NCLT Indore: Restricting CIRP Negotiations to H1–H2 Bidders Valid When Rooted in RFRP and Value Maximisation

NCLT Indore: Restricting CIRP Negotiations to H1–H2 Bidders Valid When Rooted in RFRP and Value Maximisation

Introduction

The National Company Law Tribunal, Indore Bench, has held that restricting negotiations in a Corporate Insolvency Resolution Process (CIRP) to higher-ranked bidders is not arbitrary where such restriction is expressly contemplated under the Request for Resolution Plan (RFRP). The Tribunal observed that a ranking-based negotiation structure serves the objective of value maximisation and process efficiency, and therefore cannot be faulted merely because lower-ranked bidders are not afforded repeated opportunities to improve their plans.

Factual Background

The dispute arose in the CIRP of Indian Soya Industries Pvt. Ltd., where Bio Treasure Overseas challenged the manner in which the resolution process was conducted. The applicant contended that it had submitted its resolution plan within the prescribed timeline and had also revised the plan multiple times whenever called upon to do so.

According to the applicant, after a prolonged period of silence, it was informed that the Committee of Creditors (CoC) had resolved to proceed toward liquidation. The grievance raised was that while certain bidders were repeatedly invited to improve their offers, the applicant was denied a similar opportunity despite being a valid participant in the process.

The applicant further alleged lack of transparency in the H1, H2, and H3 ranking process, arguing that its plan had effectively been sidelined without fair consideration.

Procedural Background

The challenge was placed before the NCLT Indore Bench comprising Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta. The applicant sought interference with the CIRP process on the ground that the CoC had unfairly restricted negotiations only to select bidders.

The respondents relied on the terms of the RFRP and the pre-declared evaluation matrix, submitting that the entire process was carried out in accordance with the bid framework approved at the outset.

Issues

1. Whether limiting CIRP negotiations only to H1 and H2 bidders is arbitrary.

2. Whether exclusion of lower-ranked bidders from further negotiations violates principles of fairness.

3. Whether the CoC’s decision to negotiate only with top-ranked bidders is protected by commercial wisdom.

Contentions of Parties

The applicant contended that its resolution plan was unfairly excluded from further negotiations, even though it had participated within time and revised its proposal when required. It argued that repeated invitations to improve offers were extended only to other bidders, thereby creating a discriminatory and opaque process.

The respondents submitted that the RFRP itself expressly provided that negotiations would be limited to H1 and H2 bidders, and all bidders were aware of this structure from the beginning. It was argued that the ranking was based on an objective evaluation matrix with heavy emphasis on net present value, and therefore the applicant, not being ranked among the top two, could not claim an enforceable right to further negotiations.

Reasoning and Analysis

The Tribunal found no merit in the applicant’s allegations of unfairness. It noted that the RFRP clearly stipulated that negotiations would be restricted to H1 and H2 bidders as part of a deliberate design to streamline the CIRP and narrow the field of competing plans.

The Bench emphasised that differential treatment based on pre-declared ranking criteria cannot be termed arbitrary, unless it is shown that the process was applied in a discriminatory or mala fide manner. In the present case, no such irregularity was demonstrated.

The Tribunal accepted the record showing that all resolution plans, including that of the applicant, were evaluated strictly under the prescribed matrix. The applicant’s plan was in fact placed before the CoC and was rejected with 100% voting share, while the successful resolution plan was approved unanimously.

Reaffirming settled IBC principles, the Bench held that evaluation, negotiation, and final approval of resolution plans fall squarely within the commercial wisdom of the CoC, which remains immune from judicial review in the absence of statutory violation, procedural illegality, or material irregularity. Since the applicant failed to establish any such infirmity, the Tribunal declined to interfere.

Decision

The NCLT Indore dismissed the application, holding that limiting negotiations to H1 and H2 bidders in accordance with the RFRP is valid, non-arbitrary, and protected by the commercial wisdom of the Committee of Creditors.

In this case the appellant was represented by Advocate Rohit Dubey, Advocate. Meanwhile the respondent was represented by Advocate Ayushi Patidar.