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Judgment
Ashok Bhushan, J.
These two Appeals by an Unsuccessful Resolution Applicant (SRA) has been filed challenging the Order dated 05.12.2024 passed in I.A. (IB) No. 2331/KB/2024 in C.P. (IB) No. 26/(KB)/2023 and I.A. (IB) Plan No. 21/KB/2024 in C.P. (IB) No. 26/(KB)/2023 respectively. By Order dated 05.12.2024, I.A. No. 2331/KB/2024 has been held to be infructuous in view of declaration of Respondent No. 3 - Mangalam Multiplex Pvt. Ltd. as SRA. By Order dated 07.01.2025, Resolution Plan approved by Committee of Creditors (CoC) has been approved. Appellant aggrieved by the above two Orders has come up in this Appeal.
Brief background facts necessary to be noticed for deciding these two Appeals are:
By Order dated 20.12.2023, Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor – Varutha Developers Pvt. Ltd. commenced on an Application filed by SREI Equipment Finance Ltd., the Financial Creditor.
In response to ‘Form-G’ published by Resolution Professional (RP), Expression of Interest (EoI) by several Applicant including the Appellant and Respondent No. 3 were submitted.
On 16.07.2024, Request for Resolution Plan (RFRP) and Information Memorandum were shared with the Applicants.
Appellant, Respondent No. 3 and other Applicants submitted their Resolution Plan. On 01.10.2024, RP opened all the Resolution Plans including the Appellant’s Plan before the CoC.
The CoC decided to hold the challenge process for value maximisation.
On 07.11.2024, RP shared the Negotiation Process Document with all Resolution Applicant including the Appellant. Process of Negotiation was outlined in the Process Document. On 07.11.2024, an email was sent by the RP to all the Resolution Applicants requesting all the Applicants to submit financial proposal as per Appendix 1 on or before 10:00 AM on 11.11.2024 (first bid). Email also informed that RP will open the Appendix 1 in front of the respective Resolution Applicant, CoC and other participants invited to attend the CoC on 11.11.2024.
By email sent on 11.11.2024 at 10:19 AM, Applicants were informed that Appendix 1 along with the Excel Sheet can be submitted by 11 AM on 11.11.2024.
On 11.11.2024 at 19:14 PM, the RP sent an email to all the Resolution Applicant that Base Bid Price offered by H-1 Bidder is Rs.251.79 Crores.
All the Applicants were called upon to improve financial proposal over and above Base Bid Price by at least Rs.10 Crores. Second bid was to be submitted latest by 12:00 Noon on 12.11.2024.
On 12.11.2024 at 11:55 AM, email was sent on behalf of the Appellant to the RP referring to the email sent by RP requiring the Applicant to increase bid by Rs.10 Crore. Attention of RP was invited to process of Negotiation Clause I.
Appellant by the email claimed that Appellant has immunity from elimination in the next round and it is not necessary to increase the bid price.
RP replied the above email by email dated 12.11.2024 at 17:43 PM informing that immunity granted from elimination under Clause I is designed to apply until specific point in the Negotiation Process. It was stated that at the current stage, this immunity is no longer operative and the remaining participants are required to adhere to the specified bid of Rs.10 Crores.
On 13.11.2024 at 09:45 AM, the RP informed all Resolution Applicants that considering maximisation of value for the Stakeholders, CoC has permitted extension of time for submission of bid 2 in the Negotiation Process up to end on 14.11.2024.
On 14.11.2024 at 01:44 PM, RP sent an email to all Applicant informing that immunity is no longer operative as only 2 Bidders remain in the Negotiation Process participants are requested to participate in the second round and submit the Financial Proposal with not less than specified bid by the end of 14.11.2024. Certain information and documents were also listed in the e-mail which were required to be submitted.
RP on 15.11.2024 sent an email to the Appellant asking the Appellant to remove typographical error and revised Appendix 1 in order to remove the inconsistency with the NPV calculation Excel Sheet. Reference of certain documents which were required by email dated 14.11.2024 was also mentioned. Appellant was asked to submit by 04:00 PM on 15.11.2024, after which evaluation of second bid shall commence.
The Appellant sent an email forwarding a revised Appendix 1. By revised Appendix, the Appellants has provided total NPV at Rs.263.18 Crore.
On 15.11.2024 at 09:31 PM, Appellant wrote to the RP that Appendix 1 for second round has already been shared but RP has not shared the resolution of the second round as of now.
