AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 874
X X X X Extracts X X X X
X X X X Extracts X X X X
....cturers Private Limited And Consortium of Shantech International Pvt Ltd and Worldfa Exports Pvt Ltd Versus Mr. Amit Chandrashekhar Poddar, S.S. Fabricators and Manufacturers Private Limited And Satsai Finlease Private Limited Versus Mr. Amit Chandrashekhar Poddar, Resolution, Assets Reconstruction Company (India) Limited, Punjab National Bank, Indian Bank, Bank of Maharashtra, Bank of Baroda, Corporation Bank, Canbank Factors, Pranav Financial Services Private Limited, Consortium of Shantech International Pvt Ltd and Worldfa Exports Pvt Ltd., India E Hub Services Pvt Ltd & New World Landmark LLP, Shriniwas Spintex Industries Limited, Faiz Vali; S.S. Fabricators and Manufacturers Private Limited JUSTICE ASHOK BHUSHAN CHAIRPERSON AND BARUN MITRA MEMBER (TECHNICAL) For the Appellant : Mr. Anshumaan Sahni and Mr. Ahmed Chunawala, Advocates, Mr. Maulick Choksi, Advocate, Mr. Sumesh Dhawan, Mr. Amir Arsiwala, Ms. Neha Arya and Ms. Vaishnavi Dhure, Advocates, Mr. Nitesh Ramani and Ms. Sukhda Kalra, Advocates For the Respondents : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Bharat Gupta, Mr. Varun Tyagi, Mr. Vishesh Chauhan, Ms. Shagun Gupta, Mr. Ishan Srivastava and Ms. Snig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....¢ Resolution plans were received from four Resolution Applicants namely Consortium of India Ehub Services Pvt. Ltd. and New World Landmark LLP; ("Ehub" in short) Consortium of Shantech International Pvt. Ltd. and Worldfa Exports Pvt. Ltd. ("Shantech" in short); Shriniwas Spintex Industries Pvt. Ltd. and S.S. Fabricators and Manufacturers Pvt. Ltd. ("S.S Fab" in short). • In the 37th CoC meeting held on 28.02.2025, draft plans were shared with CoC members and PRAs were informed of the negotiation process. Three rounds of negotiations were also held by the RP alongwith CoC members and the PRAs. Thereafter, the RP informed the PRAs by email on 01.03.2025 to submit their final resolution plan on or before 04.03.2025. • Following decision taken in the 39th CoC meeting, the e-voting on the resolution plan commenced on 26.03.2025. On 06.05.2025, the Adjudicating Authority directed the CoC to conclude the voting on the plan on or before 20.05.2025 while disposing of IA No. 1849 of 2025 which had been filed by the RP. However, the voting continued beyond 20.05.2025 and concluded on 23.05.2025. This order of the Adjudicating Authority also observed that the extend....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the SRA; Shri Maulik Choksi, Ld. Counsel for the E-hub; Shri Anshumaan Sahni, Ld. Counsel for Shantech; Shri Nitesh Ramani, Ld. Counsel for the Suspended Director of the Corporate Debtor and Ld. Counsel, Ms Sharanya Shivaraman appearing for CoC members. 5. Shri Sumesh Dhawan, Ld. Counsel making submissions on behalf of the DFC-Satsai, contended that the approval of the resolution plan of SRA-S.S Fab was vitiated by grave procedural and substantive material irregularities which undermined the integrity of the CIRP. Narrating these irregularities, it was submitted that the RP had acknowledged an outstanding EPF liability of Rs. 13.89 Cr. but failed to include the same in the Net Present Value ("NPV" in short) for evaluating the competing resolution plans. The failure to adjust the NPV scores based on statutory liabilities of EPF was clearly a procedural irregularity which created ambiguity in the plan comparison of PRAs. Moreover, the RP had disclosed the comparative NPV of other PRAs as well as their evaluation matrix score in breach of the RFRP which unduly helped SS Fab to bridge their plan value gap with other PRAs and improve their position. It was also pointed out that post....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich held that the plan has to pass the test of judicial scrutiny and commercial decisions of the CoC cannot be a ground to overlook procedural irregularity in the conduct of CIRP or to overlook mandatory compliances of IBC and CIRP Regulations. The impugned order therefore deserved to be set aside and hence their appeal. 6. The Ld. Counsel appearing on behalf of URA-Shantech submitted that they fully supported the arguments canvassed on behalf of DFC-Satsai. It was emphatically asserted that the CIRP process had been vitiated due to material procedural irregularities on the part of the RP in the conduct of CIRP, lack of transparency, selective back-channel negotiations without knowledge of full CoC, suppression of material information before the CoC, violation of orders of Adjudicating Authority in extending time-line of e-voting and for submission of plan approval after expiry of extended CIRP period. It was also asserted that their plan was rejected without assigning any reason at a time when on 03.03.2025, the RP had informed URA-Shantech that their plan proposal was ranked No.1 in terms of NPV and No.2 as per evaluation matrix while that of SS Fab was ranked No.3 in both NP....