2025 (6) TMI 1822 - AT - IBC

Rejection of Application of the Resolution Professional to permit him to issue a fresh Form G to invite Expression of Interest (EoI) from new interested and eligible prospective Resolution Applicants to submit their Resolution Plans - meeting of objective of maximization of value which is the basic objective of the I B Code 2016 in relation to the Corporate Debtor - HELD THAT - The Impugned Order happens to be contrary to its own finding recorded by the Ld. Adjudicating Authority in the Order passed on 17.12.2024 by Ld. NCLT in the Application filed by JSW where it was observed that since the CoC has already decided not to entertain any fresh Expression of Interest in its 36th 38th Meetings the Applicant cannot insist upon that its prayers should be considered by the CoC. But the same Ld. Adjudicating Authority has ignored the implications of exercise of commercial wisdom of the CoC in the Impugned Order when CoC prayed for permission for issuance of fresh Form G and invitation of Expression of Interest from new interested and Prospective Resolution Applicants. In fact the provisions of I B Code 2016 and IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 do not create any absolute legal embargo in resorting to the process of invitation of the fresh Form G and Expression of Interest after the completion of submission of Resolution Plans and even after the voting is completed. There are no demerits in the Proposal of the RP as contained in the Application IA No. 608 / 2025 and in the decision of CoC to invite fresh EoI by issuing fresh Form G for the reason being that inviting new PRAs to submit EoIs will certainly increase competition and in all likelihood result in higher Bids that since the EoI is proposed to be reopened for everybody and not for JSW alone it is fair and transparent and not discriminatory and that since existing PRAs are proposed to be retained with option given to them to participate in challenge mechanism it is also fair to the existing Resolution Applicants - The only snag that we can see as of now is that more time will be required to complete CIRP process. Since timely resolution of insolvency is the essence of I B Code 2016 this can be taken care of by adhering to strict timelines. Conclusion - The relief as sought for by the Resolution Professional to be permitted to issue fresh Form G and to invite Expression of Interest (EoI) from new and interested eligible Prospective Resolution Applicants is granted subject to the stipulations that the CIRP process has to be completed in a time bound manner as provided under the Code and Regulations framed thereunder. The Impugned Order of 03.04.2025 is hereby quashed - Application allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal include:

- Whether the Resolution Professional (RP) and Committee of Creditors (CoC) have the authority under the Insolvency and Bankruptcy Code, 2016 (I&B Code) and the related regulations to issue a fresh Form G and invite fresh Expression of Interest (EoI) from new Prospective Resolution Applicants (PRAs) after the submission of Resolution Plans and even after a Resolution Plan has been approved by the CoC.

- Whether the Adjudicating Authority (NCLT) was justified in rejecting the RP's application to issue a fresh Form G and invite fresh EoI, directing instead that the CoC proceed with the challenge mechanism process under Regulation 39(1A)(b) of the Insolvency and Bankruptcy Board of India (IBBI) (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

- Whether the rejection of the RP's application and direction to proceed with the challenge mechanism process infringes upon the principle of maximization of value of the Corporate Debtor's assets and the commercial wisdom of the CoC.

- Whether the Adjudicating Authority's order suffers from non-application of mind, procedural irregularity, or legal infirmity by interfering with the commercial wisdom of the CoC.

- Whether the participation of a new entity (JSW Energy Limited) in the CIRP process, after the initial EoI submission window closed, is permissible under the I&B Code and related regulations.

- The scope and interpretation of Regulation 39(1A)(b) regarding the challenge mechanism and the extent of CoC's powers post-challenge mechanism.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Authority of CoC and RP to issue fresh Form G and invite fresh EoI after submission and approval of Resolution Plans

Relevant Legal Framework and Precedents: The I&B Code, 2016 and the IBBI Regulations, 2016, particularly Regulation 36A and Regulation 39(1A), govern the invitation of EoI and the challenge mechanism. The Tribunal relied heavily on precedents such as Vistra ITCL (India) Pvt. Ltd. v. Torrent Investments Pvt. Ltd., and Ramneek Goyal v. Sunil Bajaj, which affirm the CoC's jurisdiction to negotiate, annul, or re-initiate the resolution process even after the challenge mechanism and submission of Resolution Plans.

Court's Interpretation and Reasoning: The Tribunal observed that neither the I&B Code nor the Regulations create an absolute bar on issuing fresh Form G and inviting fresh EoI after submission of Resolution Plans or even after voting on a plan. The CoC's commercial wisdom to re-publish Form G to maximize value by increasing competition among PRAs is within its statutory powers. The Tribunal emphasized that Regulation 39(1A) should not be construed as a fetter on the CoC's powers to take further steps for value maximization.

Key Evidence and Findings: The CoC, with 78.59% voting, resolved to issue fresh Form G and invite fresh EoI while retaining existing Resolution Applicants with the option to participate in the challenge mechanism. The RP's application IA No. 608/2025 sought permission to implement this decision. The Adjudicating Authority had earlier allowed extension of timelines and permitted fresh EoI submission in related proceedings.

Application of Law to Facts: The Tribunal found that the CoC's decision and the RP's application align with the objective of the I&B Code to maximize the value of the Corporate Debtor. The reopening of EoI submissions is fair, transparent, and non-discriminatory as it is open to all prospective applicants, not just a single entity.

Treatment of Competing Arguments: The Adjudicating Authority's rejection was premised on concerns about fairness and timelines, and suspicion that the move was to facilitate a particular entity (JSW Energy Limited). The Tribunal rejected this reasoning, noting that reopening the EoI process is a legitimate commercial decision by the CoC and not contrary to fairness or the Code's spirit.