On 16.11.2024, RP again wrote to the Appellant asking to submit all the pending documents no later than 18.11.2024 by 12:00 PM.
On 18.11.2024 at 07:31, RP wrote to the Appellant that following the second round of Negotiation Process a bid of Rs.265.65 Crore has been declared the highest bid in the Negotiation Process.
It was informed that Negotiation Process was completed and Appellant to submit the final Resolution Plan latest by 21.11.2024.
After receiving the email dated 18.11.2024, the Appellant filed an I.A. No.2331/2024 before the Adjudicating Authority praying for setting aside the email dated 18.11.2024 issued by the RP and further seeking direction to RP to conduct third round of Negotiation.
Resolution Plan received in the process were discussed and deliberated by the CoC in 16th CoC Meeting held on 26.11.2024. The CoC by 100% voting share has approved the Resolution Plan submitted by Mangalam Multiplex Pvt. Ltd. who was declared as the SRA. Letter of Intent (LoI) was issued by RP to SRA on 04.12.2024, which was unconditionally accepted by SRA on 05.12.2024.
The I.A. No. 2331/2024 came for consideration before the Adjudicating Authority on 05.12.2024. Before the Adjudicating Authority, the communication dated 04.12.2024 issued by the RP to SRA was placed. Adjudicating Authority noticing the communication dated 04.12.2024 by which SRA was declared and LoI was issued, observed that nothing survives in the Application. Application was dismissed as infructuous. Appellant aggrieved by the said Order has filed Comp. App. (AT) (Ins.) No. 107/2025.
The RP filed a Plan approval Application being I.A. (IB) Plan No. 21/(KB)/2024 on 12.12.2024 before the Adjudicating Authority praying for approval of the Resolution Plan.
On 16.12.2024, Plan approval Application was listed, which was heard and Order was reserved.
On 07.01.2025, Order was passed by the Adjudicating Authority approving the Resolution Plan and allowing I.A. (IB) Plan No. 21/(KB)/2024. Aggrieved by the Order dated 07.01.2025, Comp. App. (AT) (Ins.) No. 181/2025 has been filed.
We have heard Learned Sr. Counsel Mr. P. Nagesh appearing for the Appellant. Learned Sr. Counsel Mr. Abhijeet Sinha has appeared for the RP. Learned Sr. Counsel Mr. Krishnendu Dutta has appeared for the CoC.
Learned Sr. Counsel Mr. P. Nagesh appearing for the Appellant challenging the Orders passed by the Adjudicating Authority dated 05.12.2024 and 07.01.2025 submits that RP conducted the Negotiation Process contrary to the Negotiation Process Document. The Appellant’s first bid for an amount of Rs. 251.79 Crore was declared as H-1 Bidder in the first round of Negotiation. Appellant had immunity from participating in the second round by virtue of Clause I of the Process Negotiation Document, he being the highest bidder of the first round. The RP has concluded the Negotiation Process declaring the Mangalam Multiplex Pvt. Ltd. as highest bidder of second round without giving an opportunity to the Appellant to match the highest bid of second round. The entire process conducted by the RP was in violation of Process Negotiation Document. RP arbitrarily informed the Appellant by email dated 12.11.2024 the immunity granted to H-1 Bidder was no longer operative. Had given the opportunity, Appellant could have increased its bid to match with bid of Mangalam Multiplex Pvt. Ltd. RP kept on shifting timelines for submission of requisite documents. Appellant has communicated to the RP that he is looking forward to round 3 and is willing to increase the Plan value substantially. There is violation of Clause K also in the Process. Contravention of Process Negotiation Document amounts contraventions of the provisions of law. By not giving the opportunity to the Appellant to match the offer of SRA, there is a breach of value maximisation principle resulting in prejudice to Stakeholders. Adjudicating Authority rejected I.A. filed by the Appellant being I.A. 2331/KB/2024 as infructuous whereas all issued were required to be decided in the I.A. Adjudicating Authority has erroneously observed that final Resolution Plan was received from only one Resolution Applicant i.e., Mangalam Multiplex Pvt. Ltd., whereas Negotiation Process was ongoing until at least 18.11.2024. There being violation of Clause I & K of the Process Negotiation Document, the entire process deserves to be set aside including the Order approving the Resolution Plan of the SRA.
