TMI Blog2023 (1) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... the CoC to cancel/ modify/ withdraw/ abandon/ amend the process of the Challenge Process. After revised offer was received from Respondent No.2, the said factum was brought into the notice of the CoC in its 15th CoC meeting held on 25.07.2022. In 15th and 16th CoC meeting, CoC deliberated how to proceed further. Suggestions were also received that NCLT be approached for permitting modification. The present is a case where CoC did not finally took any decision to permit the Respondent No.2 to revise its bid after close of Challenge Process. CoC ultimately in the 17th CoC meeting held on 03.08.2022 in spite of earlier suggestions received in the earlier CoC meeting proposing different course of action decided to vote all the Resolution Plans received in the process. It is well settled that the timeline in the IBC has its salutary value and it was the wisdom of the CoC which decided to vote on the Resolution Plan after completion of Challenge Process and not to proceed to take any further negotiation or further modification of the plan, that decision ought not to have been interfered with. The Application was filed by the Respondent No.2 on 07.08.2022 by which date CoC has alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess (CIRP) against Mittal Corp Limited - (Corporate Debtor). Form G was issued on 20.01.2022 and thereafter again on 17.03.2022. On 11.04.2022, the Resolution Professional issued Request for Resolution Plan (RFRP). On 31.05.2022 which was the last date for receiving the plans, the Resolution Professional received six Resolution Plans including the Resolution Plan submitted by the Appellant- Jindal Stainless Limited as well as by Respondent No.2- Shyam Sel and Power Limited . The Committee of Creditors (CoC) in 12th meeting held on 04.07.2022 decided to undertake a Challenge Process in order to give an opportunity to the Resolution Applicants to improve their plans. The Resolution Professional issued a process note on the Challenge Process mechanism. All the Resolution Applicants were required to submit their unconditional acceptance of the rules of the said Challenge Process in the interest of maximising the value of assets of the Corporate Debtor. All the Resolution Applicants were communicated the rules of the Challenge Process and after receipt of the unconditional acceptance, Challenge Process was conducted in the 13th CoC meeting held on 15.07.2022. All the Resolution A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal. 2. Shri Ramji Srinivasan, Learned Senior Counsel and Shri Bishwajit Dubey, Advocate appearing for the Appellant submits that the Adjudicating Authority committed error in issuing the impugned direction for considering the revised plan of Respondent No.2. It is submitted that the CoC having taken decision to adopt Challenge Process for obtaining the optimum value which process culminated on 15.07.2022 with participation of the Appellant as well as Respondent No.2. Respondent No.2, who in the Challenge Process has made its highest offer, had no right or jurisdiction to further revise his plan. After going through the Challenge Process, the Respondent No.2 cannot be permitted to revise its plan which is against the Challenge Process rules as has been approved by the CoC. The Respondent No.2 in his Application did not even implead the CoC nor any of the Resolution Applicants including the Appellant who may be affected by the prayers made by the Respondent No.2. It is submitted that the adoption of Challenge Process by the CoC is in accordance with Regulation 39(1A)(b) as has been substituted w.e.f. 30.09.2021. The CIRP has to be completed in the timeline and any interdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 29.07.2022 from Respondent No.2 which was placed before the CoC in 15th CoC meeting held on 25.07.2022. The Regulation do not empower the Resolution Professional to permit the revision of plan more than once. 7. We have considered the submissions of the Counsel for the parties and perused the record. The question to be answered in this Appeal is as to whether after closure of Challenge Process on 15.07.2022 and consequent receipt of Resolution Plan by 18.07.2022, the Adjudicating Authority could have directed for consideration of the revised plan submitted by the Respondent No.2 thereafter. 8. Before we proceed to consider the rival submissions of the parties, we need to notice the relevant clauses of RFRP and the Challenge Process rules. Para 2 (viii) (ix) of the RFRP reserves the right of CoC to negotiate with the Resolution Applicant and to determining the mechanism of such negotiation. Para 2 (viii) and (ix) are as follows:- (viii) The CoC has the right to negotiate (if required) the terms of such Resolution Plans with the relevant Resolution Applicant(s) including but not limited to determining the mechanism of such negotiation. (ix) The CoC reserves the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21, which is to the following effect:- 39. Approval of resolution plan . (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 more than once; or (b) use a challenge mechanism to enable resolution applicants to improve their plans. 