2025 (5) TMI 1838 - AT - IBC

Approval of Resolution Plan - failure to consider the revised payment proposal submitted by the unsuccessful Resolution Applicant (Appellant) after the stipulated deadline under the Request for Resolution Plan (RFRP) process - HELD THAT Clause 1.4.6 of the challenge process document clearly prohibits Resolution Applicants to modify its proposal which was given in the challenge process. Learned Counsel for the Appellant sought to contend that email dated 05.09.2024 was only a clarification and cannot be said to be revised or enhanced proposal. The above submission cannot be accepted. The email itself contained a heading Revised Payment Proposal from RA . When the Appellant has given proposal to pay 25% within 45 days and 75% in 364 days upfront payment was offered only 25% which was sought to be modified by email dated 05.09.2024 by providing second installment i.e. 75% within 90 days. The Appellant clearly sought to modify/ enhance its proposal. Upfront payment was offered by the Appellant initially only of 25% hence no error can be said to have been committed by the RP and the CoC in not considering the revised payment offer made vide email dated 05.09.2024. It is well settled that the CoC is fully entitled to take its commercial decision after considering the Resolution Plans which are up for consideration and the commercial decision taken by the CoC has rightly not been interfered by the Adjudicating Authority. The ambit and scope of jurisdiction of the Adjudicating Authority to interfere with the commercial wisdom of the CoC are well settled. There are no error in the order of the Adjudicating Authority approving the Resolution Plan which was approved with 73.38% vote share. The CoC and RP did not commit any error in not considering the revised payment proposal which was clearly contrary to the challenge process document. The CoC has also subsequently considered the enhanced proposal submitted on 07.10.2024 and decided to abide by the process document which prohibited consideration of any enhanced/ modify offer after due date. There are no error in the order of the Adjudicating Authority dismissing IA No.5176 of 2024 filed by the Appellant. The approval of Resolution Plan by the impugned order cannot be interfered with on the grounds as raised by the Appellant in the present Appeal. The Appeal is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the Resolution Professional (RP) and Committee of Creditors (CoC) erred in not considering the revised payment proposal submitted by the unsuccessful Resolution Applicant (Appellant) after the stipulated deadline under the Request for Resolution Plan (RFRP) process.

- Whether the email dated 05.09.2024 sent by the Appellant constituted a permissible clarification or an impermissible modification/enhancement of the financial proposal under the terms of the RFRP.

- Whether the CoC's approval of the Resolution Plan of the Successful Resolution Applicant (SRA) with 73.38% vote share was in accordance with the Insolvency and Bankruptcy Code, 2016 (IBC), and whether the Adjudicating Authority was correct in approving the same.

- Whether the Appellant was entitled to a fresh or renewed voting process on the basis of the revised or enhanced offers submitted after the deadline, including the offer dated 07.10.2024.

- Whether the Appellant's challenge to the approval of the Resolution Plan and the rejection of its IA No.5176 of 2024 was sustainable.

- Whether the Appellant's IA No.1083 of 2025 seeking de-reservation of the Appeal for additional legal submissions was maintainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the revised payment proposal dated 05.09.2024 was a permissible clarification or an impermissible modification under the RFRP

Relevant Legal Framework and Precedents:

The RFRP document governed the resolution process and contained Clause 1.4.6, which explicitly stated that financial proposals submitted during the challenge process shall be unconditional and irrevocable and cannot be modified at the Resolution Applicant's own behest subsequent to the challenge process. Any modification after the deadline would be a breach of the RFRP and subject to consequences under the IBC and CIRP Regulations.

Court's Interpretation and Reasoning:

The Court closely examined the email dated 05.09.2024, which was titled "Revised Payment Proposal from RA" and clearly indicated a change in the payment timeline - from the original plan of 25% payment upfront within 45 days and 75% within 364 days, to a proposal to pay the second installment within 90 days. The Court held that this was not a mere clarification but a modification or enhancement of the financial proposal.