Learned Counsel for the RP refuting the submissions of the Appellant submits that the immunity as claimed by the Appellant as per Clause I of the Process Negotiation Document was available till only two Bidders are left in the fray. In the second round of Negotiation there were only two Bidders left in the fray hence immunity as claimed by the Appellant was not available which was communicated to the Appellant by the RP. Email was sent on 14.11.2024 by the RP informing that immunity is no longer available. The Appellant has submitted revised Appendix 1 giving commercial offer of Rs. 263.18 Crores which clearly means that he has given offer to participate in the Negotiation Process of the second round. The SRA having given offer of Rs. 265.66 Crore was declared H-1 Bidder of second round which was communicated to the Appellant by email dated 18.11.2024. CoC with 100% Vote Shares in its Meeting held on 26.11.2024 has approved the Resolution Plan of Mangalam Multiplex Private Limited. Thereafter, the RP filed Application for approval. There is no breach or violation of Process Negotiation Document as alleged by the Appellant. The CoC in its commercial wisdom has approved the Plan of SRA. Negotiation Process has rightly been completed in the second round. There was no occasion to hold third round as claimed by the Appellant. Only two Bidders were left, who had given their revised commercial offers. The second round was completed in which H-1 was declared. The RP has conducted the Negotiation Process in accordance with the Process Document. It was open for the Appellant to give his best revised offer in second round. The fact that in second round, the revised offer has been given by the Appellant itself indicates that Appellant was well aware that no immunity is available to the Appellant in the second round.
Learned Sr. Counsel Mr. Krishnendu Dutta appearing for the CoC supported the Impugned Orders and submits that the Negotiation Process was conducted in accordance with the Process Negotiation Document. RP has replied all emails received from Appellant during currency of Negotiation Process. Appellant was declared highest Bidder of first round conducted on 12.11.2024. For second round of Negotiation Process, Appellant was asked to revised its offer by Rs.10 Crore, at least, two Bidders having been left in the fray. Immunity as contemplated in Clause I was not available. Appellant did submit his revised offer. The CoC in its Meeting held on 26.11.2024 deliberated all aspects of the matter, including the commercial offers of the SRA and the Appellant and with 100% Vote Shares has approved the Resolution Plan of Mangalam Multiplex Private Limited. No grounds have been made out to interfere with the commercial decision of the CoC.
We have considered the submissions of the Counsel for the Parties and perused the records.
The main submission advanced by the Appellant is regarding breach of Process Negotiation Document. We need to first notice certain clauses of the Process Negotiation Document which has been referred to and relied by the Appellant. There is no dispute between the Parties that Applicants were informed that first bid shall not be less than Rs.250 Crores (on NPV basis) which was treated to be held to be Base Bid Price. The process of round two, following is provided:
“Round 2:
(B)Before the commencement of the Negotiation Process, the Resolution Professional shall disclose only the highest amount received as the Base Price (defined hereunder), without disclosing the name of the Resolution Applicant (“H1 Bidder”), based on the Financial Proposal submitted by the Resolution Applicants in Appendix 1 on the 1st Bid on or before _________2024. For abundant clarity:
•"Base Bid Price" shall mean the highest net present value ("NPV") amongst all the Financial Proposals (as per Appendix 1) submitted by the Resolution Applicants on 2024, under respective round of Negotiation, calculated in accordance with the provisions of the RFRP/or this Process Note for Negotiation.
•"Total Resolution Plan Amount" shall mean the total amount payable to all stakeholders (including unpaid CIRP cost) under the resolution plan submitted by the Resolution Applicants.
•"Final Resolution Plan" shall mean the Resolution Plan last submitted by a Resolution Applicant, the clarifications/further documents submitted by it after submitting the Resolution Plan which was opened on Oct 1, 2024, in conjunction with the financial offer last submitted in the Negotiation Process, whether or not the concerned Resolution Applicant submits the Resolution Plan after incorporating such changes.
•"Initial Resolution Plan"- shall mean the Resolution Plan submitted by the Resolution Applicant and opened in the presence of CoC and the respective Resolution Applicants, on Oct 1, 2024.
With regard to subsequent rounds, Clause I & K, on which the reliance has been placed, are as follows:
“(I)The Base Bidder in the First round and Highest bidder(s) ("H1 Bidder") of each subsequent round ("H2/H3/... Bidder"} will have immunity from elimination in the next round even if it does not increase its bid by specified amount, till only two bidders are left in the fray. For abundant clarity, if more than one bidder is Highest Bidder in a particular round of Negotiation Process, then all such bidders will get such immunity, till there are only two bidders left in the fray, unless all the RAs have equal Bid amount, in such an event no Bidder shall get any immunity from elimination.