11. Prior to the aforesaid amendment in the CIRP Regulation, there was no provision for adopting challenge mechanism. Insolvency Law Committee has submitted its Report dated 20.05.2022 recommending amendment in the regulation for inserting a mechanism and CoC to opt Swiss Challenge Method. Para 2.44, 2.45 2.46 of the Insolvency Law Committee Report dated 20.05.2022 is as follows:- 2.44. Considering the above, the Committee decided that the regulations should clearly lay down a mechanism for reviewing late submissions of (or revisions to) resolution plans. Further, suitable amendments should be made in the Code to ensure that the procedure provided in the regulations has due sanctity. 2.45. The Committee agreed that the CIRP Regulations may allow the CoC to opt for a Swiss challenge method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation of Insolvency Law Committee Report, the Regulation was amended as noticed above. The Regulation has been brought in place to enable the CoC to negotiate with all the Resolution Applicants by one alternative mechanism to find out the best Resolution Plan. In the present case, the Challenge Process continued in seven rounds and all Resolution Applicants who participated were given opportunity to revise and better their plans. The Respondent No.2 who was part of the Challenge Process gave his best plan in the Challenge Process which had been recorded. In the 15th CoC meeting held on 25.07.2022, the communication received from the Respondent No.2 was noticed. The revised communication from Respondent No.2 was deliberated. The Resolution Professional s statement was recorded in the minutes that pursuant to the Challenge Process, revised Resolution Plans were submitted by the Resolution Applicants. Deliberation took place regarding the future course of action. Some of the members suggested to conduct another round of negotiation after obtaining an order from NCLT, ultimately it was decided to hold another meeting on 27.07.2022. It is useful to notice paras 9 to 13 of the Item No.B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged the terms of commercial offer post closure of challenge process and SSPL has submitted a revised commercial offer on email. Accordingly, in light of the aforesaid developments, new negotiations may be considered as a continuation of the Challenge Process since the conduct of the bidder with the highest NPV in the challenge process itself has caused uncertainty. The representative of ACRE stated that the CoC has the inherent right to negotiate and accordingly, the CoC may run negotiations and subsequently inform the NCLT if basis the results of the new negotiations, revised resolution plans can be called from the Resolution Applicants. 12) The representative of SBI proposed that CoC Members can ascertain if the proposal of the Resolution Applicants seeking to submit revised commercial offers are genuine subsequent to which a decision can be taken on the going forward strategy. The representative of SBI proposed that CoC Members can reach out to SSPL to ascertain their interest and IDBI Bank may also approach JSL (without disclosing any confidential information) to ascertain their seriousness and interest in submitting an improved offer. Further, Rimjhim Ispat Limited can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that another CoC may be re-convened at a later date and during this time the lenders can convene a lenders meeting and discuss the way forward to ensure that value maximisation can take place pursuant to which a decision can be taken in the subsequent CoC. The RP also stated that they will deliberate with the legal counsel the manner in which such value maximisation can take place without violating any provisions of the Code or Regulations made thereunder. 15. The last meeting of the CoC was held on 03.08.2022 when qualitative and quantitative evaluation as per evaluation matrix filed by Resurgent India was placed before the members of the CoC, following decision was taken in Agenda Item No. D- Voting on Resolution Plans :- D. Voting on Resolution Plans 19) The Members of the CoC were of the view that since the Resolution Plan of Kalyan Toll is not in compliance with the provisions of the Code, the Resolution Plan may not be considered further for the purposes of approval. Accordingly, in compliance with Regulation 39(3)(c) and in exercise of their commercial wisdom, the Members of the CoC decided to vote simultaneously on the Resolution Plans submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their fresh bid, should they choose to participate further in the Challenge Process. However, it must be noted that no such correspondence shall be made in the last bidding round of the process. (e) H1 bidder of each round will have immunity from elimination in the next round even if it does not increase its bid. (f) In case any participating Eligible RA does not submit an improved bid, their last submitted bid will be considered as the final binding bid and such Eligible RA shall stand eliminated from this Challenge Process. 4. The aforementioned process shall be followed for each bidding round up-till all the participating Eligible RAs express their inability to improve their commercial bids i.e. if no improved commercial bid is received by any of the Eligible RAs in a Round, then the Challenge Process will come to a closure. Such closure will be intimated to all the Eligible RAs over their respective emails. However, after any given round, the CoC may declare that only one more round shall be conducted. 