Declaration of Highest Bidder Does Not Limit CoC’s Authority to Hold Fresh Challenge Process: NCLAT Delhi
Pranav B Prem
In a significant ruling reinforcing the commercial wisdom of the Committee of Creditors (CoC), the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, held that the CoC is not prohibited from conducting a second challenge process in a Corporate Insolvency Resolution Process (CIRP), even after declaring a highest bidder (H1) in the first round. The Bench comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra, and Mr. Arun Baroka (Technical Members) dismissed the appeal filed by Anuj Goyal, who had emerged as the highest bidder in the first challenge round conducted during the CIRP of Frost International Ltd.
Background
The appellant, Anuj Goyal, had participated in the first challenge process conducted by the Resolution Professional (RP), Amit Chandrakant Shah, for submission of resolution plans for the corporate debtor. Goyal was declared the highest bidder (H1) in that round. However, the RP subsequently filed an application (I.A. No. 1424/MB/2025) before the Adjudicating Authority (NCLT Mumbai Bench) seeking directions for conducting a second challenge process. This was premised on the need to allow participation by certain other resolution applicants whose financial proposals were frozen and were not part of the first challenge.
The NCLT, vide order dated 11.04.2025, allowed the RP’s application and permitted the second challenge process to proceed. A third challenge round was also scheduled for 19.05.2025. The appellant challenged the NCLT’s order before the NCLAT, asserting that once he had been declared H1, the CoC had no authority to reopen the bidding process or entertain new participants.
Appellant's Contentions
Appearing through counsel, the appellant raised several objections to the process adopted by the CoC and RP. His key arguments were:
That the CoC had no jurisdiction to conduct a second challenge process, especially once the first process had culminated in a declaration of the highest bidder.
That permitting new resolution applicants, who had abstained from the initial round, to participate in subsequent rounds was contrary to the process norms and the Request for Resolution Plan (RFRP).
That Clauses 3.3 and 3.7 of the RFRP, when interpreted correctly, barred further challenge processes and mandated closure upon finalization of the first challenge round.
That acceptance of a higher bid by Greensward Enterprises Pvt. Ltd., a non-participant in the first round, was impermissible and compromised the integrity of the process.
The appellant, therefore, sought setting aside of the NCLT's order and restoration of his H1 status as final.
Respondents' Stand
Senior Advocate Mr. Ramji Srinivasan, representing Greensward Enterprises Pvt. Ltd., along with counsel for the RP and other respondents, countered the appellant’s claims. They submitted:
That the CoC retains the commercial wisdom and autonomy to conduct additional challenge rounds to achieve value maximization, a foundational objective under the Insolvency and Bankruptcy Code, 2016.
That Clauses 3.3 and 3.7 of the RFRP did not preclude further rounds, and only regulated the status of bids in a given round.
That participation of other applicants in the second challenge round was not contrary to the process since their initial financials were frozen only in the context of the first challenge.
That the appellant had been invited to participate in the third challenge process and had not been unfairly excluded.
NCLAT's Observations and Ruling
The Appellate Tribunal undertook a detailed review of the submissions and relevant provisions in the RFRP. The key points of the NCLAT’s reasoning include:
Challenge Process Is Not Statutorily Regulated: The Tribunal observed that there is no specific statutory prescription under the IBC or its regulations that restricts the number of challenge rounds a CoC may conduct. The process, including the challenge mechanism, is guided by the CoC's objective of maximizing value and subject to procedural fairness.
Clauses 3.3 and 3.7 of the RFRP: These clauses, cited by the appellant, were interpreted by the Tribunal to relate only to the freezing of financials for a particular challenge round and did not limit the CoC’s authority to conduct further processes. Thus, there was no procedural irregularity in allowing a second challenge round.
No Vested Right for Highest Bidder: The NCLAT emphasized that being declared H1 does not confer any legal or enforceable right on a resolution applicant to insist that the CoC accept its plan. The CoC is well within its powers to conduct additional negotiations or challenge rounds.
Relying on Precedent: The Tribunal cited its earlier ruling in Vistara ITCL India Ltd. v. Torrent Investments Pvt. Ltd [Comp. App. (AT) (Ins.) No. 132/2023], where it upheld the CoC’s discretion to conduct multiple challenge processes as part of value maximization. This precedent underscored that the CoC’s decision, if guided by fairness and aimed at enhancing recovery, deserves deference.
Participation in Third Round: Addressing the appellant's grievance of exclusion from the upcoming third challenge round, the Tribunal noted that the Resolution Professional had already sent an invitation to the appellant for participation. Therefore, the appellant was not prejudiced and had an equal opportunity to participate.
No Error in NCLT’s Order: Finding no illegality or procedural lapse in the NCLT’s direction allowing the second challenge round, the NCLAT held that the Adjudicating Authority had rightly allowed the RP's application.
The NCLAT dismissed the appeal and upheld the NCLT’s order, reiterating that the CoC’s commercial discretion includes the right to conduct further challenge rounds even after a highest bidder has been declared.
Appearance
For Appellant: Mr. Mohit Chowdhary, Mr. Prakhar Mithal and Mr. Gaurav Raj, Advocates.
For Respondent: Mr. Varun Kalra and Mr. Pranav Khadda, Advocates for R-1.
Mr. Ramji Srinavasan, Sr. Advocate with Mr. Atul Shankar Mathur, Mr. Prabal Mehrotra, Mr. Shubhankar, Ms. Shefali Munde and Mr. Arjun Bhatia, Advocates for Intervenors.
Cause Title: Anuj Goyal v/s Amit Chandrakant Shah, RP of Frost International Ltd.
Case No: Company Appeal (AT) (Insolvency) No. 766 of 2025
Coram: Justice Ashok Bhushan [Judicial Member], Mr. Arun Baroka [Technical Member], Mr. Barun Mitra [Technical Member]
[Read/Download order]
