NCLT Mumbai Orders Reconsideration Of Modified Resolution Plan By Highest Bidder In Logistics Company Insolvency

The National Company Law Tribunal (NCLT) at Mumbai has directed the Committee of Creditors to reconsider Athena India's modified resolution plan in the insolvency of Arshiya Northern FTWZ Limited, a logistics and warehousing company operating a Free Trade and Warehousing Zone.

The tribunal held that denying an opportunity to consider value-enhancing modifications was arbitrary and contrary to the objective of value maximization under the insolvency framework

A coram of Judicial Member Mohan Prasad Tiwari and Technical Member Charanjeet Singh Gulati said the insolvency process cannot be reduced to a rigid procedural exercise divorced from its substantive objective.

The court described the refusal to consider changes as “mechanical, hyper-technical, and contrary to the overarching objective of value maximization.”

It said decisions taken without being guided by the evaluation matrix cannot be protected by invoking commercial wisdom.

Arshiya Northern FTWZ Limited entered insolvency after a petition filed by the State Bank of India. Athena India Opportunities was allowed to participate in the resolution process after directions from the NCLAT in October 2024.

It submitted its resolution plan within the extended timeline. A challenge and negotiation process followed. When the process concluded, Athena India emerged as the highest bidder under the approved evaluation matrix. It scored 91.71 out of 100 and offered a resolution value of Rs 164.10 crore. Despite this, the Committee of Creditors rejected the plan.

Athena India told the tribunal that the structure involving Optionally Convertible Redeemable Preference Shares was discussed throughout the negotiations and was never expressly rejected.

It said that before any resolution plan was approved, it offered to modify the structure. Without prejudice, it also proposed paying the entire resolution amount upfront in cash. The lenders opposed the plan. They said the structure could affect their rights under personal guarantees and maintained that the decision was a matter of commercial wisdom.

The tribunal rejected the objection that Athena India lacked locus standi. It held that an unsuccessful resolution applicant can still qualify as an aggrieved person.

The tribunal noted that once the CIRP is initiated, the proceedings are no longer in personam but in rem. It added, relying on the Supreme Court, that an unsuccessful resolution applicant whose resolution plan could otherwise have been approved satisfies the requirement of being aggrieved.

The tribunal noted that Regulation 39(3) requires resolution plans to be evaluated strictly in accordance with the evaluation matrix. It recorded that no material had been placed on record to show that Athena India's plan was commercially unviable, especially when it scored higher and offered a marginally higher value than the plan approved by the CoC.

The bench directed the CoC to reconsider Athena India's resolution plan, including its proposal for full upfront cash payment, preferably within 30 days.