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TMI Blog2023 (3) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant has authorised filing of the appeal by authorized person, we fail to see how the appeal filed by Vistra ITCL (India) Ltd. is incompetent. The submission of learned counsel for Respondent No.1 that Bondholders has not authorized filing of the Appeal does not commend us. The Board of Directors is fully competent to take all steps on behalf of Vistra ITCL (India) Ltd. including initiation of legal proceedings. When the Board has authorised filing of the appeal through authorised representative, the submission cannot be accepted that Appellant is not authorised by the shareholders. Interests of the shareholders are looked by the Board of Directors of the Vistra and Board having been authorized, the preliminary objection raised by Respondent No.1 cannot be accepted. The Appeal by financial creditor who is member of the Coc and as per learned senior counsel for the Appellant, holds 90% vote share in the CoC, there is sufficient locus with the Appellant to challenge the impugned order dated 02.02.2023. Appellant being Financial Creditor in the CoC which is admitted fact, there is no lack of jurisdiction in the Appellant to file this appeal. Whether Regulation 39(1A) contains an imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery concept of negotiation envisages dialogue between two parties. The Adjudicating Authority has again concluded that no negotiation or value maximization exercise can be individually undertaken by the CoC in view of the provisions of Regulation 39(1A) - It is opined that Adjudicating Authority committed error in allowing IA No.1/MB/C-I/2023 and IA No.99/MB/C-1/2023. 60. Thus, even after completion of Challenge Mechanism under Regulation 39(1A)(b), the CoC retain its jurisdiction to negotiate with one or other Resolution Applicants, or to annul the Resolution Process and embark on to re-issue RFRP - appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... or. (iii) On 18.02.2022, the Administrator issued invitation for Expression of Interest. (iv) On 26.04.2022, Administrator issued the Request for Resolution Plan (RFRP) in terms of Regulation 36B of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as CIRP Regulations). In response to RFRP no satisfactory Resolution Plan were received. (v) RFRP was reissued on 22.10.2022, last date for submission of Resolution Plan was 28.11.2022. Four Resolution Applicants submitted their signed plans namely (i) Torrent Investments Pvt. Ltd. (ii) IndusInd International Holding Ltd. (iii) Cosmea Financial and Piramal Group; and (d) Oaktree Capital. (vi) In 26th CoC meeting, the members opined that the bid values that have been received are not acceptable. (vii) On 14.12.2022, Challenge Mechanism Process Note was issued by the Administrator. (viii) On 19.12.2022, steps for Challenge Mechanism Process Note was issued. (ix) On 21.12.2022, Challenge Mechanism Process was conducted in which two Resolution Applicants namely (i) Torrent Investments Pvt. Ltd. (for short 'Torrent') (ii) IndusInd Internation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submit draft resolution plan with highest bid amount alongwith details of upfront payment and deferred payment submitted by them in the Challenge Mechanism. (xvi) On 06.01.2023, the Administrator received email from IIHL and Torrent including draft resolution plan. Torrent gave draft resolution plan with revised offer offering entire amount of Rs.8640 Crores as upfront. IIHL gave its revised draft resolution plan including some additional payment. (xvii) On 06.01.2023, CoC held its 31st meeting where it opined that outcome of the Challenge Mechanism undertaken was sub optimal and not satisfactory. The CoC in its commercial wisdom proposed that an extended round of Challenge Mechanism with the existing bidders be conducted. (xviii) On 09.01.2023, Torrent filed I.A. No. 99/MB/C-I/2023 seeking impleadment of the CoC in the application and addition of certain additional prayers. (xix) On 10.01.2023, a resolution was passed by the CoC with 98% votes in favour of the extended Challenge Mechanism. (xx) On 10.01.2023, IIHL filed an application before the Adjudicating Authority for impleadment. (xxi) On 11.01.2023, Torrent filed an additional affidavit bringing on record subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively leading to conduct of a fresh/second challenge mechanism in deviation with the process paper, challenge process note, and the CIRP Regulations which is in violation of the scheme of Regulation 39(1A) of MUMBAT BENCHA the CIRP Regulation. Further, under the provisions of the Code and the CIRP Regulations, there are specific triggers for the exercise of commercial wisdom (actions that specifically require either evaluation by or the approval of the CoC, e.g. actions under Section 28 of the Code, approval of resolution plans or evaluation of their feasibility and viability under Section 30 of the Code). The CoC, cannot exercise its commercial wisdom which is ultra vires the procedural framework provided under the Code read with the CIRP Regulations. This view is also upheld by the Hon'ble NCLAT in the case of Dwarkadhish Sakhar Karkhana Limited Vs. Pankaj Joshi, Company Appeal (AT) (Insolvency) No. 233 of 2021, upheld by the Hon'ble Supreme Court vide its order dated 12th July, 2021 in Civil Appeal No(s). 