Highest Score In Evaluation Matrix Doesn't Guarantee Resolution Plan Approval: NCLT Kochi

Securing the highest score under the evaluation matrix does not give a resolution applicant any vested right to have its plan approved by the Committee of Creditors (CoC), the National Company Law Tribunal at Kochi has reiterated.

A coram of Judicial Member Vinay Goel said:

“It is now well settled that the Evaluation Matrix is only a guiding tool intended to facilitate comparative assessment of Resolution Plans and does not confer any vested or enforceable right upon the highest-scoring Resolution Applicant to demand approval of its Resolution Plan.”

The tribunal dismissed an application filed by Dr. Ayyappan Nair Raghavan Pillai, an admitted financial creditor, former director and shareholder of Attukal Devi Institute of Medical Sciences Ltd, challenging the CoC's approval of the resolution plan submitted by Dr. M. Ayyappan and seeking consideration of his own plan.

Pillai contended that his resolution plan secured the highest score under the approved evaluation matrix and was ranked first among the four plans received during the Corporate Insolvency Resolution Process, while Dr. M. Ayyappan's plan was ranked second.

However, the CoC, with Dhanlaxmi Bank Ltd as the sole financial creditor holding 100% voting share, approved Dr. M. Ayyappan's resolution plan.

Pillai argued that the decision to approve the second-ranked plan was arbitrary and contrary to the evaluation framework governing the resolution process.

He also alleged that Dr. M. Ayyappan was permitted to enhance the value of his proposal after submission without affording a similar opportunity to other resolution applicants, rendering the process discriminatory and unfair.

Opposing the plea, the CoC argued that the applicant was effectively seeking judicial interference with its commercial wisdom, which is subject only to limited judicial review. It contended that the evaluation matrix was only one of several factors considered and did not mandate approval of the highest-scoring plan.

According to the CoC, broader commercial considerations including feasibility, viability, implementation capability, long-term sustainability, operational continuity and the overall revival prospects of the hospital were taken into account before approving Dr. M. Ayyappan's plan.

The tribunal noted that the CoC had considered all plans over multiple meetings before arriving at its decision.

“Merely because the Applicant's Resolution Plan may have secured a comparatively higher score under the Evaluation Matrix, the same by itself cannot be a ground to compel the Committee of Creditors to approve such plan in preference to another plan which, in its commercial wisdom, was found to be more feasible, viable and conducive to the revival of the Corporate Debtor.”

Rejecting the allegation of procedural unfairness, the tribunal noted that opportunities for furnishing clarifications and explanations had been extended during the process, including to the applicant.

The tribunal found no evidence of arbitrariness, discrimination or material irregularity in the conduct of the CIRP.

On the scope of judicial review, the tribunal said:

“The Insolvency and Bankruptcy Code, 2016, marks a conscious shift from a court-centric insolvency regime to a creditor-driven process where the commercial wisdom of the Committee of Creditors has been given paramount importance. The role of the Adjudicating Authority is therefore confined to examining statutory compliance and procedural fairness and not to substitute its own view for the commercial decision taken by the Committee of Creditors.”

Holding that no material irregularity, statutory violation, or arbitrariness had been established, the tribunal declined to interfere with the CoC's decision and dismissed the application.

For Applicant: Advocate Biju P Pulipra

For Respondents: Advocates Vinod P.V, A.C Venugopal, Mohan Pulickkal and Rajmohan R, RP