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the DFC to claim prejudice when the said amount was to be deducted from the share of the secured financial creditor. Moreover, the DFC having been paid more than the liquidation value which was nil under the waterfall mechanism, they cannot claim to have been aggrieved on this count. It was also contended that all the PRAs had been allowed to participate during the extended e-voting period and when the Adjudicating Authority had allowed time till 31.05.2025 to complete the CIRP, there was no material breach or irregularity committed by the RP. It was also submitted that the contention of the URA to restart the bidding process or hold a challenge mechanism lacks merit as it is the sole discretion of the CoC to decide any method or process for evaluation of resolution plan as has been clarified by this Tribunal in Ashdan Properties Pvt. Ltd. Vs. Hemant J. Mehta & Ors. in CA(AT) (Ins) No. 1608 of 2025. It was also added that in terms of Step IV(f) of the RFRP, the RP acting on the instructions of COC could decide any method or process for negotiations and that in terms of Step V(e) of the RFRP, it was the discretion of the COC to declare any Resolution Applicant as SRA either on evalu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for all the parties and perused the records carefully. 10. The first submission made by the DFC-Satsai and URA-Shantech in objecting to the plan was that any plan that capped CIRP costs or diluted the first charge of CIRP costs on the creditors was statutorily non-compliant plan. In the present case, the SRA had illegally put an artificial cap on the CIRP cost at Rs. 25 lakhs in violation of Section 30(2)(a) of the IBC which mandates that CIRP costs must be paid in full and in priority and cannot be shifted onto the creditors. The SRA had failed to make adequate provision for payment of CIRP dues at actuals. The plan of the SRA provided that CIRP costs beyond Rs. 25 lakhs was to be paid from the share of Secured Financial Creditors which plan-feature rendered the resolution plan defective. 11. Per contra, it was contended by the SRA that their plan had duly provided for payment of CIRP costs at actuals since the SRA was informed in terms of the Information Memorandum and during CoC meetings that there was no unpaid CIRP cost at the time of submission of the resolution plan. Moreover, as the Corporate Debtor was a going concern, the plan provided that the CIRP costs would be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the CoC in its business wisdom wherein the Secured Financial Creditors have more than the requisite majority share, we do not find any merit in the DFC raising their objection to the plan on this score. In any case, the DFC-Satsai being an Unsecured Financial Creditor cannot be seen to raise objections on this ground since any allocation proposed to be made beyond Rs. 25 lakhs for unpaid CIRP costs was to go from the kitty of the Secured Financial Creditor without having any bearing on the distribution of proceeds earmarked for the Dissenting Financial Creditor. Moreover, this contention of the DFC has become redundant since the resolution plan already stands implemented and there is no CIRP cost which remains unpaid post implementation of the plan. 16. This brings us to the next ground for objecting to the plans by URA and DFC. It was contended that the approved resolution plan of the SRA was defective as it did not provide for payment of EPFO dues of the Corporate Debtor amounting Rs. 13.89 Cr. though EPF dues enjoyed statutory protection under Section 36(4)(a)(iii) of the IBC. By not factoring in the EPF dues and deferring the EPF dues violated Section 30(2)(e) of the IBC ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made by the EPFO on the basis of assessment carried out during the moratorium period. It was therefore contended that the deferment of the payment of EPF dues and its distribution to stakeholders till the expiry of appeal period did not make the plan conditional. The plan of the SRA clearly provided that an amount of Rs. 3.39 Cr. would be kept aside in respect of EPF dues and that if the liability to pay the same stood discharged, since the RP had challenged the EPFO liability, the said amount would be paid to the secured financial creditors. In the given circumstances, when the EPFO dues had been set aside in an escrow account by the SRA in its resolution plan with a provision that the same would be distributed to the secured financial creditors if no orders with respect to EPF liability was passed against the Corporate Debtor, the DFC could not have raised any objection to the plan that the SRA was trying to evade the liability of making full and specific provision for PF and gratuity dues in the resolution plan. 19. Having noted the rival contentions, it would be useful now to see how the EPF liability has been treated in the resolution plan of the SRA. The relevant portion ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at Rs. 3.39 Cr would be kept aside out of the above resolution plan amount from the share of the secured financial creditors to be distributed to these creditors once the EPF assessment proceedings came to an end within the period prior to expiry of appeal period. 