Key Evidence and Findings:

The RFRP's Clause 1.4.6 was unambiguous in prohibiting any modification after the challenge process. The voting had commenced on 31.08.2024 and concluded on 07.09.2024, while the email was sent on 05.09.2024, i.e., after the voting had started. The RP's reply on 09.09.2024 reiterated that no clarifications could be accepted after the voting commenced and that the RP had not received any instructions from the CoC to consider the revised offer.

Application of Law to Facts:

The Court applied the RFRP provisions strictly and concluded that the email dated 05.09.2024 was an impermissible modification, not a clarification, and thus was rightly not considered by the RP or CoC.

Treatment of Competing Arguments:

The Appellant argued that the email was only a clarification and did not alter the financial proposal. The Court rejected this, emphasizing the language and timing of the email and the express terms of the RFRP.

Conclusion:

The revised payment proposal dated 05.09.2024 was an impermissible modification and was rightly not considered by the RP and CoC.

Issue 2: Whether the CoC and RP erred in not considering the enhanced offer dated 07.10.2024 and whether the Appellant was entitled to a fresh voting

Relevant Legal Framework and Precedents:

The IBC and the RFRP govern the resolution process, emphasizing adherence to timelines and the commercial wisdom of the CoC. The CoC's commercial decisions are generally not interfered with by the Adjudicating Authority unless there is a manifest illegality or non-compliance with the law.

Court's Interpretation and Reasoning:

The Court noted that the enhanced offer dated 07.10.2024 was submitted after the CoC had approved the Resolution Plan with the requisite majority on 12.09.2024, following e-voting that concluded on 07.09.2024. The CoC, in its 17th meeting on 14.10.2024, discussed the enhanced offer but decided to adhere strictly to the IBC and RFRP provisions, which prohibited consideration of any modified offers after the deadline.

Key Evidence and Findings:

The voting had concluded before the enhanced offer was submitted. The CoC's approval was based on the Evaluation Matrix, which scored the SRA higher (51 marks) than the Appellant (48 marks) on quantitative and qualitative parameters. The Appellant's payment timeline was less favorable compared to the SRA's upfront payment within 30 days.

Application of Law to Facts:

The Court applied the principle that the CoC's commercial wisdom is sacrosanct and that the Adjudicating Authority's jurisdiction to interfere is limited. Since the CoC had valid reasons and followed the RFRP and IBC, the rejection of the enhanced offer and refusal to conduct fresh voting was lawful.

Treatment of Competing Arguments:

The Appellant contended that the enhanced offer was in line with the Delhi High Court's liberty to submit renewed or better offers. The Court clarified that the High Court's order allowed the Appellant to approach the Adjudicating Authority but did not mandate the CoC to reconsider or conduct fresh voting. The CoC's decision was within its legal rights.

Conclusion:

The CoC and RP did not err in not considering the enhanced offer dated 07.10.2024, and the Appellant was not entitled to fresh voting after the conclusion of the e-voting process.

Issue 3: Whether the Adjudicating Authority was correct in approving the Resolution Plan of the SRA with 73.38% vote share

Relevant Legal Framework and Precedents:

Under the IBC, the CoC has the authority to approve a Resolution Plan by requisite majority, and the Adjudicating Authority's role is to ensure compliance with the Code and Regulations, not to interfere with the commercial wisdom of the CoC.

Court's Interpretation and Reasoning:

The Court found that the CoC's approval was in compliance with the IBC and based on a transparent process involving an Evaluation Matrix that considered both quantitative and qualitative parameters. The SRA had offered full upfront payment within 30 days, which was commercially more favorable.

Key Evidence and Findings:

The CoC's vote share of 73.38% in favor of the SRA's Resolution Plan and the higher score on the Evaluation Matrix supported the approval. The Appellant's plan scored lower and involved deferred payments over a longer period.

Application of Law to Facts:

The Court upheld the Adjudicating Authority's decision approving the Resolution Plan, emphasizing that the commercial wisdom of the CoC is not to be interfered with unless there is a violation of law or procedure.

Treatment of Competing Arguments:

The Appellant challenged the approval on grounds of non-consideration of revised offers and alleged procedural irregularities. The Court found these arguments unsubstantiated and consistent with the RFRP and IBC framework.

