plans. The Resolution Professional specifically informed the CoC that the Resolution Plan submitted by Respondent No.1 (Mahaveer Medicare) was of a value of Rs. 1 Lakh, whereas the Resolution Plan submitted by the Appellant, M/s Pragiti Constructions, was of a value of Rs. 20 Lakhs, out of which Rs. 10 Lakhs was proposed to be distributed to the operational creditor. The Resolution Professional further pointed out that the offer of Rs. 20 Lakhs was only an initial offer and that, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant in the present case because the only member of the Committee of Creditors was also the competing Resolution Applicant. We further note that important information relating to avoidance and fraudulent transaction proceedings was not shared with the Appellant, even though such information was relevant for a fair assessment of the Resolution Plan. The voting process was also not conducted fairly, as both Resolution Plans were not placed for consideration and voting at the same time. 89. We also find it necessary to address the factual aspect concerning the stark difference in the plan values offered by the competing Resolution Applicants, as this assumes relevance not for substituting our commercial opinion, but for examining whether the decision-making process was fair and bona fide. It is an admitted position on record that the Resolution Plan submitted by the Appellant proposed a total plan value of Rs. 20 Lakhs, apart from CIRP costs, whereas the Resolution Plan submitted by Respondent No.1 contemplated an upfront amount of only Rs. 1 Lakh, apart from CIRP costs. Such a substantial variance in plan value, by itself, may not compel acceptance of the higher offer; however, it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ture but was intended to ensure a meaningful, objective, and unbiased consideration of the Appellant's plan. Once such a direction was issued, it was incumbent upon the Resolution Professional and the Committee of Creditors to comply with the same in both letter and spirit. 93. In the present case, we note that the manner in which the 6th meeting of the Committee of Creditors was conducted suffers from serious procedural irregularities and violation of principles of natural justice. Not inviting the appellant for the meeting was a violation of Section 30(5) of the Code, which provides discretion to the Resolution Applicant and not to RP. The Appellant's Resolution Plan was not fairly or objectively evaluated, no proper evaluation matrix was applied, relevant material information was not shared, and the Appellant was not invited to or permitted to participate in the 6th CoC meeting, where its Resolution Plan was discussed and rejected. The assessment of the Resolution Plan was carried out by a single-member Committee of Creditors who was the only other Resolution Applicant directly interested in the outcome of the process. Such a process cannot be said to be fair, transparent, or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Sections 5(26), 14(2), 20(1), 20(2)(d) and (e) of the Code read with Regulations 37 and 38 of the 2016 Regulations all speak of the corporate debtor running as a going concern during the insolvency resolution process. Workmen need to be paid, electricity dues need to be paid, purchase of raw materials need to be made, etc. This is in fact reflected in this court's judgment in Swiss Ribbons (supra) as follows: "26. The Preamble of the Code states as follows: "An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto." 46. This is the reason why Regulation 38(1A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal. (Emphasis supplied) 95. We also draw support from the judgment of the Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. v. Union of India' [(2019) 4 SCC 17], wherein the Court has emphasised that the Insolvency and Bankruptcy Code is founded on the principles of fairness, transparency, and maximisation of value, and that the insolvency process must be conducted in a manner that is just, equitable, and procedurally sound. The Hon'ble Supreme Court has clearly observed that exclusion of bona fide resolution applicants, without due process violates the very spirit of the Code. Applying this settled position to the present case, we find that the approach adopted by the Committee of Creditors falls short of these principles. The CoC has noted in the 6th CoC meeting that the Resolution Plan of the Appellant offers 0.67% of the total dues of the Operational Creditor, who ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme - workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximize their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. [See ArcelorMittal (supra) at paragraph 83, footnote 3]. 12. