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TMI Blog2023 (1) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... Ashok Bhushan, J. This Appeal has been filed against the order dated 11.08.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Court-II in I.A 2193/2022 in C.P.(IB)/434(MB)2018. The brief facts of the case necessary to be noticed for deciding this Appeal are:- The Adjudicating Authority vide order dated 10.11.2021 initiated Corporate Insolvency Resolution Process (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 we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion plan on the applicant and take an informed decision. With the aforesaid observations, IA No. 2193/2022 is allowed and disposed of." The Resolution Professional in pursuance of the order passed by the Adjudicating Authority stopped the voting process which was underway in pursuance of the 17th CoC meeting dated 03.08.2022. The Appellant aggrieved by the impugned order has come up in this 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 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Resolution Plan, negotiate with Resolution Applicants and make endeavour to receive the maximum value. 6. Learned Counsel appearing for the Resolution Professional submits that after completion of the Challenge Process on 15.07.2022, all Resolution Applicants has to submit their revised and updated plan by 18.07.2022 which was the last date fixed. Appellant received e-mail dated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be submitted by 18-07-2022. The Appellant, Saarloha, Rimjhim Ispat, and Shyam SEL submitted their amended Resolution Plans accordingly." 10. Now, we need to notice the Regulation 39 (1A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 which has been substituted in the Code w.e.f. 30.09.2021, 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 regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Additionally, the manner of making revisions using a challenge mechanism and preventing late and unsolicited plans from being considered by the CoC have also been provided for in the regulations." 12. The IBBI has also issued Discussion Paper on 27.08.2021 where use of Swiss Challenge in CIRP was recommended. 13. Consequent to recommendation 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 Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicants can be asked to submit the revised resolution plans. The Members of the CoC stated that the actions of the Resolution Applicants have adversely affected the Challenge Process wherein two of the RAs have effectively not adhered to their final offer made under the Challenge Process i.e. Rimjhim Ispat Limited has changed 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n only in the event that a positive confirmation is received from JSL to the effect that they want to improve their offer. The of Indian Bank proposed that the CoC may obtain a legal opinion to ascertain if a fresh negotiation can be entered into and revised plans can be obtained. The representative of PNB proposed 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 complia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... played on the screen in the virtual meeting to the participants in the meeting. The NPV of all commercial offers will be disclosed to the Resolution Applicants (without the disclosure of identity of Resolution Applicants) whereafter they will be required to submit 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vise their bid/commercial offer. It is relevant to notice that Challenge Process also reserves the unconditional right of the CoC to cancel/ modify/ withdraw/ abandon/ amend the process of the Challenge Process at any stage. The approval 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 Application was rejected by the Adjudicating Authority on 18.03.2020 against which Appeal was filed by Respondent No.1 before NCLAT which Appeal was allowed by order dated 19.10.2020. The judgment of this Appellate Tribunal was challenged before the Hon'ble Supreme Court. The Hon'ble Supreme Court after considering the facts of the said case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved 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 have to conclude the matter by next day. On the next day, i.e., 12th February, 2020, when the adjourned proceedings of the CoC were held, the respondent No.1PPIPL had sent an email, stating therein that the Directors of its Company will not be available for the said meeting and requested for deferring the meeting by a day or two. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 commenced w.e.f. 07.08.2022. The Adjudicating Authority without there being any valid reason ought not to have been interfered with the voting on the Resolution Plans which had already commenced w.e.f. 07.08.2022. As result of the order of the Adjudicating Authority the process of voting which had commenced on 07.08.2022 was abandoned by the Resolution Professional. 27. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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