2317/2021). We are, thus, of the view that CoC cannot device an illegal mechanism to circumvent the scheme of Code to indirectly be able to negotiate further with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy Resolution Process, in compliance of the provisions enshrined in the code within stipulated period by adopting due process under Regulation 39 of the CIRP Regulations. 136. The Interlocutory Application bearing IA No. 1 of 2023, IA No. 99 of 2023 and IA No. 150 of 2023, are disposed of as allowed in the above terms." (xxviii) Aggrieved against the order dated 02.02.2023, as noted above, Company Appeal (AT) (Ins.) No. 132, 133 & 134 of 2023 has been filed by the Vistra ITCL (India) Ltd. whereas Company Appeal (AT) (Ins.) No.139 of 2023 has been filed by IndusInd International Holdings Ltd (IIHL). 2. We have heard Shri Kapil Sibal, learned senior counsel appearing for Vistra ITCL (India) Ltd., Shri Mukul Rohatgi and Shri Ramji Srinivasan, learned senior counsels appearing for Torrent Investments Pvt. Ltd. Dr. Abhishek Manu Singhvi, learned senior counsel has been heard for IndusInd International Holdings Ltd (IIHL). We have also heard Shri Gopal Jain, learned senior counsel appearing for the Administrator (Respondent No.2). 3. Shri Kapil Sibal, learned senior counsel appearing for the Appellant - Vistra ITCL (India) Ltd. submits that the Adjudicating Authority committed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draft resolution plan has offered additional payment totaling to Rs.9000 Crores. It is submitted that the Respondent No.1 has not correctly calculated NPV. The Torrent, who in the Challenge Mechanism has offered upfront payment of Rs.3750 Crores and balance as deferred amount has revised its offer offering to make entire Rs.8640 Crore as upfront payment. The facts and sequence of events clearly lead the CoC to resolve to take further steps to extend Challenge Mechanism to find out correct price discovery for maximizing the value of the Corporate Debtor. Shri Sibal further submitted that the Adjudicating Authority has no jurisdiction to entertain I.A. 1/MB/C-I/2023 which was filed at the stage when the plans submitted by the Resolution Applicants were under the process of verification and consideration. Neither both the Resolution Applicants have submitted their signed Resolution Plans nor Administrator has certified that both the Resolution Plans are compliant of the I&B Code and its Regulations. At this premature stage, the Adjudicating Authority ought not to have entertained any application, which entertainment is not contemplated in the I&B Code. It is submitted that the Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied on the Report of the Standing Committee on Finance dated 03.08.2021, Insolvency Law Committee Report, May, 2022 as well as IBBI Discussion Paper dated 27.08.2021 to highlight the purpose and object for which Regulation 39(1A) was inserted in the Regulation. It is submitted that CIRP is required to be conducted in a time bound manner. When the Challenge Mechanism was concluded on 21.12.2022, the CoC has to vote on the resolution plans received consequent to the Challenge Mechanism. There can be no dispute to the proposition that the CoC in its consideration can either approve the plan or reject the plan but the CoC cannot refuse to vote on the resolution plan received consequent to completion of Challenge Mechanism. The commercial wisdom of the CoC is not unlimited, it cannot be exercised arbitrarily and in derogation of the Code and the Regulations. The CoC and RFRP being creature of the Code and Regulations cannot circumvent the scheme laid down under the CIRP Regulations. The decision of the CoC to give a second extended round of the Challenge Mechanism is purely an attempt to give second chance to IIHL. The sub-optimal and unsatisfactory nature of the resolution plans were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares and NCDs of Rs.200 Crores payable after 7 years 1 day to the Creditors. IIHL has remained committed to NPV submitted by bid in the Challenge Mechanism of Rs.8110 Crores (entire upfront). NPV is not the sole criteria in the RFRP and Challenge Mechanism to accept or reject the bid of the Resolution Applicant. It is submitted that the CoC ought to have adopted a transparent and on line bidding process to ensure maximization of value. 