(K)The aforementioned process shall be followed for each bidding round until all the Resolution Applicants express their inability, in writing, to improve their commercial revised proposal i.e. if no improved financial proposal is received from any of the Resolution Applicants, then the Negotiation Process will come to a closure. Such bidding process if required will continue for further period, till the closure is achieved. Such closure will be intimated to all the Resolution Applicants over their respective emails. It may be noted that if such Negotiation Process continues beyond reasonable hours (in the sale opinion of the CoC) оп ___________2024, the same will be resumed on the immediately succeeding business day (s) or as may be informed by the Resolution Professional.”
Along with the Process Negotiation Document in Appendix 1, format of commercial offer was also provided in which Applicants have to give their commercial offers. The email after sharing the Process Negotiation Document intimated to all Resolution Applicant that Negotiation Process will be held on 11.11.2024, starting 12:00 noon and all Applicants were requested to submit their financial proposals as per Appendix 1. It is undisputed that in round one, the bid submitted by Appellant of Rs.251.79 Crores was declared as highest bidder and which was declared as H-1 Bidder and Base Price. On 11.11.2024 at 19:14 PM, the RP issued email to all Resolution Applicants, which is as follows:
“From: Varutha [email protected] Sent: 11 November 2024 19:14 Subject: Process for Negotiation- Round 2 | Varutha Developers Private Limited Dear RA, This is to inform you that the Base Bid Price offered by the H1 Bidder is INR 251.79 Crores (NPV Factoring the payment to the Creditors). You are hereby called upon to improve your financial proposal over and above the Base Bid Price by at least INR 10 Crores (NPV Factoring towards the payment to the Creditors) and submit your 2nd Bid latest by 12:00 Noon IST on 12.11.2024 as per Appendix 1 alongwith the NPV Calculation Excel Sheet. Kindly note, the terms and conditions as mentioned in the Process for Negotiation Documents shall remain applicable and unchanged for all the subsequent Bid Rounds. Thanks & Regards Anil Kumar Mittal IBBI/IPA-002/IP-N00742/2018-2019/12263 Resolution Professional Varutha Developers Private Limited (In CIRP) IBBI Reg Add: 5/99, Sector-2, Rajender Nagar, Sahibabad, Distt. Ghaziabad, Uttar Pradesh-201005 Correspondence Add: C/o Resurgent Resolution Professionals LLP Unitech Business Zone, 7th Floor, Tower -C, The Close South, Sector-50, Gurugram, Haryana 122018 E-Mail Id: [email protected] | [email protected] AFA No.: AA2/12263/02/311225/203459 | Valid upto 31.12.2025”
On 12.11.2024 at 11:55 AM, an email was sent on behalf of the Appellant to the RP informing that Appellant has immunity from elimination in the next round and it is not necessary for the Appellant to increase the bid. It is useful to extract the said email, which is as follows:
“On Tue, Nov 12, 2024 at 11:55AM Manish chandna [email protected] wrote: Dear Anil Mittal Ji, Please refer to trail mail below, wherein I have been declared as H-1 bidder. As per your mail, I am required to increase my BID for sum of Rs. 10.00 Crore. In this regard your attention is required "Process for Negotiation" which was forwarded to me by dated 07/11/2024. As per "paragraph I on Page No. 9 it has mentioned that "The Base Bidder in the First round and Highest bidder(s) ("H1 Bidder") of each subsequent round ("H2/H3/... Bidder") will have immunity from elimination in the next round even if it does not increase its bid by specified amount, till only two bidders are left in the fray. For abundant clarity, if more than one bidder is Highest Bidder in a particular round of Negotiation Process, then all such bidders will get such immunity, till there are only two bidders left in the fray, unless all the RAs have equal Bid amount, in such an event no Bidder shall get any Immunity from elimination". In view of above, we have immunity from elimination in the next round and it is not necessary to increase the BID Price at this stage. Kindly confirm that our understanding of reading of above paragraph. We are waiting for your reply. Screenshot of Process for Negotiation is attached.
(1)The Base Bidder in the First round and Highest bidder(s) ("H1 Bidder") of each subsequent round ("H2/H3/... Bidder") will have immunity from elimination in the next round even if it does not increase its bid by specified amount, till only two bidders are left in the fray. For abundant clarity, if more than one bidder is Highest Bidder in a particular round of Negotiation Process, then all such bidders will get such immunity, till there are only two bidders left in the fray, unless all the RAs have equal Bid amount, in such an event no Bidder shall get any immunity from elimination.”
