CoC Has Discretion To Allow Resolution Applicant To Submit Revised Plan If Its Name Appears In Final Resolution Applicant List: NCLAT

CoC Has Discretion To Allow Resolution Applicant To Submit Revised Plan If Its Name Appears In Final Resolution Applicant List: NCLAT

Introduction

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that the Committee of Creditors (CoC) has discretion to allow a Resolution Applicant (RA) to submit a revised plan if its name appears in the final list of RAs. Such discretion can be exercised to maximize the value of the corporate debtor’s assets.

Factual Background

The present appeal arose from an order passed by the National Company Law Tribunal (NCLT), Mumbai, wherein the 3rd Member allowed both Respondent No. 3 (R-3) and the Appellant to submit revised and compliant resolution plans in order to maximize the value of the corporate debtor’s assets.

Procedural Background

The Appellant argued that R-3, having failed to submit a revised plan within the time stipulated by the CoC, had no jurisdiction to submit one later—particularly when voting on the Appellant’s resolution plan had already commenced on 22.05.2024.

The Respondents, however, contended that under the Request for Resolution Plan (RFRP), the CoC has wide powers, including the ability to halt the resolution process at any stage and negotiate with any RA for value maximization.

Issues

1. Whether the CoC has discretion to allow a Resolution Applicant to submit a revised plan?

2. Whether the CoC’s decision to allow R-3 to submit a revised plan was valid?

Contentions of the Parties

• Appellant’s Contention: The Appellant maintained that R-3 had no jurisdiction to submit a revised plan once the timeline had expired and voting had already commenced.
• Respondents’ Contention: The Respondents countered that the CoC is vested with the authority under the RFRP to stop the approval process at any stage and invite further negotiations or revised plans for value maximization.

Reasoning and Analysis

The Tribunal observed that the CoC had consciously decided to consider R-3’s revised plan, as confirmed by an affidavit filed by the CoC before the Adjudicating Authority.

It distinguished this case from Jindal Stainless Steel, noting that in Jindal the applicant’s name was absent from the final RA list, whereas here, R-3 was included in the final list.

The Tribunal further noted that although R-3 initially withdrew via email, this withdrawal was retracted within two days, and R-3 confirmed its intent to submit a revised plan.

Clause 1.11.1 of the RFRP explicitly states that no amendment, alteration, revision, or withdrawal of plans can be made without CoC’s permission. Thus, the CoC retains the right to negotiate with an RA to maximize value.

Accordingly, the Tribunal found no error in the NCLT’s decision permitting R-3 to submit the revised plan with CoC’s authorization.

Implications

This ruling underscores the discretionary powers of the CoC in the resolution process. It affirms that flexibility is necessary for value maximization of corporate debtor assets, provided the applicant is part of the final RA list.

Outcome

The NCLAT dismissed the appeal, holding that the CoC has discretion to allow a Resolution Applicant to submit a revised plan if its name appears in the final RA list.

Representation

For Appellant: In this case the appellant was represented by Mr. Arun Kathpalia & Mr. Krishnendu Dutta, Sr. Advocates with Mr. Prateek Kumar, Ms. Raveena Rai, Mr. Siddhant Grover, Mr. Yajas Achal and Ms. Mehak Khurana, Advocates.

For Respondents: Meanwhile the respondent was represented by Mr. Abhinav Vasisth with Mr. Abhishek Swaroop, Advocates for R-2. Mr. Kunal Tandon, Sr. Advocate with Mr. Kunal Kanungo, Ms. Natasha, Advocates for R-3. Ms. Pooja Mahajan and Mr. Karanvir Khosla, Advocates for R-1.