Limiting CIRP Negotiations To Higher-Ranked Bidders Not Arbitrary If As Per RFRP: NCLT Indore

The National Company Law Tribunal (NCLT) Indore Bench has held that restricting negotiations in a corporate insolvency resolution process to higher-ranked bidders is valid where it flows from the bidding framework and serves the objective of value maximisation.

A coram of Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta in the CIRP of Soya Industries observed that “the Corporate Insolvency Resolution Process (CIRP) was conducted strictly in accordance with the Request for Resolution Plan (RFRP), which specifically stipulated that the Committee of Creditors (CoC) would negotiate only with the H1 and H2 bidders, with the objective of streamlining and narrowing down the CIRP process.”

It held that such a framework “cannot be termed arbitrary merely because it results in differential treatment, unless it is shown that the same was applied in a discriminatory or mala fide manner"

The ruling came in the corporate insolvency resolution process of Indian Soya Industries Pvt. Ltd., challenged by Bio Treasure Overseas.

The applicant said it had submitted its resolution plan within the stipulated timeline and revised it multiple times when called upon to do so. It claimed that after a prolonged period of silence, it was informed that the Committee of Creditors had decided to proceed with liquidation. It also alleged that while other bidders were repeatedly invited to improve their offers, it was not given a similar opportunity.

Arguing that the process was unfair, the applicant said the classification of bidders into H1, H2 and H3 lacked transparency and that its plan was effectively sidelined without proper consideration.

The Tribunal did not find merit in these claims. It noted that all resolution plans were assessed on the basis of a pre-declared evaluation matrix, with financial parameters, particularly net present value, carrying significant weight.

It recorded that “all resolution plans were evaluated strictly in accordance with the evaluation matrix and RFRP” and that the applicant “was not declared as H1 or H2 bidder.”

On the allegation that its plan was not placed before the Committee of Creditors, the Tribunal accepted the record showing that all plans, including that of the applicant, were put to vote.

The applicant's plan was rejected with 100% voting share, while the successful resolution plan was approved with full support.

The tribunal reiterated that decisions relating to evaluation, negotiation and approval of resolution plans fall within the commercial wisdom of the Committee of Creditors.

It emphasised that “the decisions taken by the CoC, including negotiation with select bidders, evaluation of plans, and ultimate rejection of the Applicant's plan, fall within the ambit of its commercial wisdom, which is immune from judicial review in the absence of violation of statutory provisions.”

Finding no material irregularity, illegality or arbitrariness in the conduct of the process, the tribunal dismissed the application