NCLAT Dismisses Appeal In Green Soul CIRP, Says SRA Consortium Cannot Be Reconstituted After Plan Approval

The National Company Law Appellate Tribunal (NCLAT) at Delhi has dismissed an appeal by the successful resolution applicant consortium in the Corporate Insolvency Resolution Process of Green Soul Ergonomics Pvt. Ltd.

The tribunal held that a consortium cannot change its composition after its resolution plan has already been approved by the Committee of Creditors.

“When composition of consortium is changed subsequent to approval of resolution plan, it cannot be said that evaluation matrix for finding feasibility and viability of the resolution plan including implementability of the plan shall remain same as was of earlier consortium Member. When plan is submitted by consortium, each Member has its own obligations,” the tribunal said, adding that the clause permitting such changes “has to take place prior to approval of the resolution plan”.

The bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra upheld the Mumbai bench of the National Company Law Tribunal, which had remanded the plan to the Committee of Creditors after finding that the re-approved plan was not in compliance with the Insolvency and Bankruptcy Code and the applicable CIRP Regulations.

Green Soul Ergonomics Pvt. Ltd. entered the Corporate Insolvency Resolution Process on May 1, 2024. The successful resolution applicant consortium, comprising Wafi Investments Ltd. and Suhail Sameer, was included in the final list of prospective resolution applicants and submitted its plan in September 2024, along with subsequent addenda.

The Committee of Creditors approved the plan with a 95.44 percent vote on November 11, 2024. On November 25, 2024, the consortium sought to induct OTP Venture Funds Scheme I as an additional member. The Committee approved the reconstitution on December 4, 2024, and re-approved the plan on December 9, 2024 with revised shareholding of Wafi Investments at 60 percent, OTP Ventures at 39 percent, and Suhail Sameer at 1 percent.

The NCLT had held that a resolution plan, once approved, cannot be re-approved by adding a new member to the consortium and found the revised plan to be in violation of Sections 30(2)(e) and (f) of the Code as well as multiple CIRP Regulations. It directed that the plan be sent back to the Committee of Creditors for reconsideration.

Before the appellate tribunal, the successful resolution applicant consortium relied on the bidding document to argue that changes in consortium composition were permissible with the approval of the Committee of Creditors.

It also submitted that OTP Ventures was eligible under Section 29A, that its inclusion enhanced financial capability, and that the financial offer of Rs 52 crore remained unchanged and above liquidation value.

The Committee of Creditors submitted that it had decided to reissue the bidding process and that the consortium had participated in the fresh round and was therefore estopped from challenging the earlier process.

Rejecting the appeal, the tribunal held that the clause permitting change in consortium composition applies at the stage prior to approval of the resolution plan and cannot be invoked after approval.

It emphasised that when a plan is submitted by a consortium, the eligibility, financial capacity, feasibility, and viability are all examined on the basis of the credentials of its members.

The tribunal further noted that OTP Ventures was not part of the final list of prospective resolution applicants and that its induction after approval contravened the regulatory bar on considering plans from entities outside that list.

The reconstituted consortium, it observed, amounted to a different entity that had not been evaluated under the prescribed framework.

It also rejected reliance on provisions permitting changes in the shareholding of a special purpose company, clarifying that those provisions relate to implementation of the plan and not to altering the composition of the resolution applicant after approval.

Finding no reason to interfere with the order of the National Company Law Tribunal, the appellate tribunal dismissed the appeal