6. Shri Ramji Srinivasan, learned senor counsel appearing for Torrent also refuted the submissions of the Appellant. It is submitted that the process undertaken on 21.12.2022 was as per the announced steps. On 21.12.2022, the Challenge Mechanism stood completed, the NPV of Rs.8640 Crores was held to be highest NPV received in the 4th Round. IIHL did not continue in the 4th Round and it was Torrent only which participated in the 4th Round. It is submitted that on 17.12.2022, the Torrent has written to the Administrator asking whether after Challenge Mechanism any Resolution Applicant can change the financial proposal which was replied by the Administrator that no change in financial proposal can be allowed. As per Regulation 40A of the CIRP Regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CoC and there was no reason for Torrent to feel aggrieved and file application before the Adjudicating Authority. Interim order dated 03.01.2023 effectively put prohibition on the Administrator's ability to consolidate the resolution plans. In the meeting held on 03.01.2023, Process Advisor to CoC pointed out that NPV calculated based on financial proposal of both Resolution Applicants are different from the NPVs submitted in the challenge mechanism. On 04.01.2023, Administrator issued emails to Torrent and IIHL to submit Revised Plans with highest bid amount submitted by them in Challenge Mechanism. On 06.01.2023, the Administrator has received emails from both Torrent and IIHL enclosing revised draft resolution plans. Torrent gave revised offer with entire Rs.8640 Crores as upfront payment. IIHL also gave revised draft resolution plan with revised offer. In the meeting held on 06.01.2023, the Administrator informed the CoC that revised draft resolution plans received from Torrent and IIHL are being reviewed. Administrator also informed the CoC that the plan received on 22.12.2022 had outstanding compliance issues which was addressed to both Resolution Applicants. 8. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022, in which application initially only respondent impleaded was Nageswara Rao, Administrator of Reliance Capital Ltd., in which application interim order was passed on 03.01.2023 and by interim order dated 03.01.2023 following liberty was granted to the Applicant (Torrent): "… Liberty is granted in favour of the Applicant to add CoC as a party respondent to the Application if it deems fit. In the event CoC is arrayed as party respondent Application be served to the newly added respondent well in advance before the adjourned date." 12. In response to the liberty granted by the Adjudicating Authority, an I.A. No.99/MB/C-I/2023 was filed by the Torrent Investments Pvt. Ltd. on 09.01.2023. In the application, Vistra ITCL (India) Ltd. was proposed as Respondent No.2. In the application apart from Nageswara Rao, Administrator who was arrayed as Respondent No.1 following were proposed as Respondents: "VISTRA ITCL (INDIA) LIMITED, having its office at IL. & FS Financial Centre, Plot No. C 22. G-Block, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra - 400051 … Proposed Respondent No.2 ASSET CARE AND RECONSTRUCTION ENTERPRISE LIMITED, having its office at 2nd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant to pursue the Appeal. We have looked into the records of both the Appeals Company Appeal (AT) (Ins.) No. 132, 133 & 134 of 2023 as well as Company Appeal (AT) (Ins.) No.139 of 2023. The Appeal by the Appellant has been filed through one Supratik Dasgupta, Assistant Vice President at Vistra ITCL (India) Ltd. Vistra ITCL (India) Ltd. has also filed appearance in Company Appeal (AT) (Ins.) No.139 of 2023 by Dy. No. 67069 dated 15.02.2023. Copy of the Board Resolution passed at the 57th meeting of Administrative Committee of Board of Directors of Vistra ITCL (India) Ltd. held on 24 August, 2021 has been annexed where Board of Directors has accorded for delegation of authority to the personnel named therein jointly and/or severally to represent in any legal proceedings. Mr. Supratik Dasgupta has been delegated authority to represent the Vistra ITCL (India) Ltd. and on the strength of resolution, the appeal has been filed through Mr. Supratik Dasgupta. When Board of Directors of the Appellant has authorised filing of the appeal by authorized person, we fail to see how the appeal filed by Vistra ITCL (India) Ltd. is incompetent. The submission of learned counsel for Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s