NCLAT favors Jindal Stainless: Sets aside NCLT order allowing Shyam Sel to submit a revised bid for Mittal Corp

NCLAT favors Jindal Stainless: Sets aside NCLT order allowing Shyam Sel to submit a revised bid for Mittal Corp

The National Company Law Appellate Tribunal, Principal Bench, New Delhi (in short NCLAT) allowed its appeal and quashed the order passed by the National Company Law Tribunal, Mumbai Bench (in short NCLT), which allowed rival Shyam Sel and Power Ltd to submit a revised resolution plan for the debt-ridden Mittal Corp Ltd.

The NCLT vide its order dated 10 November, 2021 initiated Corporate Insolvency Resolution Process (in short CIRP) against 'Mittal Corp Limited'- (hereinafter referred to as Corporate Debtor) and six resolution plans were received, including Jindal Stainless and Shyam Sel and Power Ltd.

After examining the report on the qualitative evaluation of the Resolution Plans, the Committee of Creditors (in short CoC) resolved to put four plans including that of Shyam Sel to vote. Voting was set to commence from 5 August till 26 August, 2022. Later, Shyam Sel approached Resolution Professional with a revised offer, which was rejected by him.

Soon after the voting commenced, Shyam SEL approached the NCLT, seeking direction that Resolution Professional to consider the revised offer dated 29 July, 2022 and place the same before the CoC. Further prayer was made that the Resolution Professional be restrained from continuing with CIRP. In the Application only Resolution Professional was impleaded as one of the Respondents.

On this, the NCLT on 11 August, 2022, directed CoC to "consider the revised resolution plan of the applicant and take an informed decision". This was challenged before the NCLAT by Jindal Stainless, which had put a stay on the NCLT order.

The counsel appearing for Shyam Sel and Power before the NCLAT submitted that the object of the Code is the maximization of the assets of the Corporate Debtor. It was contended that the NCLT had rightly issued direction to the Resolution Professional to place the revised offer before the CoC.

The division bench comprising of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) noted that the relevant clauses of Resolution Professional issued Request for Resolution Plan (in short 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.

The Tribunal observed 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 Appellate Tribunal was of the view that the voting process which had commenced on 7 August, 2022 was abandoned by the Resolution Professional was due to the NCLT order.

"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. 7 August, 2022. As result of the order of the Adjudicating Authority the process of voting which had commenced on 7 August, 2022 was abandoned by the Resolution Professional," the Tribunal stated in its order.

The Tribunal observed that the voting process was disrupted due to the NCLT, and it should commence afresh and must be completed in a time-bound manner and directed, "As per the decision of the CoC dated 3 August, 2022, the Resolution Professional may initiate fresh voting process on the Resolution Plans received in the process which may be completed within the period of one month."

The Tribunal set aside the order passed by the NCLT dated 11 August, 2022, and viewed it as unsustainable and extended the CIRP till 28 February, 2923, by which the Resolution Professional may file an appropriate Application before the NCLT, to bring relevant facts and development in the CIRP on record.