21. We further notice that the CoC was also seized of the matter and had deliberated on this issue in its 41st meeting. It was none else but the Assignor of Satsai who had themselves raised a query in the 41st CoC as to when the EPF amount of Rs. 3.39 Cr. would be paid. RP stated that the SRA had clarified that the amount specifically set aside for EPF dues would be distributed to the secured financial creditors if no orders were passed against the Corporate Debtor post 90 days of the approval of the plan by the Adjudicating Authority. 22. It would be instructive to notice the relevant deliberations during the 41st CoC meeting which is as reproduced below: "....Mr. Raghava Lakhotiya asked the RP few queries regarding the expenses of renewal of certification, cash flows of the Corporate Debtor and the calculation of interest of NCDs to be issued by one of the Resolution Applicants. He had also asked regardin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....C of post-facto modification having been made in SRAs approved plan which materially altered the financial parameters and consequential NPV valuations is unfounded. 24. Further, when we look at the pleadings of the DFC-Satsai in CA No. 73 of 2025, we find that Satsai have themselves admitted that the EPFO liability was sub-judice and that being so the Appellant's contention that the EPFO dues was a crystallised liability is also clearly a contradiction. The relevant pleadings are reproduced below for easy reference: "7. It is further revealed from the minutes of the 41st meeting that the Resolution Professional/Respondent No.1 had informed the members that the application filed by the EPFO had been earlier rejected by the Adjudicating Authroity and that the EPFO had subsequently passed adverse orders against the Corporate Debtor. These orders were under challenge before the Hon'ble Central Government Insdustrial Tribunal (CGIT), Nagpur, where the matter remains sub judice." In any event, Satsai being a dissenting financial creditor also could not have claimed to have been prejudicially impacted in any manner for even if the EPFO dues were payable by the Corporate Deb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ending the timeline also clearly adverted attention to the directions of the Adjudicating Authority for completing the voting by 20.05.2025. Moreover, each time the extension of timeline was allowed, the Financial Creditor seeking the extension was kept apprised and cautioned about the deadline of 20.05.2025 fixed by the Adjudicating Authority for completion of voting process and that CoC would have to bear the consequences for voting period being extended. It was also stoutly submitted that all the PRAs had been informed about the extended voting lines but none of the PRAs had raised any objection in this regard. 27. To return our findings on whether e-voting done after 20.05.2025 by the RP without seeking any permission from the Adjudicating Authority in this regard had rendered the voting process illegal, at this stage, it would be relevant to take notice of the order of the Adjudicating Authority dated 06.05.2025 extending the CIRP period. The relevant paras of the said order is as below: "4) Having considered the submission and taking note of facts and circumstances of the present case, this Bench deems it fit and appropriate to allow the present Interlocutory Appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch of the directions of Hon'ble NCLT, Mumbai Bench. Accordingly, the CoC members would bear all the consequences, if any, before Hon'ble NCLT, Mumbai Bench, due to such extension requested and granted." We have also noticed that each time the RP had extended the voting window, it had taken due care to sound the CoC of the likely consequences. However, as has already been noticed in the preceding paragraph 28, the RP had completed the voting process by 31.05.2025 which was the outer date fixed by the Adjudicating Authority. Thus, this cannot be viewed as a material irregularity which rendered the voting process ultra vires. 