Conclusion: The CoC and RP have the authority to issue fresh Form G and invite fresh EoI after submission and approval of Resolution Plans, subject to adherence to CIRP timelines.

Issue 2: Validity of the Adjudicating Authority's rejection of RP's application and direction to proceed with the challenge mechanism process

Relevant Legal Framework and Precedents: The challenge mechanism under Regulation 39(1A)(b) allows improvement or modification of Resolution Plans by the Resolution Applicants. However, the CoC retains powers to negotiate, annul, or re-initiate the process even after the challenge mechanism, as held in Vistra ITCL and Ramneek Goyal judgments.

Court's Interpretation and Reasoning: The Tribunal found that the Adjudicating Authority's order was inconsistent with its own earlier findings and failed to appreciate the commercial wisdom of the CoC. The direction to proceed with the challenge mechanism without allowing fresh EoI was viewed as an unwarranted interference with the CoC's powers and contrary to the objective of maximizing value.

Key Evidence and Findings: The Adjudicating Authority had earlier allowed withdrawal of the Plan approval application with liberty to file a fresh application post challenge mechanism. However, the CoC chose to reopen EoI submissions, a decision rejected by the Adjudicating Authority without assigning valid reasons.

Application of Law to Facts: The Tribunal held that the Adjudicating Authority's rejection amounted to non-application of mind and was legally unsustainable. The CoC's decision to invite fresh EoI was a valid exercise of commercial wisdom within the Code's framework.

Treatment of Competing Arguments: The Adjudicating Authority's concern about timelines and fairness was acknowledged, but the Tribunal emphasized that these concerns could be managed by adhering to strict CIRP timelines rather than denying the CoC's decision.

Conclusion: The Adjudicating Authority erred in rejecting the RP's application and directing the CoC to proceed only with the challenge mechanism process.

Issue 3: Participation of new entity (JSW Energy Limited) in the CIRP process after closure of EoI submission

Relevant Legal Framework and Precedents: The I&B Code and Regulations require that new PRAs submit EoI within prescribed timelines. The Tribunal referred to the NCLT's earlier orders rejecting JSW Energy Limited's applications to participate as it was not a PRA at the relevant time.

Court's Interpretation and Reasoning: The Tribunal noted that JSW Energy Limited's applications were dismissed on valid grounds as it was not a PRA when the EoI window was closed. However, the reopening of EoI submissions by the CoC and RP would give JSW and other new applicants a fair opportunity to participate.

Key Evidence and Findings: JSW Energy Limited's multiple applications for participation were dismissed by the Adjudicating Authority for non-compliance with procedural requirements and timelines.

Application of Law to Facts: The Tribunal made clear that no new applicant can insist on participation unless a fresh Form G is issued inviting fresh EoI. The reopening of EoI submissions would cure this defect.

Treatment of Competing Arguments: The Adjudicating Authority's rejection of JSW's participation was upheld, but the Tribunal's allowance of fresh EoI invitation indirectly provides JSW and others an opportunity to participate legitimately.

Conclusion: New applicants like JSW Energy Limited can participate only upon issuance of fresh Form G inviting fresh EoI, which is permissible under the Code and Regulations.

Issue 4: Interpretation of Regulation 39(1A)(b) and scope of CoC's powers post challenge mechanism

Relevant Legal Framework and Precedents: Regulation 39(1A)(b) provides for a challenge mechanism allowing Resolution Applicants to improve their plans. The Tribunal referred to the Vistra ITCL judgment which clarified that this regulation does not fetter the CoC's powers to negotiate, annul, or re-initiate the resolution process post challenge mechanism.

Court's Interpretation and Reasoning: The Tribunal emphasized that the challenge mechanism is a tool for modification but does not restrict the CoC's broader powers to maximize value. The CoC retains jurisdiction to take further steps including inviting fresh EoI or re-issuing the Request for Resolution Plans (RFRP).

Key Evidence and Findings: The CoC's decision to withdraw the approved plan application and to initiate fresh EoI submissions was consistent with the regulatory framework and judicial precedents.

Application of Law to Facts: The Tribunal found that the Adjudicating Authority's strict adherence to the challenge mechanism without regard to the CoC's broader powers was misplaced.

Treatment of Competing Arguments: The Adjudicating Authority's view that the challenge mechanism must be completed before any fresh EoI is invited was rejected in light of the broader interpretation of Regulation 39(1A)(b).

Conclusion: Regulation 39(1A)(b) does not limit the CoC's powers to invite fresh EoI or take other steps post challenge mechanism to maximize value.

3. SIGNIFICANT HOLDINGS

- "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." (Para 19, Vistra ITCL Judgment)

- "The CoC has the jurisdiction to negotiate, annul the resolution process and embark on re-issuing the Request for Resolution Plans (RFRP) even after completion of the challenge mechanism."

- The commercial wisdom of the CoC in deciding to issue fresh Form G and inviting fresh EoI for maximization of value is sacrosanct and must be respected unless shown to be illegal or irrational.

- The Adjudicating Authority erred in rejecting the RP's application to issue fresh Form G and invite fresh EoI, and in directing the CoC to proceed only with the challenge mechanism process.

- New prospective resolution applicants cannot participate in the CIRP process unless a fresh Form G is issued inviting fresh EoI.

- The CIRP process must be completed within the statutory timelines, but this does not preclude the CoC from taking steps to maximize value, including reopening EoI submissions, subject to adherence to time limits.

- The Impugned Order of the Adjudicating Authority dated 03.04.2025 is quashed, and the RP is permitted to issue fresh Form G and invite fresh EoI, subject to completion of CIRP within prescribed timelines.