namely CIRP Regulations, 2016 in exercise of power conferred under various Sections of the Code including Section 30 with Section 240 of the Code. Chapter X of the Regulations deals with 'Resolution Plan'. Regulation 36A provides for 'Invitation for Expression for Interest'. Regulation 36B provides for 'Request for Resolution Plan'. Regulation 36B, which is relevant for the present case is as follows: "36B. Request for resolution plans. - (1) The resolution professional shall issue the information memorandum, evaluation matrix and a request for resolution plans, within five days of the date of issue of the provisional list under sub-regulation (10) of regulation 36A to - (a) every prospective resolution applicant in the provisional list; and (b) every prospective resolution applicant who has contested the decision of the resolution professional against its non-inclusion in the provisional list. (2) The request for resolution plans shall detail each step in the process, and the manner and purposes of interaction between the resolution professional and the prospective resolution applicant, along with corresponding timelines. (3) The request for resolution plans shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulation 39, Regulation (1A) and Regulation (1B) were inserted by (Third Amendment) Regulations, 2021 w.e.f. 30.09.2021. Regulation 39 as amended w.e.f. 30.09.2021 is as follows: "39. Approval of resolution plan. - 1[(1) A prospective resolution applicant in the final list may submit resolution plan or plans prepared in accordance with the Code and these regulations to the resolution professional electronically within the time given in the request for resolution plans under regulation 36B along with (a) an affidavit stating that it is eligible under section 29A to submit resolution plans; 2[***] (c) an undertaking by the prospective resolution applicant that every information and records provided in connection with or in the resolution plan is true and correct and discovery of false information and record at any time will render the applicant ineligible to continue in the corporate insolvency resolution process, forfeit any refundable deposit, and attract penal action under the Code. 3[(1A) The resolution professional may, if envisaged in the request for resolution plan- (a) allow modification of the resolution plan received under sub-regulation (1), but not mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the Administrator on 26.04.2022. We need to notice certain clauses of RFRP dated 26.04.2022, which RFRP is also relevant for subsequent process undertaken. Clause 3.17.16 and 3.17.17 which are relevant are as follows: "3.17.17 The Resolution Plan(s) that are in compliance with the provisions of the IBC shall be considered by the CoC in accordance with Regulations 39(3), 39(3A) and 39(3B) of the CIRP Regulations. The Administrator and the CoC (along with any person authorised by the CoC in this regard) reserve the right to negotiate with the Resolution Applicant(s) and/or the Resolution Bidder(s) prior to such plan(s) being put to vote for approval by the CoC in order to achieve a successful resolution of RCAP with the objective of maximising the value of the Corporate Debtor for all stakeholders." 21. Learned counsel for the Appellant has also referred to various other clauses of the RFRP which clauses were also noticed by the Adjudicating Authority in its impugned order while noticing submission of Vistra ITCL (India) Ltd. Clause 4.2.4 provides as follows: "4.2.4 Notwithstanding anything contained in this RFRP, the CoC reserves the absolute right to: (a) consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (b) If the Administrator receives only a single Resolution Plan, then the Administrator on the instructions of the CoC or the CoC have the discretion to either discuss with the said Resolution Applicant to better terms of the said Resolution Plan, or annul the Submission Process. (c) The CoC may, in its sole discretion, request and require Resolution Applicants and/or the Resolution Bidders to submit the Resolution Plan(s) and/or the Resolution Bid(s), as the case may be in such form and manner that will ensure, inter alia: (i) insolvency resolution of the Corporate Debtor is achieved in accordance with the provisions of the IBC, the CIRP Regulations and the FSP Rules; and (ii) maximization of value of assets of the Corporate Debtor is achieved." 