NCLAT Upholds Approval of Manglam Multiplex’s Resolution Plan, Dismisses Ganga Construction’s Challenge for Non-Participation in CIRP Bidding
NCLAT Upholds Approval of Manglam Multiplex’s Resolution Plan, Dismisses Ganga Construction’s Challenge for Non-Participation in CIRP Bidding
Introduction
The National Company Law Appellate Tribunal (NCLAT), New Delhi, dismissed an appeal filed by Ganga Construction Consortium, an unsuccessful resolution applicant, challenging the approval of the resolution plan submitted by Manglam Multiplex Pvt. Ltd. in the Corporate Insolvency Resolution Process (CIRP) of Varutha Developers Pvt. Ltd. The Appellate Tribunal held that a party that fails to participate in the challenge mechanism or submit a final resolution plan cannot later challenge the approved plan or question the eligibility of the successful resolution applicant (SRA).
Factual Background
Varutha Developers Pvt. Ltd., the corporate debtor, had purchased 9.26 acres of land in Gurugram, financed by SREI Equipment Finance Ltd. with a loan of ₹300 crore. After default, the creditor initiated proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), leading to admission of the CIRP by the NCLT. During the process, eight prospective resolution applicants (PRAs) submitted Expressions of Interest (EOI), including the appellant, Ganga Construction Consortium, and the successful resolution applicant, Manglam Multiplex Pvt. Ltd. The Resolution Professional (RP) established a challenge mechanism requiring PRAs to submit financial bids of at least ₹250 crore. While Manglam Multiplex and others participated, Ganga Construction failed to submit its financial bid despite multiple opportunities. The CoC approved Manglam’s resolution plan, following which Ganga Construction filed an interlocutory application before the NCLT, challenging the approval. The NCLT rejected the plea, prompting the present appeal before the NCLAT.
Procedural Background
The appellant’s grievance arose from the NCLT’s order approving the CoC’s decision to accept Manglam Multiplex’s plan. The appellant alleged procedural irregularities in the conduct of CIRP and claimed that the SRA was ineligible under Section 29A of the IBC due to its links with M3M group entities through a share purchase agreement (SPA). The NCLT, however, held the plan valid and within the CoC’s commercial wisdom, leading to the appeal before the Appellate Tribunal.
Issues
1. Whether an unsuccessful resolution applicant that failed to submit a final plan can challenge the resolution plan’s approval.
2. Whether the successful resolution applicant, Manglam Multiplex Pvt. Ltd., was ineligible under Section 29A of the IBC.
3. Whether the NCLT erred in approving the plan without properly addressing the appellant’s objections.
Contentions of the Parties
Appellant: The SRA was ineligible under Section 29A(c), (h), and (j) of the IBC since M3M Group had obtained control of the corporate debtor through a Share Purchase Agreement (SPA) dated 17.05.2019. The resolution process was conducted in violation of due procedure, and the challenge mechanism was unfair. The CoC’s decision was arbitrary and violated the principles of equality among resolution applicants.
Respondents: The appellant lacked locus standi as it failed to participate in the challenge mechanism and did not submit a final plan. The SPA between M3M entities and the corporate debtor never materialized because the Enforcement Directorate (ED) had attached the land in February 2020, preventing transfer of ownership or control. The allegations of ineligibility under Section 29A were baseless since no shareholding or guarantee existed that would render the SRA ineligible.
Reasoning and Analysis
The bench of Justice Ashok Bhushan and Mr. Arun Baroka (Technical Member) observed that the appellant, having not submitted a final resolution plan or participated in the challenge mechanism, had no legal standing to challenge the plan’s approval. It emphasized that once a bidder voluntarily exits the process, procedural grievances cannot be raised later.
On the question of ineligibility under Section 29A, the NCLAT noted that while an SPA existed, it was never executed due to ED’s attachment of assets, meaning no de facto or de jure control was ever transferred to the M3M group. Therefore, provisions under Section 29A(c), (h), or (j) did not apply.
The Tribunal further clarified that the share purchase agreement did not amount to a guarantee within the meaning of Section 29A(h). It also pointed out that another unsuccessful resolution applicant had already challenged and failed against the same order, reinforcing that such attempts amounted to abuse of process. The Bench upheld the commercial wisdom of the CoC, reiterating that courts or tribunals cannot interfere with CoC’s evaluation and approval of resolution plans unless there is a violation of law.
Implications
This judgment reinforces the principle that unsuccessful resolution applicants cannot reopen settled insolvency processes after voluntarily abstaining from the bidding mechanism. It underscores the finality of CoC decisions and the need to maintain procedural discipline and certainty in CIRP proceedings. The ruling also clarifies that Section 29A ineligibility cannot be mechanically invoked without concrete evidence of control or guarantees and that unexecuted share purchase agreements do not trigger disqualification.
In this case the appellant was represented by Mr. Mohit Choudhary, Mr. Prakhar Mithal, Mr. Gaurav Raj, Advocates.