Conclusion:

The Adjudicating Authority rightly approved the Resolution Plan of the SRA, and no interference was warranted.

Issue 4: Whether the Appellant's IA No.1083 of 2025 seeking de-reservation of the Appeal for additional legal submissions was maintainable

Relevant Legal Framework and Precedents:

Procedural rules allow for applications to de-reserve matters for additional submissions, but such applications must demonstrate sufficient grounds.

Court's Interpretation and Reasoning:

The Court noted that the Appeal had been heard and reserved on 24.01.2025. The IA No.1083 of 2025 was filed on 07.02.2025 seeking de-reservation based on submissions made in another Appeal (Company Appeal (AT) (Ins.) No.179 of 2025) regarding non-compliance of the Competition Act, 2002.

Key Evidence and Findings:

The Court found that the grounds raised in IA No.1083 did not constitute sufficient cause to de-reserve and rehear the Appeal. The Appellant had already made submissions on the grounds raised in the Appeal, and the hearing was complete.

Application of Law to Facts:

The Court rejected the IA, holding that no fresh grounds were presented that warranted re-opening the hearing or de-reserving the Appeal.

Treatment of Competing Arguments:

The Appellant sought to rely on additional legal grounds arising from another pending Appeal, but the Court held that these did not justify disturbing the reserved status.

Conclusion:

IA No.1083 of 2025 was rightly rejected.

3. SIGNIFICANT HOLDINGS

"The financial proposals submitted during the Challenge Process shall be unconditional and irrevocable and cannot be modified at their own behest in any manner whatsoever subsequent to the Challenge Process. In case any Eligible PRA does not participate in the Challenge Process, the last financial proposal submitted by such Eligible PRA in respect of its resolution plan on or before 6 June 2024 shall be considered as its final financial proposal and no further modification shall be permitted to such financial proposal. Any modification sought to be undertaken in breach of this provision shall be tantamount to a breach of the terms of the RFRP and shall be subject to the consequences as set out in the RFRP, the Code and CIRP Regulations."

"The Appellant clearly sought to modify/enhance its proposal by email dated 05.09.2024, which was rightly not considered by the RP and CoC as it was contrary to the RFRP."

"The CoC is fully entitled to take its commercial decision after considering the Resolution Plans, which are up for consideration and the commercial decision taken by the CoC has rightly not been interfered by the Adjudicating Authority."

"The ambit and scope of jurisdiction of the Adjudicating Authority to interfere with the commercial wisdom of the CoC are well settled."

"The decision of the CoC shall definitely be considered by the NCLT in a just and expedient manner, and if it deems fit it, may even allow 'Open Court Bidding' in accordance with law."

"The Appellant's IA No.5176 of 2024 praying to reject the Resolution Plan and direct consideration of revised offers was rightly rejected."

"IA No.1083 of 2025 seeking de-reservation of the Appeal was rightly rejected as no fresh grounds were made out."p>

Core Principles Established:

• Financial proposals in a CIRP challenge process are binding and irrevocable after the deadline; modifications post-deadline are impermissible.
• The commercial wisdom of the CoC in approving a Resolution Plan is sacrosanct and is not to be interfered with by the Adjudicating Authority unless there is a clear violation of law or procedure.
• Procedural compliance with the RFRP and IBC timelines is mandatory and strictly enforced.
• Judicial review of CoC decisions is limited and does not extend to re-evaluating commercial decisions.
• Liberty granted by courts to submit renewed or better offers does not compel CoC to reconsider or conduct fresh voting outside the stipulated process.

Final Determinations on Each Issue:

• The Appellant's revised payment proposal dated 05.09.2024 was an impermissible modification and was rightly not considered.
• The enhanced offer dated 07.10.2024 was submitted after CoC approval and was correctly not entertained.
• The CoC's approval of the SRA's Resolution Plan with 73.38% vote share was valid and lawful.
• The Adjudicating Authority rightly rejected the Appellant's IA No.5176 of 2024 challenging the approval.
• The Appellant's IA No.1083 of 2025 seeking de-reservation of the Appeal was rightly dismissed.