With respect to the email sent by the Appellant to the RP, RP sent a reply on 12.11.2024, 17:43 PM that the immunity is no longer available at this stage and the Appellant may give enhanced bid. The reply sent on 12.11.2024 by the RP, is as follows:
“From: Varutha [email protected] Sent: 12 November 2024 17:43 To: Manish chandna [email protected] Subject: Re: Process for Negotiation-Round 2 | Varutha Developers Private Limited Dear Resolution Applicant, With reference to your previous email, we hereby clarify the applicability of the Immunity clause for the H1 bidder in subsequent rounds of the bidding process. As per the provisions outlined in Clause I on Page 9, immunity from elimination in the next round is granted to the Base Bidder in the first round and the Highest Bidder(s) ("H1 Bidder") in each subsequent round, provided that multiple bidders remain active in the process. Specifically, the clause states:
"(1)The Base Bidder in the First round and Highest bidder(s) ("H1 Bidder") of each subsequent round ("H2/H3/... Bidder") will have immunity from elimination in the next round even if it does not increase its bid by a specified amount, till only two bidders are left in the fray. For abundant clarity, if more than one bidder is the Highest Bidder in a particular round of the Negotiation Process, then all such bidders will receive this immunity, until only two bidders remain in the fray, unless all RAs have equal bid amounts, in which case no bidder shall receive immunity from elimination.
In accordance with the clause, the immunity from elimination granted to the Highest Bidder(s) under this clause is designed to apply up until a specific point in the negotiation process. At the current stage, this immunity is no longer operative, and the remaining participants are required to adhere to the specified bid increase of Rs. 10.00 Crore, as communicated previously.
Should the Resolution Applicant choose not to submit an enhanced bid, the latest submitted financial proposal will be considered as the final offer and evaluated accordingly.
This clarification is provided for your reference and consideration.
Thanks & Regards
Anil Kumar Mittal
IBBI/IPA-002/IP-N00742/2018-2019/12263
Resolution Professional
Varutha Developers Private Limited (In CIRP)
IBBI Reg Add: 5/99, Sector-2, Rajender Nagar, Sahibabad, Distt. Ghaziabad, Uttar Pradesh-201005
Correspondence Add: C/o Resurgent Resolution Professionals LLP Unitech Business Zone, 7th Floor, Tower -C, The Close South, Sector-50, Gurugram, Haryana 122018
E-Mail Id: [email protected] | [email protected]
AFA No.: AA2/12263/02/311225/203459 | Valid upto 31.12.2025”
All Resolution Applicants were informed by the RP on 13.11.2024, that CoC has permitted extension of time for submission of bid 2 in the Negotiation Process up to end of 14.11.2024. On 14.11.2024, RP has sent an email to all Resolution Applicants, which is as follows:
“From: Varutha [email protected] Sent: Thursday November 14, 2024 1:44:55 PM To: PMO_OFFICE/Srei [email protected]; Shamik Roy /CEO_office/Srei [email protected] Cc: Anil Mittal [email protected]; Tanya Anand [email protected]; Sunil Gupta [email protected] Subject: Re: Extension of time for second round in Process of Negotiation
Dear Resolution Applicants, As we advance to the second round of the negotiation process, we hereby invite your active participation in this stage.
The Base Bid Price for the 2nd Round is established at INR 251.79 Crores (Net Present Value (NPV), factoring payment to the creditors).
Please note that, as per Clause (1) on Page 9 of the Process Note for Negotiation, the immunity from elimination previously granted to the Highest Bidder(s) applies only until a specific stage in the negotiation process. At this current stage, this immunity is no longer operative, as only two bidders remain in the negotiation process. Thus, the participants are requested to participate in the second round and submit the financial proposal with not less than the specified bid threshold by today end of the day (23:59 Hours, 14.11.2024),
In case the Resolution Applicant submits a financial proposal (as prescribed in the Process Document) below the specified threshold or chooses not to submit a financial proposal, in the second round, the most recent financial proposal submitted will be considered final and evaluated on that basis as per Clause (J) on Page 9 of Note for Negotiation Process,
Additionally, request all Resolution Applicants to submit the following information and documentation-either alongside their second bid or with their mail for non-participation. This will enable us to assess each applicant's financial readiness and commitment to the resolution process.
1.Statement of Available Funds: A detailed statement outfining the current free cash and bank balance or cash equivalents that can be deployed towards the overall resolution plan commitments.