23. Clause 4.3.7 reserves right to the Administrator as well as the CoC to negotiate terms of the resolution plan with one or more Resolution Applicants. Clause 4.3.7 is as follows: "4.3.7 The Administrator and the CoC shall have the right to negotiate terms of the Resolution Plan(s) and/or Resolution Bid(s) with one or more Resolution Applicant(s) and/or Resolution Bidder(s) (including Successful Resolution Applicant) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional advisor as appointed by the CoC or the Administrator reserve the right to conduct due diligence on the Resolution Applicant(s) and/or Resolution Bidder(s) with the assistance of external agencies at any stage of the Submission Process. The scope of the due diligence shall include but not be limited to the following parameters: (i) compliance with Applicable Laws; (ii) submission of documents for the requisite, "know your customer" checks to the satisfaction of CoC and/or the Administrator (who is acting on the instructions of the CoC); (iii) review of the financial and operational capability of the Resolution Applicant and/or the Resolution Bidder; (iv) any other matter, which the CoC and/or the Administrator (acting on the instructions of the CoC) may deem fit or necessary, and (v) the Resolution Applicant's and/or Resolution Bidder's ability and intent to run the Corporate Debtor under Option 1 or the relevant Cluster under Option 2 as the case may be, as a going concern as part of the implementation of the Resolution Plan. (d) During the negotiations, or post the negotiations, the Resolution Applicant(s) and/or Resolution Bidder(s) may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIRP Regulations (collectively referred to as the "RFRP") to the prospective resolution applicants ("PRAs"). Accordingly, PRAs submitted their duly executed resolution plans in accordance with the terms of the RFRP on 29th August 2022. The Process Paper required the PRAs to submit duly executed resolution plans on 28th November 2022, which would be followed by a challenge mechanism to maximize the value of the resolution plans. Set forth below is the challenge mechanism ("Challenge Mechanism") to be conducted amongst Resolution Applicants who have submitted Resolution Plans on 28th November 2022 ("Resolution Applicants" or "Bidders" or "RA"). The Challenge Mechanism shall be read along with the terms of the RFRP. II. Key Notes: 1. By participating in the Challenge Mechanism, each Resolution Applicant accepts that it has understood the Challenge Mechanism and confirms that the process is fair and reasonable. 2. Each Resolution Applicant accepts and acknowledges that participation in the Challenge Mechanism does not in any manner confirm the eligibility or compliance of the Resolution Applicant or its resolution plan in terms of the provisions of the Code or the RFR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the regulations. Where the regulations specify the procedure for conducting the CIRP, unless they are ultra vires to the Code, participants are required to comply with them. Non-compliance of the same undermines the certainty, predictability and transparency of the process thereby making it unfair for the participants and being detrimental to the development of a market for resolution plans. Since the regulations are framed in furtherance of the objectives of the Code and its provisions, a reliance on its objectives (value maximisation) for non-compliance of the procedure will go against the scheme of the Code." 29. Reliance has also been placed on the Report of the Standing Committee on Finance, Implementation of Insolvency and Bankruptcy Code - Pitfalls and Solutions. On the heading performance review of the NCLT system, following observations have been made in the report "Second, it should be noted that invited bidders are asked to submit their respective resolution plans within the specified deadlines. These resolution plans are then evaluated by the CoC. In the meanwhile, other bidders may suddenly emerge and submit their own resolution plans. These bidders typically wait ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FRP with due consideration of the market conditions. (ii) The CoC shall decide on allowing for revision of the RFRP, number of such revisions and timelines for the same on exante basis. The number of revisions shall not exceed 2. (iii) CoC shall decide the timelines within which it will allow for negotiation and changes to the submitted resolution plans (iv) CoC and RP shall not entertain unsolicited revision to resolution plans. (v) The CoC shall decide whether it considers appropriate to opt for a swiss challenge method and if the same is decided by the CoC, then it should be provided in RFRP on ex-ante basis. (vi) The CoC to decide basis for evaluation, timelimit within which the challenge process shall be concluded and the minimum threshold for improvement over the resolution plan on ex-ante basis. Economic Analysis 31. The proposed amendment would help by allowing additional options to the CoC