IBBI Regulations restrict only Modification of an already issued Expression of Interest, CoC can issue a fresh call : NCLT [Read Order]

The bench, comprising Member (Judicial) Shri. Vinay Goel and Member (Technical) Smt. Madhu Sinha, held that the commercial wisdom of the Committee of Creditors (COC) is paramount and cannot be interfered with by the Adjudicating Authority unless there is a finding of perversity or statutory violation.

The application was filed by Mr. Sumit Khanna, the Resolution Applicant, after his resolution plan was rejected by the COC for being non-compliant with the mandatory requirements of Section 30(2) of the IBC. The applicant contended that the rejection was based on an "inflated and erroneous" liquidation value of INR 66.67 crores and alleged that the subsequent issuance of a fresh Expression of Interest (Form G) was illegal, designed to allow certain COC members to participate as resolution applicants after gaining access to the applicant's confidential plan.

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The Resolution Professional (RP) and the COC, in their replies, argued that the applicant's plan was rightfully rejected for non-compliance, including its failure to meet the minimum liquidation value and provide for mandatory payments. They contended that the applicant had been given multiple opportunities to rectify the deficiencies and that the reliefs sought had become infructuous, as the COC had already appointed new valuers and a fresh Form G had been issued.

The RP further argued that by participating in the new EOI process, the applicant was estopped from challenging it.

The NCLT, in its analysis, relied on the judgment of the Supreme Court in K. Sashidhar v. Indian Overseas Bank, which stated that the commercial wisdom of the COC is non-justiciable. The Tribunal found that the applicant's plan was non-compliant and that the COC's decision could not be interfered with.

The bench also held that the Applicant's reliance on Regulation 36(4A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, is also misplaced. The said regulation restricts modification of an existing EOI to only once, but it does not curtail the power of the COC to issue a fresh EOI.

The interpretation sought to be advanced by the Applicant is therefore misconceived and not applicable to the present circumstances.

It is also clear from the record that the Applicant failed to comply with Section 30(2)(a) and 30(2)(b) of the Code, as the plan did not unconditionally provide for mandatory payments such as CIRP costs, dues of operational creditors including Government dues, and amounts payable to dissenting financial creditors.

The NCLT concluded that all substantive prayers in the application had either become infructuous or related to matters falling squarely within the COC's commercial discretion. Therefore, no grounds existed for interference under Section 60(5) of the Code, and the application was dismissed.

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