Bankruptcy Code - Resolution Plan approval process - Non-communication of individual scores does not render the process invalid.

NCLAT Upholds CoC's Decision in Insolvency Case, Dismisses Appeal by Consortium of Govindrao Sable The Tribunal affirms the commercial wisdom of the CoC, dismisses objections over non-communication of individual scores in resolution plan process.

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal by the Consortium of Govindrao Sable against the approval of a resolution plan in the insolvency proceedings of a company, reinforcing the supremacy of the Committee of Creditors' (CoC) commercial wisdom. The appeal, filed under the Insolvency and Bankruptcy Code, 2016, challenged the decision of the National Company Law Tribunal (NCLT), Mumbai Bench, which had approved the resolution plan submitted by Grainotch Industries Limited, the successful resolution applicant, with an overwhelming 99.86% vote share.

The appellant argued that they were prejudiced due to the non-communication of individual scores and rankings during the resolution plan evaluation process, which they claimed violated Step IV of the process. However, the NCLAT, comprising Justice Ashok Bhushan and Member Barun Mitra, held that the CoC's commercial discretion was paramount and that the non-communication of individual scores did not constitute a valid ground to invalidate the approval process.

The Tribunal noted that the appellant was aware of the evaluation matrix and the net present value (NPV) of their bid, which was crucial for the scoring. It was further observed that the appellant participated in 27 rounds of the negotiation process, demonstrating their engagement and awareness of the competitive scoring environment.

The NCLAT emphasized that the process note was duly followed, and all compliances were reflected in 'Form-H', as submitted by the Resolution Professional. The appellant's contention that they were not allowed to revise their financial proposal post-negotiation was also dismissed, with the Tribunal noting that the resolution applicants were not entitled to any revisions after the conclusion of the negotiation process.

In concluding remarks, the Tribunal underlined that the CoC had acted within its commercial wisdom, and the resolution plan of Grainotch Industries Limited was rightfully approved. The appeal was found to be without merit and was consequently dismissed.

Bottom Line:

Insolvency and Bankruptcy Code - Resolution Plan approval process - Commercial wisdom of the Committee of Creditors (CoC) is paramount - Non-communication of individual scores to the appellant does not render the process invalid.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016

Consortium of Govindrao Sable v. Pankaj Sham Joshi, (NCLAT)(Principal Bench)(New Delhi) : Law Finder Doc Id # 2812839