Earlier CoC Approval Gives Resolution Applicant No Right To Plan Approval After It Is Sent Back: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has recently held that a resolution applicant cannot insist on approval of its plan merely because the Committee of Creditors (CoC) had approved it earlier. This is particularly so when the plan is sent back for reconsideration and the revised proposal fails to secure the required voting majority.

The bench of Judicial Member Justice N Seshasayee and Technical Members Arun Baroka and Indevar Pandey observed:

“Based on the discussion in earlier paras, we are of the view that the earlier approval of the original Resolution Plan did not create an indefeasible right in favour of the Appellant once the Plan had been remitted for reconsideration and the revised proposal subsequently failed to secure the statutory majority.”

The tribunal upheld the NCLT's decision allowing a fresh Form G to invite expressions of interest from prospective resolution applicants for IVR Prime IT SEZ Pvt. Ltd.

Vasu Buildcon, whose original resolution plan was approved by the CoC, and suspended director Ankit Pathak had challenged the decision.

The CoC approved Vasu Buildcon's plan on March 31, 2022, with 100% voting share. However, the NCLT later sent it back for reconsideration in light of the Supreme Court's ruling in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, which concerned Noida Authority's status as a secured creditor.

Vasu Buildcon submitted a revised plan, but it failed to secure the required 66% voting majority. A settlement proposal under Section 12A of the Insolvency and Bankruptcy Code also failed to obtain the required 90% voting share.

The CoC then unanimously approved the publication of a fresh Form G.

Vasu Buildcon argued that the NCLT had sent the plan back only for reconsideration of Noida Authority's claim. It contended that the CoC could not reopen the entire plan and that its commercial wisdom did not justify going beyond the remand order.

The resolution professional argued that the revised plan had deficiencies, including concerns about funding arrangements, feasibility and viability. After the revised plan and settlement proposal failed, the CoC was entitled to invite fresh expressions of interest.

ICICI Bank also opposed Vasu Buildcon's challenge. It argued that the revised plan differed materially from the original and involved substantially higher financial commitments.

The NCLAT noted that the original plan had received the CoC's approval but had never been approved by the NCLT under Section 31 of the IBC. The tribunal ruled that the earlier approval did not give Vasu Buildcon an indefeasible right to insist on approval of its original plan.

It also found no absolute statutory prohibition against issuing a fresh Form G in the circumstances. The CoC had considered both the revised plan and the settlement proposal before deciding to invite fresh expressions of interest rather than proceed towards liquidation.

Pathak alleged irregularities in the voting process over assignments of claims by 13 homebuyers to parties allegedly connected with a prospective resolution applicant.

The tribunal found no fraud or material irregularity. It noted that the original homebuyers remained recorded as creditors when the relevant votes were cast and that subsequent recognition of the assignments could not retrospectively change the voting position.

The NCLAT dismissed both appeals and upheld the decision allowing publication of the fresh Form G.