Late CIRP Bid Can't Be Accepted Without Publishing Provisional List Of Resolution Applicants First: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at New Delhi has held that a belated expression of interest in an insolvency process cannot be accepted unless a provisional list of bidders is first published and objections are invited. The court reiterated that it is a mandatory requirement under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The ruling came while dismissing appeals filed by the committee of creditors of Nirmal Lifestyle (Kalyan) Pvt. Ltd. and the Dharmesh Jain Consortium challenging the rejection of the consortium's resolution plan.

A bench comprising Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra said this requirement is a mandatory safeguard under the insolvency framework.

“The requirement of issue of provisional list of all PRAs and inviting objection, is a statutory requirement as per Regulation 36A, sub-regulations 10 and 11,” the tribunal said.

It added that even if timelines are extended, “any EoI could have been accepted and included in the final list of PRAs only after due compliance” with this process.

The dispute arose during the corporate insolvency resolution process of the real estate company. The provisional list of prospective resolution applicants was published without including the Dharmesh Jain Consortium.

The committee of creditors later extended timelines and accepted the consortium's expression of interest. Its resolution plan was then evaluated and approved by the committee of creditors. This was done without issuing a revised provisional list or inviting objections first owing to which NCLT, Mumbai rejected the plan.

Challenging the rejection of the plan by the NCLT the committee of creditors and the consortium argued that the bid invitation allowed timelines to be extended. They said acceptance of a late expression of interest fell within the commercial wisdom of creditors.

Homebuyers opposed the appeals. They argued that allowing a new bidder into the process without reopening it to objections violated basic transparency requirements.

Rejecting the appellants' arguments, the appellate tribunal said statutory safeguards cannot be bypassed in the name of commercial wisdom.

“When no provisional list of eligible PRAs, including the name of Consortium of Dharmesh Jain inviting any objections was published, inclusion the name of Consortium of Dharmesh Jain, cannot be said to be in accordance with the statutory requirements,” the tribunal said.

It held that a resolution plan considered through such a process could not be sustained.

However, the NCLAT declined to allow the company to be pushed into liquidation. It took note of the interests of around 2,200 homebuyers spread across multiple projects.

“In view of interest of 2200 homebuyers, who are homebuyers in different projects of the CD, one last effort needs to be made for resolution of the CD by a Resolution Applicant,” the tribunal said.

The appellate tribunal set aside the direction to initiate liquidation. It ordered issuance of a fresh Form-G on the same terms as the earlier invitation. It also directed the insolvency process to restart from the expression of interest stage and be completed within 90 days.