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2023 (1) TMI 813 - AT - Insolvency and BankruptcySeeking consideration of Revised Resolution Plan after receipt of Resolution Plan - whether after closure of Challenge Process on 15.07.2022 and consequent receipt of Resolution Plan by 18.07.2022, the Adjudicating Authority could have directed for consideration of the revised plan submitted by the Respondent No.2 thereafter? - HELD THAT - Clause 7 of the Challenge Process clearly contemplates that after conclusion of the Challenge Process, the eligible Resolution Applicants shall not revise their bid/commercial offer. It is relevant to notice that Challenge Process also reserves the unconditional right of the CoC to cancel/ modify/ withdraw/ abandon/ amend the process of the Challenge Process at any stage. The approval of the plan submitted in CIRP is in the domain of the CoC. Under Regulation 39 of the CIRP Regulations, the Committee is entitled to record its deliberation and vote on such Resolution Plan simultaneously. Challenge Process also reserves the unconditional right of the CoC to cancel/ modify/ withdraw/ abandon/ amend the process of the Challenge Process. After revised offer was received from Respondent No.2, the said factum was brought into the notice of the CoC in its 15th CoC meeting held on 25.07.2022. In 15th and 16th CoC meeting, CoC deliberated how to proceed further. Suggestions were also received that NCLT be approached for permitting modification. The present is a case where CoC did not finally took any decision to permit the Respondent No.2 to revise its bid after close of Challenge Process. CoC ultimately in the 17th CoC meeting held on 03.08.2022 in spite of earlier suggestions received in the earlier CoC meeting proposing different course of action decided to vote all the Resolution Plans received in the process. It is well settled that the timeline in the IBC has its salutary value and it was the wisdom of the CoC which decided to vote on the Resolution Plan after completion of Challenge Process and not to proceed to take any further negotiation or further modification of the plan, that decision ought not to have been interfered with. The Application was filed by the Respondent No.2 on 07.08.2022 by which date CoC has already decided to resolve the vote on all the plans and voting has also commenced w.e.f. 07.08.2022. On going through the whole Application filed by the Respondent No.2, it is found that there is not even mention of the fact that voting has already commenced w.e.f. 07.08.2022. The Adjudicating Authority without there being any valid reason ought not to have been interfered with the voting on the Resolution Plans which had already commenced w.e.f. 07.08.2022. As result of the order of the Adjudicating Authority the process of voting which had commenced on 07.08.2022 was abandoned by the Resolution Professional - the order passed by the Adjudicating Authority dated 11.08.2022 is unsustainable and deserves to be set aside. CoC having already resolved to vote on all the Resolution Plans including the Resolution Plan submitted by the Appellant and the Respondent No.2 which voting process having commenced and was disrupted due to impugned order, the voting process in pursuance of the CoC decision dated 03.08.2022 may commence afresh and be completed in a time bound manner. Appeal allowed.
Issues Involved:
1. Error in Adjudicating Authority's Direction 2. CoC's Jurisdiction and Challenge Process Rules 3. Maximization of Corporate Debtor's Assets 4. Regulation 39(1A) Compliance 5. Validity of Revised Resolution Plans 6. Commercial Wisdom of CoC Issue-wise Detailed Analysis: 1. Error in Adjudicating Authority's Direction: The Appellant argued that the Adjudicating Authority erred in directing the consideration of the revised plan from Respondent No.2 after the Challenge Process concluded. The CoC had adopted the Challenge Process to maximize asset value, and Respondent No.2 had no right to revise its plan post-process. The Authority's intervention was deemed to delay the CIRP, contrary to IBC objectives. 2. CoC's Jurisdiction and Challenge Process Rules: The CoC reserved the right to negotiate with Resolution Applicants and determine the negotiation mechanism. The Challenge Process rules required unconditional acceptance from all applicants, who were then bound by the process outcome. The CoC conducted the Challenge Process over seven rounds, with the final plans submitted by 18.07.2022. The CoC's decision to proceed with voting on the final plans was within its jurisdiction. 3. Maximization of Corporate Debtor's Assets: Respondent No.2 argued that the Code's objective is asset maximization, justifying the revised offer's consideration. However, the CoC's commercial wisdom in adopting the Challenge Process aimed to achieve this objective. The CoC's decision to vote on the final plans was a strategic move to ensure timely resolution and value maximization. 4. Regulation 39(1A) Compliance: Regulation 39(1A) allows one-time modification of resolution plans or the use of a challenge mechanism. The CoC adopted the Challenge Process, which concluded on 15.07.2022. The regulation's intent is to provide a structured mechanism for plan improvement, which the CoC followed. The CoC's adherence to this regulation was crucial in maintaining process integrity. 5. Validity of Revised Resolution Plans: The Challenge Process rules stipulated that no revisions were allowed post-process. Respondent No.2's revised offer, submitted after the Challenge Process, violated these rules. The CoC's decision to vote on the final plans, without considering further revisions, was consistent with the established process and regulatory framework. 6. Commercial Wisdom of CoC: The Supreme Court has consistently upheld the CoC's commercial wisdom in decision-making. The CoC's decision to proceed with voting on the final plans, despite suggestions for further negotiation, was a strategic choice to adhere to IBC timelines and ensure resolution. The Adjudicating Authority's interference with this decision was unwarranted. Conclusion: The order of the Adjudicating Authority dated 11.08.2022 was set aside. The CoC's decision to vote on the final plans, as per its 03.08.2022 resolution, was upheld. The Resolution Professional was directed to initiate a fresh voting process, to be completed within one month, ensuring adherence to the IBC's objectives and timelines. The CIRP was extended till 28.02.2023 for the Resolution Professional to report the developments to the Adjudicating Authority.
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