The National Company Law Appellate Tribunal (NCLAT), Chennai Bench comprising Justice M. Venugopal, Judicial Member and Ms. Shreesha Merla, Technical Member was recently hearing an appeal and held that the Regulation 39(1A) does not prohibit the Committee of Creditors from negotiating or requesting revisions in the Resolution Plan, and previous judgments affirmed the CoC's power to cancel or modify negotiations, including the challenge process.
In the present case, the Company Appeal (AT) (CH) (Ins) No. 37/2023 was filed to challenge the dismissal of an application by the appellant, who sought various reliefs including restraining the respondents from proceeding with the Challenge Process, directing the acceptance of their Resolution Plan, and restraining the consideration of any Resolution Plans submitted after a certain date. The appellant argued that their plan was submitted on time but additional documents were requested by the Resolution Professional (RP), aChend they provided the required clarification. The RP extended the timelines for all prospective Resolution Applicants, prompting the appellant to challenge this extension. Additionally, the appellant sought to amend their plan due to the termination of a power purchase agreement (PPA).
The RP filed an application to extend the Corporate Insolvency Resolution Process (CIRP) period and re-run the Expression of Interest (EOI) process, which was granted. The appellant submitted their Resolution Plan, but another applicant revised their plan in violation of regulations. The appellant contended that the RP allowing multiple modifications or challenges to the Resolution Plans was contrary to the regulations and the intent of the Insolvency and Bankruptcy Code. The appellant also argued that the Adjudicating Authority failed to focus on procedural matters and cited relevant judgments.
The RP argued that a previous NCLAT order was irrelevant as the CIRP period had been extended, allowing consideration of another Resolution Plan. The Committee of Creditors rejected the appellant's plan, and the RP denied any breach of confidentiality. The NCLAT concluded that Regulation 39(1A) of the CIRP Regulations does not prohibit the CoC from negotiating with the Resolution Applicant or requesting an increase in the value of the Resolution plan. The appellant argued that the regulation should be read as mandatory and not allow multiple revisions or the use of the challenge mechanism. However, the NCLAT referred to the discussion paper of the Insolvency and Bankruptcy Board of India, which proposed a cap of two revisions in the resolution plan.
The NCLAT also cited previous judgments, including Jindal Stainless Limited v. Mrs. Shailendra Ajmera, Resolution Professional of Mittal Corporation and Others, REED 2023 NCLAT Del 01582, which affirmed the CoC's power to cancel or modify negotiations with the Resolution Applicant, including the challenge process. The CoC's decision to conduct the challenge process was supported by the relevant clauses of the Request for Resolution Plans (RFRP). The NCLAT found no violation of Regulation 39(1A) or any other provisions of the Code.
Therefore, the Company Appeal (AT) (CH) (Ins) No. 37 of 2023 was dismissed.
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