2.Fund Commitment Documentation: In the event of a defferred payment structure, please include details of the financial security arrangements you propose to secure these obligations. This should include commitment letters or other binding documentation evidencing your financial tie-ups with banks, NBFCs, Flis, or other funding sources, affirming the adequacy and certainty of funding for the proposed resolution.
3.Security to Financial Creditors in Case of Deferred Payments: Details of the security you intend to offer to the financial creditors in the event of any deferred payment structure.
4.Financial capability of the bidder-CA certified Net-worth statement of the bidder(s) as on 31 March 2024 оr later.
5.Authorizations to participate in the process-Board resolutions or authorizations to the authorized representative of the bidder.
These documents are essential for us to thoroughly evaluate your financial proposal in the Negotiation Process.
We look forward to your timely submission.
Thanks & Regards
Anil Kumar Mittal”
The Appellant was again on 15.11.2024 informed by the RP asking certain documents required. The Appellant has submitted its revised commercial offer and sent the revised Appendix 1 offering total NPV of Rs.263.18 Crores. RP on 18.11.2024, informed the Appellant that in the second round of Negotiation Process, bid of 265.65 Crores has been held to be H-1 Bidder which has been declared by the CoC. Resolution Plan was asked to submit by 21.11.2024. Email dated 18.11.2024 was subject to challenge by the Appellant in I.A.2331/2024. It is useful to extract the entire email sent by the RP, which is as follows:
“From: Varutha [email protected] Sent: Monday, November 18, 2024 7:31:59 PM To: Manish chandna [email protected]; PMO_OFFICE/Sreip[email protected]: Shamik Roy /CEO_office /Srei [email protected] CC: Anil Mittal [email protected]; Sunil Gupta [email protected]; Tanya Anand [email protected] Subject: End of Negotiation Process i Submission of Final Resolution Plan I Varutha Developers Private Limited
Dear RA,
We write to inform you that following the second round of the Negotiation Process, a bid of INR 265.65 Crores on a Net Present Value basis factoring payments to the Creditors (with a total resolution plan amount of INR 310 Crores for Creditors) submitted by another RA, has been declared as the highest bid in the Negotiation Process.
This is to inform you that the negotiation process as per the RFRP and the Process Note for Negotiation is completed and H1 Bidder has been declared by the CoC.
The value of your last bid, on Net Present Value basis factoring payments to the Creditors, was found to be lower than the abovementioned highest bid. Further, the RP in consultation with the CoC has requested you via multiple e-mails to submit documentary evidence in respect of your ability to make payment of the incremental bid value. However, you have failed to submit the necessary documentary evidence to the satisfaction of the CoC.
We request you to submit the Final Resolution Plan latest by 21 November 2024, 5:00 PM IST after incorporating: (1) the clarifications submitted by you on 19.10.2024 and (ii) the last financial proposal submitted by you in the Negotiation Process.
Please note that in case any Resolution Applicant fails to adhere to the timelines set out above, the COC shall have the right and discretion to proceed without considering the clarifications and revised offer of the Resolution Applicant.
This is without prejudice to all rights of the RP and the CoC, which are expressly reserved. Regards
Thanks & Regards
Anil Kumar Mittal
IBBI/IPA-002/IP-N00742/2018-2019/12263
Resolution Professional
Varutha Developers Private Limited (In CIRP) IBBI Reg Add: 5/99, Sector-2, Rajender Nagar, Sahibabad, Distt, Ghaziabad, Uttar Pradesh-201005
Correspondence Add: C/o Resurgent Resolution Professionals LLP Unitech Business Zone, 7th Floor, Tower -C, The Close South, Sector-50, Gurugram, Haryana 122018
E-Mail Id: [email protected] | [email protected]
AFA No.: AA2/12263/02/311225/203459 | Valid upto 31.12.2025”
It was subsequent to the said email dated 18.11.2024 the IA was filed. In the I.A. which was filed by the Appellant, following prayers were made:
“1.Kindly set aside the Email dated 18.11.2023 issued by the Resolution Professional titled End of Negotiation Process issued contrary to the Negotiation Process Document;
2.Direct the Resolution Professional Respondent No. 1 to conduct the 3rd Round of Negotiations in terms of the Negotiation Process Document shared vide Email dated 07.11.2004;
3.Direct the Resolution Professional to allow the Applicant herein to further negotiate with the CoC and submit a Revised Financial Proposal in terms of the Negotiation Process Document;
4.During the pendency of the present application, grant ex-parte ad-interim restrain against the Respondents from taking any steps or action pursuant to the impugned email dated 18.11.2024 and/or restrain the Respondents to not to take any further steps for approval of any resolution plan;”
