CoC Not Bound To Accept Plan With Highest NPV: NCLAT In Vedanta's Plea Against Adani's JAL Plan

The National Company Law Appellate Tribunal (NCLAT) has held that under the resolution framework adopted in the insolvency process of Jaiprakash Associates Ltd., the Committee of Creditors was not bound to approve a plan merely because it had the highest net present value or the highest score under the evaluation matrix.

“However, the CoC is not bound to approve a Resolution Plan, which has the highest score in Evaluation Matrix, which is clearly provided in the RFRP, nor the CoC is bound to approve a Resolution Plan, which has highest NPV, as noted above.”

A bench of Judicial Member Justice Ashok Bhushan and Technical Member Barun Mitra made the observation while dealing with appeals filed by Vedanta Ltd. against the approval of Adani Enterprises' resolution plan.

The insolvency process saw multiple bidders, including Vedanta, Adani Enterprises, Dalmia Cement, Jindal Power and PNC Infratech, submit resolution plans pursuant to the request for resolution plans.

After the initial bids were found sub-optimal, the Committee of Creditors conducted a challenge process to improve financial offers. Vedanta emerged with the highest net present value (NPV) offer of about ₹12,505 crore.

Vedanta argued that its plan value was about ₹17,926 crore, compared to about ₹14,535 crore offered by Adani Enterprises.

However, the final evaluation was carried out using a pre-disclosed evaluation matrix that gave significant weight to upfront cash recovery in addition to NPV and qualitative factors.

Vedanta's upfront cash component was significantly lower, which impacted its overall score despite its higher NPV and total value.

During the process, Vedanta submitted an addendum to its plan, increasing its upfront cash component to about ₹6,560 crore and enhancing equity infusion.

The Committee of Creditors rejected the addendum, holding that modifications after the conclusion of the challenge process were not permissible.

The tribunal upheld this decision, holding that the addendum amounted to a modification of the financial proposal and could not be accepted.

The tribunal emphasised that the insolvency process had been conducted fairly and transparently.

“When we come to the facts of the present case, we are satisfied that the CIRP was conducted in transparent manner giving opportunity to all Resolution Applicants to submit their best resolution plan as per the Evaluation Matrix which was part of the RFRP in a Challenge Process and also all Resolution Applicants were given opportunity to submit their best financial offer. We fail to appreciate as on what basis the Appellant is alleging that there was no transparency in the process.”

The tribunal also noted the comparative scores of the competing plans.

“When we take cumulative scores of upfront cash recovery and NPV of both, Appellant and Respondent No.3, the Appellant score comes to 53.51, whereas score of Respondent No.3 comes to 62.84. Thus, on NPV and upfront cash recovery, the score of Respondent No.3 was much more. Total score of Appellant in quantitative and qualitative parameters was 75.60, whereas total score of Respondent No.3 was 89.76.”

The tribunal found that the resolution plans were evaluated in accordance with the prescribed framework and that no material irregularity had been committed in the process.

For Vedanta Ltd.: Senior Advocate Abhijeet Sinha with Deep Roy, Anuj Lakhotiya, Aridaman Raghav, Heena Kochar, Bhavit Baxi, Shrishti Agnihotri, Rishi Badraj, Aditya Narayan Sharma, Sourabh Goyal and Abhishek, Advocates.

For the Resolution Professional: Senior Advocates Abhishek Manu Singhvi and Arun Kathpalia with Anoop Rawat, Sagar Dhawan, Vaijayant Paliwal, Nikhil Mathur, Aditya Marwah, Ahkam Khan, Rashi Sharma, Kirti Gupta and Diksha Gupta, Advocates.