When application for approval of Resolution Plan is yet to be filed, a better offer received from any Prospective Resolution Applicant(PRA) constitutes a changed circumstance, as such the CoC should be allowed to give a fair chance and level playing field to all other PRAs to enhance their Resolution Plans

CoC of Tamra Dhatu Udyog Pvt. Ltd. Vs. Ms. Mamta Binani RP

(2023) ibclaw.in 650 NCLT
August 25, 2023
NCLT Kolkata Bench
Ms. Bidisha Banerjee, Member (Judicial) and Sh. Arvind Devanathan, Member (Technical)

The Division Bench of Smt. Bidisha Banerjee, Member (Judicial) and Shri D. Arvind, Member (Technical), NCLT, Kolkata has considered the preamble of the Insolvency and Bankruptcy Code and various case laws to  hold that the objective of the Code for maximization of the value of assets and the commercial wisdom of COC are of paramount importance and thus, if any better offer is received from any PRA before a plan is up for approval, it constitutes a changed circumstance, and as such the Committee of Creditors should be allowed to give a fair chance and level playing field to all other PRAs to enhance their Resolution Plans provided the timelines are strictly adhered to.

I. Factual Matrix:

I.A. (I.B.C)/1459(KB)2023 was filed by the COC of the corporate Debtor (Tamra Dhatu Udyog Private Limited) to seek the following relief:

a) To clarify the order dated 03/08/2023 to the extent that all the resolution applicants may be given a last opportunity to revise their resolution plan so that equal and fair opportunity may be given to them to submit a revised resolution plan.

b) Direction to the RP to cancel the ongoing voting on the resolution plans and to conduct fresh voting on the resolution plans post submission of the revised resolution plans.

The prayer has been vehemently opposed by the PRA H1 bidder on the following grounds:

1. After the said PRA has been declared as H1 Bidder and the same is made public, no further opportunity can be given to other PRAs to enhance their plan;
2. Regulation 39(1A) (a) of the IBBI (CIRP) Regulation 2016 imposes a bar as the PRA (Tarun Singh) was allowed by the RP to enhance his plan twice.

III. Key Issues:

The issue that cropped up for determination is whether the COC can be permitted to go ahead with its decision to allow all the PRAs a fair chance and a level playing field to enhance their plan with the object of maximization of value of assets. This Adjudicating Authority therefore proceeds to consider whether a single modification to a Resolution Plan is practicable to get an optimum value.

IV. Interpretation of Statutory Provisions and Various Case Laws

1. Regulation 39(1A) (a) of IBBI (CIRP) Regulation, 2016 reads as: “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;”
2. The Hon’ble Apex Court in the case of Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta [2019] ibclaw.in 07 SC has emphasised on giving paramount importance to the commercial wisdom of COC and has opined that only a limited judicial review is available for reopening issues decided by COC. It is therefore imperative that COC would negotiate a resolution plan in a manner so as to get better commercial terms towards value maximization and negotiate with all PRAs. Whereas, if the COC is allowed only one opportunity to negotiate, it may avail of the other option to restart the CIRP by re-issuing RFRP which will cause a re-running of the entire CIR Process which is not only time-consuming but also put the Corporate Debtor at risk of being liquidated.
3. In Aditya Kumar Tibrewal vs. Om Prakash Pandey (2022) ibclaw.in 278 NCLAT, the Hon’ble NCLAT has declared that the timelines prescribed under regulation 35A is directory and not mandatory, as actions taken by RP after the prescribed timelines if annulled will cause injustice to the Corporate Debtor and such treatment may be fraught with serious consequences to all the stakeholders.
4. In Bank of Maharashtra v. Videocon Industries Ltd. (2022) ibclaw.in 136 NCLAT, the Hon’ble NCLAT has held that COC, the custodian of the public trust, is entrusted with the duty of determining feasibility, viability and commercial aspects of a plan, while treating all the stakeholders fairly, in the process.
5. In Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited (2021) ibclaw.in 153 SC, the Hon’ble Supreme Court observes that the analysis of the statutory framework governing the CIRP and periodic reports of the Insolvency Law Committee indicates that it is a creditor-driven process.

The aim of the process, in preferential order, is to:

First, enable resolution of the debt by maintaining the corporate debtor as a going concern, in order to preserve the business and employment of the personnel;

Second, maximize the value of the assets of the corporate debtor and enable a higher payback to its creditors than under liquidation; and

Third, enable a smoother and faster transition to liquidation in the event that a time-bound CIRP fails, in a bid to avert further deterioration of value.

6. In Ebix Singapore (supra), it has been further held that a resolution plan cannot be withdrawn while it is pending for approval of the Adjudicating Authority. It appears that the Ebix Singapore (supra) discusses three phases where a resolution plan may be withdrawn:

(i) Firstly, before approval by COC.

(ii) Secondly, after approval by the COC and while it is pending before AA for approval.

(iii) Lastly, after approval by AA.

V. Decision:

1. It is settled position of law that Adjudicating Authority can return the plan for reconsideration, to the COC albeit on limited grounds. This Adjudicating Authority cannot remain oblivious of the fact that under Section 31 of the Insolvency and Bankruptcy Code, 2016, a Resolution Plan attains finality and becomes binding only after approval by the Adjudicating authority and no such application is pending with this Adjudicating authority.
2. In terms of the Bank of Maharashtra v. Videocon Industries Ltd. (2022) ibclaw.in 136 NCLAT judgment, any better offer received from any PRA will constitute a changed circumstance which should allow the COC to seek approval to give a fair chance to all other PRAs to enhance their plan, provided the timelines are strictly adhered to.
3. Therefore, the Adjudicating Authority should have the power to allow the prayer of the COC of the Corporate Debtor of permitting all the PRAs to enhance their plans financially giving them a level playing field.
4. The instant application is filed by COC of the Corporate Debtor. We are mindful of the objective of the Code and commercial wisdom of COC being of paramount importance. Hence, we allow this application and allow all the Participating Resolution Applicants, by giving then a last, equal and fair opportunity, to submit their revised and/or enhanced resolution plans to the RP of the Corporate Debtor. If required fresh timelines may be provided to all the Participating Resolution Applicants who wish to enhance and/or revise their resolution plans, keeping in view the prescribed timelines of completion of the CIR Process and the voting period may also be extended if necessary
5. Accordingly, this A. (IB) 1459/KB/2023 is disposed of in terms of order above.

I.A. (IBC) No. 1444/KB/ 2023 filed by one M/s Kedarnath Mining Private Limited seeks the following relief:

a) Direct the respondent to consider the proposal made by the applicant for enhancement in their resolution plan vide email dated 05/08/2023

b) Extend the voting period by such time as deemed fit and proper, for consideration of the plans submitted in consequence of the order dated August 03, 2023;

c) Any other order as deemed fit and proper.

The aforesaid order will govern this I.A. too and accordingly, this I.A. (IBC) No. 1444/KB/ 2023 is also disposed of in terms of order above.

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