Now we come to Clause I & K as extracted above, violation of which is claimed to have been committed by the RP as per submissions advanced by the Appellant. First sentence of Clause I reads “the base Bidder in the first round and the highest Bidder (H-1 Bidder) of each subsequent round (H-2 and H-3/Bidder) will have immunity from elimination in the next round, even if does not increase its bid by specified amount, till only two Bidders are left in the fray”. The above Clause clearly indicates that immunity is from elimination as where till only two Bidders are left in the fray. It is an admitted fact that Appellant was declared the highest Bidder in first round after having given highest bid of Rs.251.79 Crores. For the second round, email was sent by RP to all Applicant to submit their commercial offer. At 11:55 AM on 12.11.2024 email was sent by Appellant, raising the issue that he being highest bidder of first round has immunity to participate in the second round. The said email was immediately answered by the RP on the same day, informing that at the current stage, immunity is no longer operative and remaining participants are required to adhere to the specified bid of Rs.10 Crores. Appellant was asked to increase his bid. Appellant, thus on 12.11.2024 itself which was beginning of the second round was intimated that immunity is no longer available. The timeline for submitting the bid in second round of Negotiation was extended till the end of day of 14.11.2024 and 14.11.2024, RP has informed that only two Bidders are remained in the Negotiation Process hence, participants are required to participate in second round and submit a financial proposal with not less than specified threshold by today end, which email we have already extracted above. The Appellant has submitted the revised Appendix 1, containing an offer of total NPV of Rs.263.18 Crores. It was on 18.11.2024, the RP has sent emails to Appellant for asking certain documents. On 18.11.2024, the RP has informed the Appellant that in second round of Negotiation Process bid of Rs.265.65 Crores was declared as highest bid. All the Applicants were asked to submit final Resolution Plan by 21.11.2024.
The submission of the Appellant that he has immunity to participate in the second round by virtue of Clause I, does not commend us. The fact remains that only two Bidders were left in fray i.e., Appellant and Respondent No.3, the SRA and RP on 12.11.2024 itself has intimated to the Appellant that the immunity is not available to the Appellant from not participating in the second round, when only two Bidders were left in the fray the immunity does not continue, which is contemplated by Clause I itself. Further, the fact remains that Appellant has submitted his revised offer for second round, which is matter of record.
Present is not a case where Appellant has not submitted his revised commercial offer. Appellant being well aware that there is no immunity for the Appellant from not participating in the second round has submitted its commercial offer Rs.263.18 Crores. The Process as noticed above are not Process of simultaneous bidding, rather Applicant were requested to submit the best commercial offer in Appendix 1 for the second round, by increasing it by not less than Rs.10 Crores. It was open for all Resolution Applicants to submit their best offers in the second round. Appellant has submitted its offer Rs.263.18 Crores, whereas SRA has submitted its offer of Rs.265.66 Crores. We, thus, do not find any error in declaration of SRA as H-1 Bidder of the second round. The Appellant submission that RP arbitrarily declared completion of second round on 15.11.2024, whereas Appellant ought to have been given opportunity to participate in the third round. We are of the view that only two Resolution Applicants being in fray and both having given commercial revised offer, there was no occasion for conducting any third round, and since there was no immunity to the Appellant from participating in the second round, there was no occasion of conduct of third round as contended by the Appellant. The closure of round was achieved in the second round itself, both the Applicants have submitted their revised commercial offer. It is true that in event the Appellant had immunity from elimination for second round, it could have insisted for conduct of third round, but since only two Bidders were left, there was no immunity in second round for the Appellant which was communicated to it during the process itself.
The CoC in its CoC Meeting held on 26.11.2024, having approved the Resolution Plan of the SRA and the RP immediately issued a LoI dated 04.12.2024 to the SRA, which was brought into the notice of the Court when I.A. filed by the Appellant came for consideration. Adjudicating Authority has extracted the entire LoI dated 04.12.2024 in its Order and noticing the LoI has observed that nothing survives for consideration.
The Adjudicating Authority while approving the Resolution Plan has noticed the process of Negotiation. As noted above the process of challenge process, it has noticed that all 6 Plans were placed before the CoC for voting and voting was conducted on 04.12.2024 when the Plan of SRA was approved with. In Paragraphs 42 to 45, Adjudicating Authority made following observations:
“42.Round 1 of the Negotiation Process was concluded on 11th November 2024. Subsequently, round 2 of the Negotiation Process was concluded on 15th November 2024 wherein Mangalam was declared as the H1 bidder. After the conclusion of the Negotiation Process, all the RAs were communicated to submit their final Resolution Plans till 21st November, 2024. However, the Final Resolution Plan was received from only one RA i.e., Mangalam.