5. In any given round: (a) an Eligible RA cannot decrease his total fixed/unconditional/committed amount to the creditors, vs previous round; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval of the plan submitted in CIRP is in the domain of the CoC. Under Regulation 39 of the CIRP Regulations, the Committee is entitled to record its deliberation and vote on such Resolution Plan simultaneously. Challenge Process also reserves the unconditional right of the CoC to cancel/ modify/ withdraw/ abandon/ amend the process of the Challenge Process. 19. When we come to the facts of the present case, it is relevant to notice that after revised offer was received from Respondent No.2, the said factum was brought into the notice of the CoC in its 15th CoC meeting held on 25.07.2022. In 15th and 16th CoC meeting, CoC deliberated how to proceed further. Suggestions were also received that NCLT be approached for permitting modification. The present is a case where CoC did not finally took any decision to permit the Respondent No.2 to revise its bid after close of Challenge Process. CoC ultimately in the 17th CoC meeting held on 03.08.2022 in spite of earlier suggestions received in the earlier CoC meeting proposing different course of action decided to vote all the Resolution Plans received in the process. We had already noticed the resolution of the 17th CoC meeting. The CoC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Plan of Respondent No.2. There is a reference of judgment of the Hon ble Supreme Court in Ajay Gupta vs. Pramod Kumar Sharma- Civil Appeal No. 1358 of 2022 but we failed to see that how the said judgment helped the Respondent No.2 in seeking the direction to modify his Resolution Plan which he had submitted after completion of Challenge Process. Order of the Adjudicating Authority does not give any reason as is clear from the order itself. 22. We may also notice a judgment of the Hon ble Supreme Court in Civil Appeal Nos. 3665-3666 of 2020- Ngaitlang Dhar vs. Panna Pragati Infrastructure Private Limited Ors. . In the above case, the CoC has adopted the Swiss Challenge Method and after finalisation of the negotiation by Swiss Challenge open biding method plans were considered for approval and was approved on 12.02.2020. The Respondent No.1 who was also Resolution Applicant and filed Application before the Adjudicating Authority had sent revised Resolution Plan dated 14.02.2020. An I.A No. 27 of 2020 was filed by Respondent No.1 to the Adjudicating Authority seeking direction to the Resolution Professional to take on record the revised Resolution Plan which Applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present increased their offer. In the said open bidding process between the two prospective Resolution Applicants present, Ngaitlang Dhar was found to be the highest bidder/prospective Resolution Applicant having offered the bid of an upfront amount of Rs.64.30 crore plus CIRP costs. The said Resolution Plan of Ngaitlang Dhar was approved unanimously by Allahabad Bank having 68.34% voting rights and the Corporation Bank having 31.66% voting rights. 26. It is thus clear that the respondent No.1PPIPL was very much aware that the CoC has decided to finalise the proceedings by 12th February, 2020. It is also clear that though PPIPL was first called upon by the CoC to enhance the bid amount, it had specifically rejected the same. It insisted on disclosing the basis of score. In the proceedings of the 5th meeting of the CoC dated 11th February, 2020, post lunch, though Ngaitlang Dhar had enhanced his bid from Rs.63 crore to Rs.64 crore, the representative of PPIPL subsequently came and requested for adjourning the meeting for few days. The said request was specifically rejected by the CoC by informing the representative of PPIPL that it had to adhere to the IBC timeline and would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Padmanabhan Venkatesh and others, (iv) Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another. (v) Ghanashyam Mishra and Sons Private Limited Through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited Through the Director Ors. 24. The above judgment of the Hon ble Supreme Court fully supports the case of the Appellant that after adoption of Swiss Challenge Method to find out the best plan one Resolution Applicant cannot be allowed to submit a revised plan. 25. It is well settled that the timeline in the IBC has its salutary value and it was the wisdom of the CoC which decided to vote on the Resolution Plan after completion of Challenge Process and not to proceed to take any further negotiation or further modification of the plan, that decision ought not to have been interfered with. The Application was filed by the Respondent No.2 on 07.08.2022 by which date CoC has already decided to resolve the vote on all the plans and voting has also commenced w.e.f. 07.08.2022. 26. We have gone through the whole Application filed by the Respondent No.2. There is not even mention of the fact that voting has already comm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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