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tors' discriminated between the eligible 'Resolution Applicants', while considering the 'Resolution Plan' of 'Rajputana Properties Private Limited? and; (ii) Whether the Resolution Plan submitted by Rajputana Properties Private Limited is discriminatory? 31. The Adjudicating Authority has noticed that the 'Committee of Creditors' had extensive negotiations and consultations with the Rajputana Properties Private Limited' on the ground that it was the highest 'Resolution Applicant and also obtained certain clarification: after due deliberation voted in favour of the Resolution Plan' of the "Rajputana Properties Private Limited in its meeting held on 14th March, 2018. At the same time the Committee of Creditors' discriminated with the other Resolution Applicants which will be evident from the fact that the proposal for negotiation and better proposal given by the Ultratech Cement Limited' was not at all considered though it was submitted on 8th March, 2018 i.e. much prior to the approval of the plan (14th March, 2018). The 'Committee of Creditors' have taken plea that the revised offer given by Ultratech Cem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in causa sua, that no person can be a judge in his own case, is not a mere technical rule but a foundational principle intended to preserve the integrity of adjudicatory and decision-making processes. When the same entity proposes a Resolution Plan, evaluates competing plans, rejects them, and finally approves its own plan, the process ceases to be fair, impartial, or credible. Even if actual mala fides are not expressly proved, the existence of a real likelihood of bias is sufficient to vitiate the process. Justice must not only be done but must also appear to have been done. 98. In view of the aforesaid discussion, we are satisfied that the rejection of the Appellant's Resolution Plan is vitiated by material irregularity, violation of principles of natural justice, and non-compliance with binding judicial directions. Accordingly, we hold that the decision of CoC which comprised of a Resolution Applicant who was also an Operational Creditor and had 100% voting rights in CoC on the resolution plan of the appellant was vitiated by material irregularity. A single member of CoC who is also a Resolution Applicant would always have conflict of interest vis-a-vis another Resolution Ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Corporate Debtor is not possible within the current legislative framework and liquidation is the only solution in this case. 103. Accordingly, we set aside the impugned order and order the liquidation of the Corporate Debtor. C.P. (IB) No. 31/ALD/2021 is restored to its original position. Parties to appear before the Ld. Adjudicating Authority (National Company Law Tribunal, Allahabad Bench) on 18.02.2026. ============= Document 1 IA No. 401/2024 & 358/2024 The RP apprised the CoC that the IA/401/2024 has been filed by the RP seeking approval of the Resolution Plan filed by M/s Mahaveer Medicare, SRA and the Operational Creditor in the matter of Rancom Healthcare Private Limited, and who itself initiated the present CIRP U/s 9 of the Code by filing the application along with the Resolution Plan. There are two objections application filed to this approval of the Resolution Plan; one by way of an IA No 358/2024 i.c. M/s Pragati Construction on the ground that the Resolution Plan submitted by the Applicant has been rejected by the RP/ COC on the ground of having been submitted beyond the cut-off date. The Hon'ble NCLT instructed that though the Resolution Plan of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....agati Constructions' Resolution Plan. Moreover, M/s Mahaveer Medicare has more than 35 years of experience in the business of trading pharmaceutical and medical products, which is the foremost criteria adopted by the Committee of Creditors to accept M/s Mahaveer Medicare's Resolution Plan. The RP made a submission to the CoC that the value of the Resolution plan submitted by Mahaveer Medicare (SRA) is Rs 1 Lakh and the value of Resolution Plan submitted by M/s Pragati Constructions is Rs 20 Lakhs out of which Rs 10 lakhs will be distributed to the operational creditors. The RP further stated that as there is a noticeable difference between both the plans value therefore, can we match the values of the resolution plans with one another. The amount of Rs 20 lakhs as offered by M/s Pragati Constructions is their initial offer and if this goes further in competition with the Resolution Plan of Mahaveer Medicare then the same may be increased. The RP further submitted that if the Resolution Plan of M/s Pragati Constructions is considered for review then this will create a healthy competition. To this, Mr. Harshvardhan Sharma replied that the purpose is not like matching/increasing or....