for resolution of a firm while under CIRP. The cap on number of extensions in RFRP would ensure that the sacrosanct timelines envisaged under the Code is practicable. Further, such an amendment would help instilling faith amongst stakeholders in the corporate insolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a provision incorporating a procedural mechanism for Resolution Professional for finalization of Resolution Plan submitted by Resolution Applicants. Now, we need to notice other relevant statutory Regulations, which throw light on the jurisdiction of CoC to proceed further when Resolution Plan is received from the Resolution Applicants and duly certified by the Resolution Professional. As noted above, the authority and jurisdiction to consider Resolution Plan for approval is vested with the CoC after considering its feasibility and viability under Section 30, sub-section (4) of the Code. 35. Regulation 36B, sub-regulation (7), empowers Resolution Professional with the approval of the CoC to re-issue request for Resolution Plans, if the Resolution Plans received in response to an earlier request are not satisfactory. Regulation 36B, sub-regulation (7) is self-explanatory even if Resolution Professional with the approval of CoC uses a Challenge Mechanism to enable Resolution Applicants to improve their Plans and consequently the Resolution Applicants submit their improved Plan, the power under Regulation 36B, sub-regulation (7) can very well be exercised by the CoC to decide to re-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Applicant, even if the best technical capabilities or highest financial plan received, the CoC reserves the right to engage in discussion with any Resolution Applicant. Clause 4.2.9, sub-clause (a), clearly indicate the said conclusion. 38. The submission of learned Counsel for Respondent No.1 that the aforesaid Clauses of RFRP are ultra vires to Regulation 39(1A) also needs to be answered. When we look into Regulation 39(1A), this was inserted empowering Resolution Professional to allow modification of the Resolution Plan, but not more than once or use a Challenge Mechanism to enable Resolution Applicants to improve their Plans. The Regulation 39(1A) cannot be read containing any fetter on the right of the CoC to take further action as per RFRP after receipt of the Resolution Plan consequent to Challenge Mechanism. We may in this context refer to a judgment of this Tribunal in Jindal Stainless Ltd. vs. Mr. Shailendra Ajmera, Resolution Professional of Mittal Corp Ltd. & Ors. - Company Appeal (AT) (Ins.) No. 1058 of 2022 decided on 18.01.2023, which was a judgment delivered by this Bench. In the above case also CoC decided to undertake a Challenge Process in order to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Resolution Plan process and reject all Resolution Plans and/or Combined Resolution Plans and call for submission of new Resolution Plans from any Person". The above clause is wide enough to empower the CoC to annul the Resolution Process including the Challenge Process. Further Clauses of RFRP of the present case clearly reserve the power of CoC to call the Applicants for negotiations or improving their Resolution Bid. Hence, the CoC is not denuded of its power to take action under RFRP in the present case and the law laid down by this Tribunal in Jindal Stainless Ltd. (supra) that there can be no fetter on the power of CoC to cancel or modify any negotiation with the Resolution Applicant including a Challenge Process is fully attracted in the present case. The Adjudicating Authority itself in its judgment has noticed that Challenge Process can be cancelled if any fraud is found in the Challenge Process. The power to cancel a Challenge Process is not confined only to the cases of fraud detected, but there may be other circumstances also, when Challenge Process may be annulled by the CoC with right to initiate fresh Challenge Process or a Revised Challenge Process. One of such ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IIHL included revised NPV of INR 9000+ crores, which was in deviation from the final bid submitted by it in Challenger mechanism process, i.e. INR 8110/- crores. The CoC also noticed in the meeting the deadline of January 31, 2023. It is useful to extract following part of the Agenda Item: "After multiple deliberation it was decided that both the draft resolution plans received by the Administrator will be evaluated by the CoC advisors and a comparison of both the plans received will be presented to the CoC members and subsequently the COC members can deliberate on how to further engage with the bidders in relation to the resolution process. The view of the COC members was sought on the approach to be