TRIBUNAL: NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI

COMPANY APPEAL (AT) (INSOLVENCY) NO. 132,133 &134 OF 2023

VISTRA ITCC (INDIA) LTD.

VS

TORRENT INVESTMENT PVT. LTD.

WITH

COMPANY APPEAL (AT) (INSOLVENCY) NO. 139 OF 2023

INDUSIND INTERNATIONAL HOLDINGS LTD.

VS

TORRENT INVESTMENT PVT. LTD.

FACTS OF THE CASE:

• The given two appeals have been filed against the same order that was passed by the Adjudicating Authority (Hon’ble NCLT) Mumbai Bench.
• In this given case, Vistra ITCC (India) Ltd, who is the Financial Creditor of Reliance Capital Ltd. whereas in the Company Appeal No. 139 of 2023, the Appellant IndusInd International Holdings Ltd. is one of the Resolution Applicants of the CD.

BACKGROUND OF THE CASE:

• When the RBI superseded the Board of Directors of Reliance Capital Limited, Shri Nageshwara Rao who is Respondent No.2, was appointed as the Administrator.
• Pursuant to initiation CIRP, the Administrator requested for Resolution Plan in terms of Regulation 36B of the IBBI Regulations, 2016, four Resolution Applicants submitted their signed plans, two of them being Torrent Investment Pvt. Ltd. and Indusind International Holdings Ltd. (IIHL).
• The Administrator, on 21.12.2022, introduced a new clause i.e; the Challenge Mechanism Process in which IIHL’s final NPV was Rs. 8110 crores and the highest bid was of Torrents’ NPV, that is Rs. 8640, which was duly acknowledged by the Administrator who even sent an email to all the Resolution Applicants regarding the same.
• However, in the 29^TH CoC meeting, the matter of IIHL’s new bid of Rs. 9000 crores was discussed, due to which the Coc Advisors decided to compare both the plans of IIHL and Torrent.
• The sudden deviation of plans resulted in Torrent filing objection to the Administrator and eventually filing an application to the AA praying for various reliefs, to which the AA allowed and directed the Administrator to not submit any non-compliant plan to the CoC.
• Therefore, this matter was discussed in the 30^th CoC meeting and the differences between the first NPVs and the revised NPVs were observed. The meeting concluded with the decision to both the Resolution Applicants to re-submit their plans within a stipulated period of time.
• In the subsequent CoCs, while Torrent challenged the commercial wisdom of the CoC Advisors regarding the Challenge Mechanism, IIHL filed an Application to the AA requesting impleadment. The Financial Creditor of the CD came into the picture when t filed an application against the order dated 23.01.2023.
• Finally, the AA in the order dated 02.02.2023, held that the Administrator must hold the resolution process rationally and not to deviate from the original NPVs.
• Therefore, in the present case, two appeals were filed against the abovementioned order.

Issues:

1. Whether the Appellant – Vistra ITCL (India) Ltd. has no appropriate authority to pursue the present Appeal and the Appeal is not competent at its instance?
2. Whether after completion of Challenge Mechanism on 21.12.2022, the Committee of Creditors was obliged to put the draft plans submitted by the Resolution Applicants on 22.12.2022 to vote without it having any other option?
3. Whether after the result of Challenge Mechanism held on 21.12.2022 under Regulation 39(1A) (b) value maximization was achieved and Committee of Creditors was prohibited to take any further steps towards value maximization?
4. Whether clauses 4.2.4, 4.2.9, 4.3.7 and 4.4.7 of the RFRP permit the Committee of Creditors to negotiate, enter into discussion with the Resolution Applicants to increase their plan value, amend their plan or to tweak any other Challenge Mechanism, before completion of voting and if Committee of Creditors chooses so or the clauses permits so, they are ultravires under Regulation 39(1A) (b)?
5. Whether the decision of the Committee of Creditors taken in the meeting dated 06.01.2023 to conduct an extended Challenge Mechanism amongst both the Resolution Applicants is impermissible and violative of Regulation 39(1A) (b)?

Arguments:

Issue 1

As Vistra is the financial creditor which has been admitted in the CoC, has no lack of jurisdiction to file an appeal.

Issues 2-5 were answered together-

Regulation 36B provides that the request for resolution plans shall detail each step in the process, and the manner and purposes of interaction between the resolution professional and the prospective resolution applicant, along with corresponding timelines; The clause 4.2.4 indicate that power reserved under 4.2.4 is notwithstanding anything contained in RFRP. Clause 4.3.7 reserves right to the Administrator as well as the CoC to negotiate terms of the resolution plan with one or more Resolution Applicants.

Sub-regulation (1A) begins with the expression “Resolution Professional may, if envisaged in the request for resolution plan — (a) allow modification of resolution plan received under sub-regulation (1), but not more than once: or (b) use a Challenge Mechanism to enable resolution applicants to improve their plans”. The insertion of Regulation 39(1A) was with clear object to reduce the delay, which is caused in submission of final Resolution Plan. The Challenge Mechanism by its nature envisages multiple rounds of challenge, hence, no other expression was required in the Regulation, except the word “a Challenge Mechanism”. Reference to Regulation 39(1A) contemplate modification of Resolution Plan and improvement of Resolution Plan at the instance of Resolution Applicant. The above modification or improvement in the Plan cannot be confined only to Plan value, rather, it shall cover the entire Plan.

The authority and jurisdiction to consider Resolution Plan for approval is vested with the CoC after considering its feasibility and viability under Section 30, sub-section (4) of the Code.

Clause 4.2.4 is wide enough to empower the CoC to annul the Resolution Process including the Challenge Process. Further Clauses of RFRP of the present case clearly reserve the power of CoC to call the Applicants for negotiations or improving their Resolution Bid.

Conclusion

• The CoC retained its jurisdiction to negotiate with one or other Resolution Applicants, or to annul the Resolution Process and embark on to re-issue RFRP.
• Regulation 39(1A) cannot be read as a fetter on the powers of the CoC to discuss and deliberate and take further steps of negotiations with the Resolution Applicants, which resolutions are received after completion of Challenge Mechanism.
• The order impugned dated 02.02.2023 is set aside. IA No.1/MB/C-I/2023 and IA No.99/MB/C-1/2023 filed by Respondent No.1 are rejected.
• It is held that CoC is fully empowered as per the Clauses of RFRP to further negotiate with one or more Resolution Applicants, even after completion of Challenge Mechanism on 21.12.2022 and the decision of CoC taken on 06.01.2023 to undertake an Extended Challenge Mechanism is not violative of Regulation 39(1A).
• The CoC may proceed to fix a date after two weeks for holding a Revised Challenge Mechanism or/and to take any steps for further negotiations with the Resolution Applicants as per the relevant Clauses of the RFRP.
• A further exclusion of 30 days period is allowed.

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