No Bar on CoC’s from Seeking Multiple Modifications or Revisions of Resolution Plans: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench has ruled that the Committee of Creditors (CoC) has the authority to request changes or revisions to the Resolution Plans that the Resolution Applicants have submitted on more than one occasion. This is because Regulation 39(1A) of the Corporate Insolvency Resolution Process (CIRP) Regulations, 2016 (CIRP Regulations) only prohibits the Resolution Professional from allowing changes to the plan more than once; the CoC is not subject to this restriction.

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In Jabalpur MSW Pvt. Ltd.'s Corporate Insolvency Resolution Process (CIRP), the Committee of Creditors (CoC) examined ten resolution plans. A different plan provided by the Successful Resolution Applicant (SRA) was adopted with a 100 percent vote share, and the appellant's proposal was also taken into consideration and not rejected by the CoC. The appellant, Sagar Stone Industries, filed two interlocutory applications to have the approved plan rejected and to have the Resolution Professional investigated. The applications were turned down. This order is the subject of the current appeals.

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The Appellant argued that the Resolution Applicant was never notified that his plan had been rejected and that SRA's plan had been approved. The CoC had not used the challenge mechanism and had given the Resolution Plan more time to be considered. On the other hand, the Respondent argued that the Appellant was informed of the SRA's email and the decision on June 15, 2024.

The bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) observed that the legality of the CoC's decision is unaffected by the lack of a formal notification of the rejection of the appellant's resolution plan. After giving careful thought to the appellant's strategy, the CoC used its business acumen to approve the SRA's Resolution strategy. At the Appellant's request, such permission cannot be altered.

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While dismissing the appeal, the Tribunal held  that the CoC is not bound by Regulation 39(1A) of the CIRP Regulations, even though it forbids the Resolution Professional from allowing multiple modifications to a Resolution Plan. The CoC may request changes or engage in negotiations with resolution applicants more than once. Furthermore, the challenge mechanism serves as a tool to maximize value, and its absence cannot be used as justification for contesting the plan's approval.

To Read the full text of the Order CLICK HERE

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