Rejecting Resolution Plan over one day delay is not allowable: NCLT Criticises Act of CoC’s

The Mumbai bench of the National Company Law Tribunal ( NCLT ) has held that Committee of Creditors' decision to reject the Applicant's plan solely due to a technical delay of one day in submission, without evaluating the substantive efforts made and the potential value of the plan, does not align with the objectives of the Corporate Insolvency Resolution Process (CIRP). Ashdan Properties Private Limited, the Applicant filed an application seeking reliefs under Section 60(5) of the Insolvency & Bankruptcy Code, 2016. The reliefs sought include: condoning a one-day delay in submitting the Applicant's Resolution Plan, directing the Harshad Despande (Resolution Professional) to accept and present the Applicant's plan to the Committee of Creditors (CoC) for consideration, evaluating the Applicant's plan on par with others, and granting a stay on the consideration or voting of other resolution plans until the Application is disposed of. A A Estates Private Limited, the Corporate Debtor was admitted to the Corporate Insolvency Resolution Process (CIRP) with Mr. Harshad Deshpande appointed as the Interim Resolution Professional (IRP). Despite multiple calls for Expressions of Interest (EOI), initially on July 28 and again on August 29, 2023, there was no response. Consequently, the CoC decided in their 7th meeting on November 8, 2023 to republish the EOI and opt for asset sales. Get a Copy of Ready to Grow? Choose a Course That Fits Your Goals!, Click here The Applicant requested the IRP to share EOI details on November 22, 2023, and submitted the EOI and required documents on December 4, 2023. After verifying the initial submission, the IRP requested additional information from the Applicant which was promptly provided. The provisional list of Prospective Resolution Applicants (PRAs) was published on December 16, 2023 and the final list on December 30, 2023. Information Memorandum, Evaluation Matrix, and Request for Resolution Plan (RFRP) were made available on January 1, 2024 with the submission deadline set for February 5, 2024 later extended to February 14, 2024. The Applicant faced difficulties accessing essential documents. IT requested an extension, but received no response and submitted their Resolution Plan on February 15, 2024, a day after the deadline, along with an Earnest Money Deposit (EMD). While the IRP initially accepted the submission without raising issues, the Applicant was later informed that their plan was not considered by the CoC due to its late submission. On the other hand, the Respondent (IRP) denied all allegations and claims made by the Applicant. It was argued that the Applicant's application should be dismissed for lack of clean hands, suppression of facts, and because the Applicant lacked locus standi. The Respondent contended that the Applicant did not demonstrate any legal infringement or violation warranting the reliefs sought. He argued that the authority to extend deadlines lay with the CoC, not the IRP, and that the decision not to consider the late submission was made by the CoC under their commercial wisdom. Get a Copy of Ready to Grow? Choose a Course That Fits Your Goals!, Click here The two member bench of Reeta Kohli (Judicial Member) and Madhu Sinha (Technical Member) observed that Regulation 36(B)(6) of the IBBI (CIRP) Regulations, 2016 grants discretion to the RP in consultation with the Committee of Creditors (CoC). It noted that the RP and the CoC overlooked this regulation thus failing to exercise the discretion available to them. The NCLT held that the CoC's decision to reject the Applicant's Plan based solely on a technical delay of one day was inconsistent with the objectives of the CIRP. The NCLT relied on the NCLAT's ruling in “IDBI Bank Ltd. Vs. Jaypee Infratech Ltd.” where it was held that resolution plans should be considered even if submitted after the deadline provided that this does not impact the CIRP timeline. Since the delay was deemed excusable, the NCLT held that the Applicant's Resolution Plan deserved to be considered by the CoC. Therefore, the NCLT directed the CoC and the RP to review the Applicant's Plan before making a final decision on the Resolution Plans. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Rejecting Resolution Plan over one day delay is not allowable: NCLT Criticises Act of CoC’s

Your free access to Taxscan has Expired

To read the article, get a premium account.

Taxscan Premium

Topics

Rejecting Resolution Plan over one day delay is not allowable: NCLT Criticises Act of CoC’s

Your free access to Taxscan has Expired

To read the article, get a premium account.

Taxscan Premium

Sign-up to receive exclusive news and promotions straight to your inbox!

Topics