followed:- LIC, EPFO, Broadpeak, JC Flower, Yes Bank, SSG, Trust Group, Vistra, Franklin, CS agreed to the said approach. It was proposed that the CoC advisors will share the presentation and evaluation by 28th December 2022 and next CoC will be scheduled on 3rd January 2023 to discuss on the same. Further, discussion can be scheduled with the Resolution Applicants subsequently basis the deliberation in that COC. The Chair apprised the members that advisors are of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt (along with details of Upfront Payment and Deferred Payment) submitted by them in the Challenge Mechanism process conducted on December 21, 2022 by January 06,2023. The plans were received from Torrent and IIHL and the same is under review by the Administrator and advisors to the Administrator and the CoC. The legal counsel of the Administrator apprised the CoC members that the highest NPV as per the last challenge mechanism was INR 8,640 crores. The CoC discussed at length the developments since the conclusion of its challenge mechanism. It was summarized as below. That the resolution plans were first received on November 28, 2022. Comments on plans were circulated to the bidders by the Administrator and CoC's process and legal advisors on December 12, 2022. Revised drafts were received from certain bidders on December 19/20, 2022. The draft plans that were received had outstanding compliance as well as interpretational issues. CoC expressed its anguish and dissatisfaction with the outcome of the process and the events that have transpired thereafter. The COC was of the view that it demonstrates that outcome of the challenge mechanism undertaken was sub optimal and not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CoC is approved by the CoC's vote, then the Administrator shall update the NCLT of the said development. The legal counsel to the CoC also mentioned that the CoC shall file necessary intervening application in the said matter along with the decision of the CoC to continue the bidding process. Necessary communication will be done to the PRAs in relation to the next steps. Further, details of the extended round of challenge mechanism shall be circulated to all the 4 Resolution Applicants who submitted under Option 1 as on November 28, 2022. Voting agenda 4(a): RESOLVED THAT the Challenge Mechanism note for conduct of extended round of challenge process including the thresholds and conditions of bidding and for removal of difficulties in terms of the provisions of the RFRP be approved and issued on behalf of the CoC to the resolution applicants that have submitted their Resolution Plan on the Submission Date. The Administrator raised concerns on the timeline considering the litigation that are ongoing and there is limited time available for achieving the milestone as envisaged under RFRP and for putting the compliant resolution plan for approval of the CoC, having said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by IIHL. In our view a late bid is not allowed to be considered as per the challenge mechanism and the assurance given by the Administrator in its letter dated 22.12.2022, and therefore any decision on second challenge motivated by the late bid, besides running foul to the process set out in Regulation 39 (1A), suffers from the same infirmity as a late bid and any subsequent thought on sub-optimal or non-satisfactory apparently motivated on this basis should not be allowed." 44. It is relevant to notice that in the Minutes of the CoC Meeting, it was noticed that bid of IIHL was not in accordance with the Bid, which was offered in the Challenge Mechanism. The decision of the CoC to go for Extended Challenge Mechanism cannot be said to be based on the bid of IIHL and further the view of the Adjudicating Authority that second Challenge Mechanism runs fouls to Regulation 39(1A) also cannot be sustained. The Adjudicating Authority has also noticed the judgment of this Tribunal delivered in Jindal Stainless Ltd. (supra) and has distinguished the said judgment on the ground that in the present case no extensive powers were reserved in the CoC in the RFRP. The relevant Clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f voting share of the financial creditors, after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (Ord. 7 of 2017), where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to clause (c) of section 29A: Provided also that nothing in the second proviso shall be construed as ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Regulation 39(1A) cannot prohibit any negotiation or any further steps of the CoC. The view of the Adjudicating Authority that "no negotiation or value maximizatioin exercise can be individually undertaken by the CoC dehors the mandate of Regulation 39(1A)" is contrary to the Scheme delineated by the Code and CIRP Regulations. The very concept of negotiation envisages dialogue between two parties. The word 'Negotiate' and 'Negotiation' are defined in the Black's Law Dictionary to the following effect: "Negotiate, vb. (16c) 1. To communicate with another party for the purpose of reaching an understanding . 