30. It is also an uncontroverted fact that all the PRAs were aware that the voting window on the plan was extended up to 23.05.2025. Neither the DFC- Satsai nor any other PRA at any point of time had raised any objection against extension of voting time-line. Having participated in the voting process and thereafter questioning the extension of voting window, and that too, after the voting had concluded and the plan of the SRA had emerged successful is clearly an act of approbation and reprobation which therefore cannot be accepted. Extended time-line cannot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial placed on record, we find that it is an undisputed fact that clarification had been sought by one of the SFCs viz. Punjab National Bank ("PNB" in short). However, it is equally pertinent to note that the query had not been selectively sought only from the SRA but was sought from other PRAs also and the response received from them was brought to the knowledge of other SFCs except minority CoC members. Thus, this is a case where equal opportunity was given to all PRAs to submit their clarifications on queries raised before them. Even Shantech-URA which is now objecting to the approval of the plan of SRA had also provided clarifications to the query raised unto them by PNB without any demur or protest. Thus, when PRAs including Shantech had never objected to the clarifications sought from them and to the contrary had in fact furnished their respective responses, raising of belated objections now after their plan was rejected by the CoC clearly shows that it was an afterthought. When the SFC members who constituted 98.54% of the CoC had no objections at clarifications being sought, DFC-Satsai and other similarly placed members of the CoC who constitute barely 1.46% of the CoC canno....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... date for submission of commercial offers of 04.03.2025 was communicated to all the parties. The closure of all the rounds was achieved on the last date fixed for submission of the resolution plan. The final plans of PRAs were opened in the 38th CoC. RP provided Comparative Chart and Summary of Plans based on evaluation scores and NPV to CoC. The PRAs were also informed about voting on their plans including the extended time-line of voting. The Adjudicating Authority also took notice of the fact that request was made by certain PRAs to conduct further negotiations, however, the CoC in its 39th CoC meeting categorically decided that no further negotiations would be allowed and resolved to proceed with e-voting on the final revised resolution plans already received. The minutes of the 39th and 40th CoC deliberations also show that the final revised plans were opened and evaluated before all other members of the CoC. There is no record of any alteration or modification of the plan having been permitted selectively for any PRA including the SRA once plan was frozen. The 41st CoC meeting had only discussed the EPF liability and sought clarifications on how the EPF payments kept in Escro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fer and this opportunity had already been availed, it cannot be the vested right of the URA or the DFC to insist on the CoC to adopt the Swiss Challenge Mechanism. 38. We do not find any merit in the contention of the URA that their plan was rejected wrongly without assigning any reason. When we look at the clauses of the RFRP, it is clear that commercial wisdom of CoC enjoyed paramount importance and was to be the prime decider. Hence, the URA after having participated in the process cannot now turn around and question the RFRP which was the guiding document in this regard. We may now advert our attention to the relevant clauses of the RFRP which is as extracted below: Step IV Discussions and negotiations with the Resolution Applicant(s) and further Due Diligence of Resolution Applicant(s) .... b) The Committee of Creditors shall negotiate on one to one basis with each of the Compliant Resolution Applicant in presence of the Resolution Professional. CoC reserves its right to further enter into negotiations with each of the Resolution Applicant(s) for multiple rounds and for multiple dates till the satisfaction of the CoC. c) At no point durin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any criteria as per its commercial wisdom to approve a resolution plan. The CoC is the best judge to interpret the RFRP which is its own document. When all relevant information was available before it and the plans of the PRAs were duly deliberated upon by all its members, the commercial wisdom of the CoC cannot be questioned. The CoC also comprised of leading banks who undoubtedly were well aware of the financials of each resolution plan and their implications on the survival of the Corporate Debtor. The CoC having approved the resolution plan of the SRA with 98.4% vote-share, we are of the view that nothing really survives for consideration. The Shantech-URA after having also availed their chance to revise their plan and not succeeded thereafter have now questioned the CIRP process which does not meet our countenance. As regards Satsai which is a dissenting financial creditor, they were at best entitled for an amount under Section 30(2)(b) which is not less than the liquidation value. In the present case, the minimum amount payable to the DFC is the liquidation value of the Corporate Debtor. It is pertinent to note that Satsai-DFC was being provided Rs. 16.70 lakh in the plan in....