CoC Free To Invite Fresh Bids; Regulation 36(4A) Restricts Only Modification of Existing Bids, Rules NCLT Kochi
Pranav B Prem
The National Company Law Tribunal (NCLT), Kochi Bench has clarified that the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 restrict only the modification of an already issued Expression of Interest (EOI) and do not prevent the Committee of Creditors (CoC) from inviting a fresh call for EOIs. The Tribunal held that a resolution applicant does not acquire any vested right merely by submitting a resolution plan, and once the plan is rejected by the CoC, the applicant cannot stall the CIRP or block issuance of fresh EOIs.
A Bench comprising Judicial Member Vinay Goel and Technical Member Madhu Sinha was adjudicating an application filed by Sumit Khanna, who had submitted a resolution plan for Kerala Chamber of Commerce and Industries (KCCI), the corporate debtor. The CoC rejected Khanna’s plan following valuation reports placing the liquidation value at approximately ₹66.67 crore, which was significantly higher than what the applicant considered realistic. The applicant alleged that the valuation was grossly inflated and that assets not owned by the corporate debtor were wrongfully included in the valuation.
Khanna contended that the CoC acted beyond its powers in inviting fresh EOIs, arguing that Regulation 36(4A) permitted modification of an EOI only once and therefore barred the CoC from issuing a fresh EOI. He also sought appointment of a third valuer and urged the Tribunal to direct that his plan be put to vote after revising the liquidation value.
Opposing the plea, the Resolution Professional and the CoC submitted that the plan was non-compliant and failed to meet statutory requirements under Section 30(2) of the Insolvency and Bankruptcy Code. They argued that the applicant had assumed a NIL liquidation value despite the valuations communicated by the RP, and that the plan did not unconditionally provide for mandatory payments such as CIRP costs, dues of operational creditors including government authorities, and amounts payable to dissenting financial creditors. It was further pointed out that Khanna himself submitted an EOI in response to the fresh invitation and therefore could not legally challenge the process.
Agreeing with the stand of the CoC, the Tribunal held that the applicant’s reliance on Regulation 36(4A) was “misconceived.” It observed that the regulation “restricts modification of an existing EOI to only once, but it does not curtail the power of the CoC to issue a fresh EOI.” It added that a fresh EOI becomes necessary where circumstances require wider participation or where a previously issued call is no longer workable in view of developments in the CIRP.
The Tribunal found that Khanna’s resolution plan suffered from non-compliance with Section 30(2), highlighting that the plan did not provide for mandatory payments in accordance with law. It observed that unilateral adoption of a NIL liquidation value was contrary to the Code, the valuation communicated by the RP, and the objectives of the insolvency framework.
It also noted that having participated in the fresh EOI process, the applicant could not “approbate and reprobate” by challenging it later, and that the CoC’s commercial wisdom could not be interfered with in the absence of material irregularity or statutory violation. Finding no substance in the application, the NCLT dismissed it without costs and upheld the CoC’s decision to issue fresh EOIs for the corporate debtor.
Appearance
For Applicant: Advocate Dhruv Dewan
For Respondents: Advocate Akhil Suresh for RP; Advocate Terry V James for Kerala Trade Centre Owner's Association.
Cause Title: Phoenix ARC Private Limited v. Kerala Chamber of Commerce and Industries
Case No: IA (IBC)/228/KOB/2023 In CP (IB)/33/KOB/2021
Coram: Judicial Member Vinay Goel, Technical Member Madhu Sinha