2. To bring about by discussion or bargaining . 3. To transfer (an instrument) by delivery or indorsement, whereby the transferee takes the instrument for value, in good faith, and without notice of conflicting title claims or defenses ." "Negotiation, n. (16c) 1. A consensual bargaining process in which the parties attempt to reach agreement on a disputed or potentially disputed matter. • Negotiation usu. Involves complete autonomy for the parties involved, without the intervention of third parties. 2. (usu. Pl.) Dealings conducted between two or more partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the High Court. The Hon'ble Supreme Court also held in the above case that highest tenderer can claim no right to have his tender accepted. It was further observed that inadequacy of the price offered in the highest bid could be a cogent ground for negotiating with the tenderers giving them equal opportunity to revise their bids with a view to obtain the highest available price. In the above case, the action of the Food Corporation of India to negotiate with tenderers even after receiving of the bid of the Respondent, which was highest, was upheld. In paragraph 10 of the judgment, following was laid down: "10. From the above, it is clear that even though the highest tenderer can claim no right to have his tender accepted, there being a power while inviting tenders to reject all the tenders, yet the power to reject all the tenders cannot be exercised arbitrarily and must depend for its validity on the existence of cogent reasons for such action. The object of inviting tenders for disposal of a commodity is to procure the highest price while giving equal opportunity to all the intending bidders to compete. Procuring the highest price for the commodity is undoubtedly in publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any rights or any Resolution Applicant including the Resolution Applicant with the Highest NPV." 56. Judgment of Hon'ble Supreme Court in "Arcelor Mittal India Pvt. Ltd. v. Satish Kumar Gupta & Ors, (2019) 2 SCC 1" also needs to be referred, where it was held that no right accrues to the highest bidder. In para 79 following has been laid down: "79. Given the timeline referred to above, and given the fact that a resolution applicant has no vested right that his resolution plan be considered, it is clear that no challenge can be preferred to the Adjudicating Authority at this stage. A writ petition under Article 226 filed before a High Court would also be turned down on the ground that no right, much less a fundamental right, is affected at this stage. This is also made clear by the first proviso to Section 30(4), whereby a Resolution Professional may only invite fresh resolution plans if no other resolution plan has passed muster." 57. Thus, even if, Respondent No.1's Plan consequent to Challenge Mechanism held on 21.12.2022 was with highest NPV, it has no right to insist that the Plan should be put to vote by CoC, without taking any further steps by the CoC. 58. The Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mization exercise can be individually undertaken by the CoC in view of the provisions of Regulation 39(1A). We, thus, are of the considered opinion that Adjudicating Authority committed error in allowing IA No.1/MB/C-I/2023 and IA No.99/MB/C-1/2023. 60. In view of the foregoing discussions, we, thus conclude that even after completion of Challenge Mechanism under Regulation 39(1A)(b), the CoC retain its jurisdiction to negotiate with one or other Resolution Applicants, or to annul the Resolution Process and embark on to re-issue RFRP. Regulation 39(1A) cannot be read as a fetter on the powers of the CoC to discuss and deliberate and take further steps of negotiations with the Resolution Applicants, which resolutions are received after completion of Challenge Mechanism. 61. In view of the above discussions, we allow the Appeals in following manner: (i) The order impugned dated 02.02.2023 is set aside. IA No.1/MB/C-I/2023 and IA No.99/MB/C-1/2023 filed by Respondent No.1 are rejected. (ii) It is held that CoC is fully empowered as per the Clauses of RFRP to further negotiate with one or more Resolution Applicants, even after completion of Challenge Mechanism on 21.12.2022 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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