In the present appeal, the Appellant is the successful resolution applicant, whose Resolution Plan has been sanctioned by the Committee of Creditors (CoC) with 84.70% of voting share. The Appellant contends that after the acceptance of the resolution plan by the Committee of Creditors (CoC), the Resolution Professional filed the same before the Adjudicating Authority for its approval under Section 31 of the Code. Thus, said application was challenged by the other two bidders (unsuccessful bidders) before the Adjudicating Authority.

The final figures of the bid amount offered by the bidders during the Corporate Insolvency Resolution Process (CIRP) are as under:

H1 (Appellant in Appeal No.1490/2019) bidder (total bid amount) is Rs.89.86 crores (First Appellant). H2 (Appellant in Appeal No.184/2020) bidder offered Rs. 85.66 crores (Second Appellant”). and Rituraj Steels Private Limited (Appellant in Appeal No.78/2020) offered Rs. 57 crores (Third Appellant).

The Appellant contends that according to the law laid down by the Apex Court, the Adjudicating Authority, under Section 31, is having limited power of judicial review which has to be within the four corners of Section 30(2) of the Code and the same cannot, in any circumstance, trespass upon the commercial wisdom of the Committee of Creditors (CoC). The approach of the Adjudicating Authority while directing the re-bidding to take place after the approval of Resolution Plan by the requisite majority is erroneous, as a Resolution Plan is neither a sale nor an auction, and not a liquidation proceeding or a recovery proceeding.

Appellant alleged that the Resolution Professional has conducted the proceeding in a non-transparent way without affording an opportunity of hearing to the applicant; that the H1 bidder was declared on NPV basis and Evaluation Matrix was not followed; the approval of Committee of Creditors (CoC) is forged as the conditions required for the Resolution Plan was not followed; the Resolution Professional manipulatively conducted the bidding procedure and vitiated the whole procedure of approval of the Resolution Plan.

Appellant (another prospective applicant) contended that he has not received complete information I.r.t debts owed and activities of the Corporate Debtor. The Appellant also contended that there is a complete bypass of the provisions of Regulation 36B(5) and Regulation 39(2) of the Insolvency & Bankruptcy Board of India for Corporate Persons Regulation, 2016 (“Regulations”), and Section 30(2), Section 30(4) of the Code. Since the Committee of Creditors (CoC) in the present case has overlooked the maximization of assets and as such, the Adjudicating Authority has all the right to interfere under Section 31 of the Code. While saying so Appellant relied on the fact that he had placed a bid of Rs. 57 crores, later on, increased to Rs.92 crores which were again revised to Rs.102 crores. He also pressed on the fact that the figure of Rs.92 crores is higher than the bid approved for H1, i.e. Rs.89.86 crores. Thus, the figure of the Appellant in Company Appeal No. 78 of 2020 was the highest, but the same had not been considered. The appellant has placed reliance on the judgment of the Apex Court in Essar Steel India Limited through Authorized Signatory Vs. Satish Kumar Gupta and Others (2019) SCC OnLine SC 1478, Swiss Ribbons Pvt. Ltd. Vs. Union of India and Maharashtra Seamless Limited Vs. Padmanabhan Venkatesh & Others.

Issues

The issue in the present case was whether the Adjudicating Authority (NCLT) has exceeded its jurisdiction in passing order for re-bidding, despite the approval of the Resolution Plan by Committee of Creditors (CoC), with a vote share of 84.70% of votes?

Judgment

National Company Law Appellate Tribunal (NCLAT) before adverting to its findings and ratio relied upon the dictum passed by the Apex Court in the matter of K. Sashidhar v. Indian Overseas Bank. Thus, said dictum was reiterated by the Apex Court in the matter of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta and Others (2019) SCC OnLine SC 1478 and in Maharashtra Seamless Limited Vs. Padmanabhan Venkatesh & Others Civil Appeal No.4242 of 2019 judgment dated 22nd January 2020.

Thus, it is clear that the Adjudicating Authority is having restricted power of judicial scrutiny under Section 31, which has to remain within the four corners of Section 30(2) of the Code and the same cannot, in any condition, trespass upon the commercial wisdom of the Committee of Creditors (CoC). The statutory provision does not allow the Adjudicating Authority to interfere with the commercial wisdom of the Committee of Creditors (CoC). Even for maximization of the value of the assets of the Corporate Debtor, the Adjudicating Authority cannot overturn the business decisions of the Corporate Debtor.

The reason that the bid amount is below the fair market value of the corporate debtor also fails in the light of the decision of the Apex Court in case of Maharashtra Seamless Limited wherein the Apex Court has noted that “..the Appellate Authority has, in our view, proceeded on equitable perception rather than commercial wisdom. On the face of it, the release of assets at a value twenty percent below its liquidation value arrived at by the valuers seems inequitable. In the circumstances as stated above, it is clear that the Adjudicating Authority cannot interfere with the commercial wisdom of the Committee of Creditors (CoC). The direction for rebidding for maximization of the value of the corporate debtor also amounts to interference in the business decision of the Committee of Creditors (CoC), which is not allowed in law. Thus, the Appeal No 1490/2019 was allowed.

National Company Law Appellate Tribunal (NCLAT) also held that the prospective resolution applicant has a right to receive complete information as to the Corporate Debtor but the Appellant was not given an opportunity and thus the complete process is biased towards H1 bidder is also not a ground which can justify the judicial scrutiny by the Adjudicating Authority on this ground National Company Law Appellate Tribunal (NCLAT) also held that judicial scrutiny of the Resolution Plan is based on the equitable perception and the AA cannot question the Commercial wisdom of Committee of Creditors (CoC) and indulge in quantitative analysis. Thus, appeal No 78 of 2020 fails and is therefore dismissed. National Company Law Appellate Tribunal (NCLAT) also held that the Evaluation matrix of the Resolution Plan also falls within the parameters of commercial wisdom of the Committee of Creditors (CoC), which is non-justiciable. Thus appeal No 184 of 2020 also fails and is therefore dismissed.