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2024 (12) TMI 681 - AT - IBCIrregularities in the conduct of CIRP by RP - Existence of evidence of irregularity in the conduct of CIRP proceedings by the RP or not - Appellant in their capacity as suspended management was prevented from effectively participating in the CoC deliberations or not - Adoption of the Swiss Challenge Method by the CoC - approval of resolution plan of the SRA - Denial of effective participation to the Appellant in the Committee of Creditors (CoC) meetings. Adoption of the Swiss Challenge Method by the CoC - HELD THAT - The Challenge Mechanism envisaged under Regulation 39(1A) by its nature envisages multiple rounds of challenge so as to enable Resolution Applicants to improve their Plans. Regulation 39(1A) does not prohibit CoC from negotiating with Resolution Applicants or asking Resolution Applicants to further increase the Plan value. Any such step taken by the CoC to follow the Swiss Challenge Method cannot be said to be arbitrary or in violation of any statutory provisions of the IBC - The CoC had noted that the process has been carried on by the RP and his team in a completely fair and transparent manner which process was also well explained to all the PRAs. The declaration of the Anchor Bidder was also made in a transparent manner and all the other PRAs were given opportunity to improve the consideration in two rounds of discussions held in the COC meeting on 09.05.2024. This contention of the Appellant questioning Swiss Challenge method clearly lacks merit as the adoption of Swiss Challenge for value maximization was the outcome of the commercial wisdom of COC. The Adjudicating Authority has not committed any error in holding at para 30 of the impugned order that a perusal of the 52nd CoC Meeting reveals that the agenda qua adoption of the Swiss Challenge Method and the Anchor Bidding system were duly approved by the CoC in its commercial wisdom. Denial of effective participation to the Appellant in the Committee of Creditors (CoC) meetings - HELD THAT - The RP apprised the members of CoC that despite being the highest bidder, Truflair Buildwell has further improved the offer by Rs 1.50 cr and cured their plan by removing the conditional clause. Thus, clearly this is a case where the revised resolution plan of the SRA was duly considered, evaluated and approved by the CoC before the RP placed the same for the approval of the Adjudicating Authority and hence the ratio of the judgement of the Hon ble Supreme Court in M.K Rajagopalan 2023 (5) TMI 344 - SUPREME COURT is clearly not applicable in the present factual matrix. The CoC members were fully aware of the details of the plan proposals submitted by the PRAs. At this stage, all PRAs were asked to send their best possible offers in a closed envelope and password protected soft copy by 21.05.2024 for consideration of the CoC. This modality was equally applicable on all the PRAs in terms of the decision taken by the CoC. The resolution plans received from PRAs other than the anchor bidder were opened up during the first session of the 54th meeting and was displayed through shared screen during the said meeting. Thereafter the resolution plan submitted by the anchor bidder for approval of CoC was also shared on screen by the RP and then the same was thoroughly evaluated by COC. When the CoC, inspite of being the stakeholder whose interests were most critically affected, had evinced no complaints about the fairness and transparency of the process which had been followed by the RP, there are not much force in the contention of the Appellant that there were irregularities in the process followed by the RP. Whether the Adjudicating Authority had erred in approving the resolution plan of the SRA? - HELD THAT - The Hon ble Supreme Court in a catena of judgments has laid down that commercial wisdom of CoC has to be given paramount importance and cautioned time and again about the need of minimal interference in the commercial decision of CoC to approve the Resolution Plan. It has been held that the opinion expressed by the CoC after due deliberations in the meetings through voting, as per voting shares, is the collective business decision and that the decision of the CoC's commercial wisdom is non-justiciable, except on limited grounds as are available for challenge under Section 30(2) or Section 61(3) of IBC. The Hon ble Supreme Court has consistently held that it is not open to the Adjudicating Authority or the Appellate Authority under IBC to take into consideration any other factor other than the ones specified in Section 30(2) or Section 61(3) IBC in questioning the decision of the CoC - No sufficient ground has been made out within meaning of Section 61(3) of the IBC to interfere with the decision of the Adjudicating Authority approving the Resolution Plan of the SRA. The Adjudicating Authority did not err in approving the resolution plan of the SRA. We are also of the considered view that the Adjudicating Authority did not commit any error in rejecting the interlocutory application of the Appellant objecting to the approval by the CoC of the resolution plan of the SRA. In result, the impugned order does not warrant any interference. Appeal being devoid of merit is dismissed.
Issues Involved:
1. Alleged irregularities in the conduct of the Corporate Insolvency Resolution Process (CIRP) by the Resolution Professional (RP). 2. Denial of effective participation to the Appellant in the Committee of Creditors (CoC) meetings. 3. Adoption of the Swiss Challenge Method by the CoC. 4. Approval of the resolution plan by the Adjudicating Authority. Detailed Analysis: 1. Alleged Irregularities in the Conduct of CIRP by the RP: The Appellant contended that the RP failed to conduct the CIRP proceedings with due diligence, citing irregularities and violations of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Appellant argued that the RP did not supply the final resolution plan to the CoC and the suspended management, which was a violation of established legal precedents. The RP allegedly presented an unsigned word document as the final financial proposal, which was only screen-shared, preventing meaningful discussion on its viability. The Appellant also claimed discrepancies in the liquidation value estimates, which were not adequately addressed by the RP. Upon examination, the Tribunal found no substantial evidence of irregularity in the CIRP's conduct. It noted that the RP had conducted the process transparently, and the CoC had approved the resolution plan with a 100% vote. The Tribunal emphasized that the commercial wisdom of the CoC is paramount and non-justiciable unless there is a violation of Section 30(2) or Section 61(3) of the IBC. 2. Denial of Effective Participation to the Appellant in CoC Meetings: The Appellant argued that as the suspended management, they were entitled to participate in CoC meetings and have access to the resolution plans. However, they were denied a copy of the resolution plan, which hindered their participation. The Tribunal found that the Appellant, being a competing Resolution Applicant, could not be provided with the resolution plan of other applicants due to potential conflicts of interest. The Tribunal highlighted that the Appellant's submission of a resolution plan was rejected due to non-compliance with procedural requirements, such as failing to submit an Expression of Interest and earnest money. 3. Adoption of the Swiss Challenge Method by the CoC: The Appellant challenged the CoC's decision to adopt the Swiss Challenge Method, arguing it was wrongful. The Tribunal noted that the CoC's decision to adopt this method was within its commercial wisdom and aligned with the IBC's objective of value maximization. The Tribunal referenced Regulation 39(1A) of the CIRP Regulations, which permits the use of a challenge mechanism to improve resolution plans. The Tribunal concluded that the adoption of the Swiss Challenge Method was neither arbitrary nor in violation of statutory provisions. 4. Approval of the Resolution Plan by the Adjudicating Authority: The Appellant contended that the Adjudicating Authority erred in approving the resolution plan without addressing their objections. The Tribunal found that the Adjudicating Authority had not erred, as the CoC had approved the plan with 100% voting, reflecting its commercial wisdom. The Tribunal reiterated that the CoC's decision is non-justiciable unless it violates specific provisions of the IBC. The Tribunal dismissed the appeal, finding no grounds to interfere with the Adjudicating Authority's decision. In conclusion, the Tribunal upheld the Adjudicating Authority's approval of the resolution plan and dismissed the appeal, emphasizing the importance of the CoC's commercial wisdom and the lack of substantial evidence of irregularities in the CIRP process.
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