CoC can hold Second Challenge Process even after Declaration of Highest Bidder: NCLAT [Read Order]

According to a ruling by the National Company Law Appellate Tribunal (NCLAT), the Committee of Creditors may still hold a second challenge process for the corporate debtor's asset auction even if the top bidder has already been decided in the first process.

The appellant, Anuj Goyal, was deemed the highest bidder in the initial challenge round of Frost International Ltd.'s corporate insolvency resolution process. Nevertheless, the Resolution Professional thereafter submitted a request for guidance to carry out a second challenge procedure, which the NCLT granted.

Since their financial proposals were deemed definitive for the purposes of that round, certain resolution candidates who had not participated in the first round were therefore permitted to participate in the second challenge procedure. After then, a third challenge procedure was planned as well. Disappointed, the appellant appealed the NCLT's decision to permit the RP to carry out a second challenge procedure.

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The appellant argued that applicants who did not take part in the first round should not have been permitted to join further rounds and that the CoC lacked the authority to hold a second challenge process.

The New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) clarified that a resolution applicant does not have the right to insist that the CoC approve their plan only because they were the highest bidder in a challenge procedure. In any given round, the CoC is not required to accept the highest bid.

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The NCLAT referred to its earlier decision in Vistara ITCL India Ltd. v. Torrent Investments Pvt. 2023, which had upheld the CoC's authority to carry out several challenge procedures in order to maximize value. As a result, the Appellate Tribunal maintained the NCLT's ruling and declared that, even in cases where the highest bidder has been announced, the COC is not required to carry out additional challenge procedures.

To Read the full text of the Order CLICK HERE

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