1. In Vistra ITCL (India) Limited v. Torrent Investments Private Limited and others, the NCLAT was faced with the critical issue of interpreting the provision contained in Regulation 39(1A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 which empowered resolution professionals to allow modification of the resolution plan, but not more than once or allowed them to use a challenge mechanism to enable resolution applicants to improve their plans.
While interpreting the aforesaid regulation, the NCLAT went on to observe as follows:
(i) there can be no fetter on the power of committee of creditors (“CoC”) to cancel or modify any negotiation with the resolution applicant including a challenge process, but it is the wisdom of the CoC to take a decision in this regard;
(ii) in view of subsection 4 of Section 30, which requires the CoC to vote on a plan ‘after considering its feasibility and viability’ implies that after receipt of the plan, subsequent to the challenge mechanism, a CoC is not obliged to put the plan to vote and Regulation 39(1A) does not prohibit CoC from negotiating with resolution applicants or asking Resolution Applicants to further increase the plan value; and
(iii) that even after completion of challenge mechanism under Regulation 39(1A)(b), the CoC retains its jurisdiction to negotiate with one or other Resolution Applicants, or to annul the Resolution Process and embark on to re-issue RFRP.
The NCLAT, further observed the following:
(i) the highest bidder in the challenge mechanism has no right to claim that its resolution plan be put to vote, without the CoC taking any further steps;
(ii) that a debenture trustee which holds 90% of the voting share in the CoC, is entitled to maintain an appeal against the order of Adjudicating Authority rejecting the CoC’s right to negotiate with the resolution applicants post the conclusion of challenge mechanism even in absence of a specific authorization of the underlying bond holders.
Source: Barandbench
