NCLAT permits RP to Issue Fresh Form G and to Invite Eol from New Eligible Resolution Applicants by strictly Adhering to Time Bound CIRP Process [Read Order]

In a recent ruling, the Chennai bench of the National Company Law Appellate Tribunal (NCLAT) permits the Resolution Professional (RP) to issue a fresh Form G and to invite expressions of interest (EoI) from new and eligible resolution applicants by strictly adhering to the time-bound CIRP process.

JM Financial Asset Reconstruction Company Ltd, the appellant, challenged the Impugned Order, as it was passed by the adjudicating authority on the Application. The consequential effect of the impugned order under challenge has been that, the directions has been given to the Resolution Professional (RP) to conduct and complete the challenge mechanism process amongst the Resolution Applicants as contemplated under Regulation 39 (1A) (b) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Standardize Accounting Policies – Specimen Drafts at Your Fingertips! Perfect for internal reference and client consistency - Click here

By virtue of the impugned order, the Adjudicating Authority has rejected the application of the resolution professional to permit him to issue a fresh Form G to invite expressions of interest (EoI) from new, interested and eligible prospective resolution applicants to submit their resolution plans, while continuing to retain the existing resolution applicants within the option given to them to participate in the challenge mechanism. It is the case of the Appellant that the rejection of his application happens to de hors the basic principles of maximizing the value of assets of the Corporate Debtor.

The CIRP process of the Corporate Debtor stood commenced with effect from 01.01.2021. The First Form G was issued on 24.08.2021, and as many as 9 Prospective Resolution Applicants had submitted their Expression of Interest. But, however, due to there being a bundle of litigations involving the Corporate Debtor and the decisions which were taken thereon, the process contemplated on the basis of the First Form G, as issued on 24.08.2021 remained pending and it could not be crystalized to be given a final shape, because no compliant Resolution Plan was received and most of the PRAs sought extension of time to submit the said Plans. Meanwhile, the Consortium comprising of NTPC, PFC & REC, requested RP for a permission to submit EoI and to participate in the Bidding process. This was allowed by CoC and later affirmed by NCLT on 05.06.2023, by extending time to submit EoI.

The EoI submission process remained pending till May’2024, because NCLT directed the RP of KMPCL (KSK Mahanadi Power Company Limited) not to receive any resolution pending adjudication of various proceedings seeking consolidation of CIRP of KMPCL, KWIPL & the Corporate Debtor herein.

An Application was submitted before the Adjudicating Authority for the purposes of approval of the Resolution Plan. The same was heard and was reserved for final orders on 10.07.2024. However, before NCLT could pass any orders on the said Application, CoC on 23.10.2024 with the majority voting share of 78.59%, resolved to undertake the challenge mechanism process, in accordance with the CIRP Regulations under I & B Code, 2016.

The CoC also resolved to withdraw the Plan approval application already submitted, with liberty to file a fresh application depending upon the outcome of the “challenge mechanism process” to be undertaken to which the Successful Resolution Applicant had consented upon. On filing of the Application to that effect, as above, the Adjudicating Authority, on 25.10.2024 dismissed the Application IA No. 16 / 2024 as withdrawn, with a liberty to file a fresh application in respect of the same subject matter.

However, instead of proceeding with the “challenge mechanism process’’, as permitted by NCLT, the RP, based on the decision of CoC in its 43rd Meeting with 78.59% majority filed IA No. 388 / 2025, praying for limited reopening of the Bidding process of the Corporate Debtor and to enable submission of Expression of Interest from JSW Energy Limited, to achieve greater value maximization. This Application was rejected by NCLT by observing thereof that the said proposal was found to be contrary to the principles of fairness and timelines of the CIRP process.

The JSW Energy Limited, itself had filed an application seeking permission to participate in the CIRP process of the Corporate Debtor, and requesting for the issuance of a fresh Form G which were dismissed by NCLT. JSW Energy Ltd. The Resolution Professional filed the application being IA, seeking permission to issue fresh Form G and to invite Expression of Interest from new, interested and eligible Prospective Resolution Applicants in the interest of maximisation of value of the Corporate Debtor. The Adjudicating Authority dismissed the said IA by passing the Impugned Order because the said application appears to be yet another attempt to facilitate entry of JSW as a Resolution Applicant in the CIRP process of the Corporate Debtor.

Your ultimate guide for mastering TDS provisions - Click here

The Counsel for the Appellant has argued that the manner in, which the Impugned Order has been rendered by the Adjudicating Authority goes contrary to the principle of the maximization of value of the assets of the Corporate Debtor and consequently, to the very spirit of the CIRP process.

A two member bench of Justice Sharad Kumar Sharma, Member (Judicial), and Jatindranath Swain, Member (Technical) found no demerits in the proposal of the RP as contained in the application IA and in the decision of the CoC to invite fresh EoI by issuing fresh Form G for the reason that inviting new PRAs to submit EoIs will certainly increase competition and, in all likelihood, result in higher Bids.

It was evident that since the EoI is proposed to be reopened for everybody and not for JSW alone, it is fair and transparent and not discriminatory, and since existing PRAs are proposed to be retained with option given to them to participate in challenge mechanism, it is also fair to the existing Resolution Applicants. Further, as the amount quoted by the higher Bidder “Medha’’, is proposed to be the Reserve Price, there cannot be any value erosion of the corporate debtor if EoI process is reopened.

The bench found that more time will be required to complete CIRP process. Since, timely resolution of insolvency is the essence of I & B Code, 2016, this can be taken care of by adhering to strict timelines.

The relief as sought for, by the Resolution Professional, to be permitted to issue fresh Form G and to invite Expression of Interest (EoI) from new and interested eligible Prospective Resolution Applicants is granted subject to the stipulations that the CIRP process has to be completed in a time bound manner as provided under the Code and Regulations framed thereunder.

It is made clear that the said directives as issued by us would be not de hors to the time frame required to be adhered to for completion of the CIRP process.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates