After Submitting EoI Under RFRP, Resolution Applicant Cannot Question Its Clauses: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has recently held that a resolution applicant cannot question clauses of the Request for Resolution Plan after submitting its Expression of Interest under the same RFRP, while challenging rejection of its resolution plan by the Committee of Creditors.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra observed, “When the Appellant had submitted their EoI basis the RFRP, they cannot now turn around to question any of the clauses of the RFRP. Having submitted their EoI in terms of the RFRP tantamount to subscribing to the clauses of the RFRP and that having been done, applicability of Clause 12 cannot be questioned at this stage when the plan has been rejected.”

The appeal arose from an order of the NCLT Mumbai rejecting a plea filed by Goldendreams Buildcon Pvt. Ltd. challenging the decision of the Committee of Creditors (CoC) to reject its resolution plan and annul the resolution process in the corporate insolvency resolution process of Somerset Construction Pvt. Ltd.

The appellant had submitted its EoI and resolution plan under the RFRP, which contained Clause 12 reserving the right of the Resolution Professional/CoC to accept, reject, or annul the bid process and reject any or all resolution plans at any time without assigning reasons. The appellant revised its plan multiple times at the request of the Resolution Professional and the CoC.

It argued that it was not given proper opportunity to present its plan before the CoC and relied on the ruling in Rajputana Properties Pvt. Ltd. v. Ultra Tech Cement Ltd. to contend that participative rights of a resolution applicant are substantive safeguards and not an empty formality.

The respondents relied on Arcelor Mittal India Pvt. Ltd. v. Satish Kumar Chandra, submitting that an unsuccessful resolution applicant has no vested right to insist that its plan be accepted and that the commercial wisdom of the CoC is paramount.

The NCLAT noted from the minutes of the CoC meetings that the appellant had participated in negotiations, attended meetings, and revised its plan several times. It also noted that in the 17th CoC meeting all resolution plans, including that of the appellant, were rejected as financially non-viable since they offered value lower than the liquidation value, and the bid process was annulled in the interest of value maximisation.

The tribunal reiterated that approval or rejection of a resolution plan falls within the commercial wisdom of the CoC and that judicial review is limited to the scope of Section 30(2) of the Insolvency and Bankruptcy Code. Finding no infirmity in the NCLT order, the appeal was dismissed.