43.Accordingly, all six (6) Plans were placed before the CoC for voting and the voting on the Final Resolution Plans was concluded on 04.12.2024. The voting took place and/or was conducted as per Regulation 25(5) read with Regulation 26 of the CIRP Regulations.
44.Since, Mangalam Multiplex Private Limited obtained the highest affirmative vote of the CoC, its resolution plan dated 21st November 2024 and revised on 26th November 2024 was duly approved by the CoC under Section 30(4) of the Code read with Regulation 39(3B) of the CIRP Regulations. Mangalam was declared as the Successful Resolution Applicant and the Letter of Intent dated 4th December 2024 was accordingly issued to Mangalam.
45.Thereafter, Mangalam submitted unconditionally accepted Letter of Intent on 5th December 2024 along with the Performance Security Deposit in the form of a Bank Guarantee amounting to Rs. 62,20,00,000/- in accordance with regulation 36B(4A) of the CIRP Regulations.”
The CoC having approved Resolution Plan submitted by SRA it being found compliant with provisions, Adjudicating Authority has also relied and referred to the Judgement of the Hon’ble Supreme Court in the matter of ‘K. Sashidhar’ Vs. ‘Indian Overseas Bank & Ors.’ reported in (2019) 12 SCC
Hon’ble Supreme Court in Paragraph 35 has made following observations:
“35.The stage at which the dispute concerning the respective corporate debtors (KS&PIPL and IIL) had reached the adjudicating authority (NCLT) is ascribable to Section 30(4) of the I&B Code, which, at the relevant time in October 2017, read thus:
“30.(4) The Committee of Creditors may approve a resolution plan by a vote of not less than seventy-five per cent of voting share of the financial creditors.”
If CoC had approved the resolution plan by requisite per cent of voting share, then as per Section 30(6) of the I&B Code, it is imperative for the resolution professional to submit the same to the adjudicating authority (NCLT). On receipt of such a proposal, the adjudicating authority (NCLT) is required to satisfy itself that the resolution plan as approved by CoC meets the requirements specified in Section 30(2). No more and no less. This is explicitly spelt out in Section 31 of the I&B Code, which read thus (as in October 2017):
“31.Approval of resolution plan.—(1) If the adjudicating authority is satisfied that the resolution plan as approved by the Committee of Creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan.
(2)Where the adjudicating authority is satisfied that the resolution plan does not conform to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan.
(3)After the order of approval under sub-section (1)—
(a)the moratorium order passed by the adjudicating authority under Section 14 shall cease to have effect; and
(b)the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database.”
It is now settled law that Adjudicating Authority has very limited jurisdiction in matter of the approval of Resolution Plan. The interference with the commercial wisdom of the CoC is permissible only when the Resolution Plan is not in compliance of Section 30(2) and Section 31 of the IBC. Present is not a case, where any submission is made that Resolution Plan submitted by the SRA is non-compliant of Section 30(2). We having looked into the Process Negotiation Document and the process which was followed for Negotiation in first and second round and having looked into the email exchanged between the Appellant and the RP are satisfied that RP did not commit any error in conduct of the second round of the Negotiation Process. There was no immunity to the Appellant to participate in the second round since only two Bidders were left in the fray which was communicated to the Appellant on 12.11.2024. Further, Appellant has also submitted its revised commercial offer of Rs.263.18 Crores, both offers were looked into while declaring H-1 of the second round the Mangalam Multiplex Pvt Ltd was declared H-1 of second round who had given offer of Rs.265.66 Crores.
We, thus do not find any violation of the Negotiation Process done by the RP, second round of Negotiation Process was done in accordance with the process negotiation document. The Committee of Creditors had evaluated all Resolution Plan including the Appellant and having approved the Resolution Plan of the Mangalam Multiplex Private Limited with 100% vote shares. We do not find any error in the Order of the Adjudicating Authority approving the Resolution Plan on the submissions which has been advanced by the Appellant.
In view of the foregoing discussions, we do not find any good ground to interfere with the Orders of the Adjudicating Authority dated 05.12.2024 and 07.01.2025 challenged in these two Appeals. In result, both the Appeals are dismissed.