In its ruling dated April 18, 2022 ("Judgement") in the case of Steel Strips Wheels Limited v. Shri Avil Menezes, Resolution Professional of AMW Autocomponent Limited and Others [Company Appeal (AT) (Insolvency) No. 89 of 2022], the National Company Law Appellate Tribunal ("NCLAT") held that the committee of creditors of AMW Autocomponent Limited ("CoC") cannot consider a new resolution plan.
In the instant case titled Steel Strips Wheels Limited. v. Shri Avil Menezes, Resolution Professional of AMW Autocomponent Limited and Others the issue raised for clarification before the NCLAT was:
If a resolution plan has previously been adopted, may the CoC still consider another resolution plan?
With regard to this issue, The NCLAT took notice of the parties' presentations and pertinent information. The Resolution Plan was approved well inside the NCLT-extended CIRP window. The Resolution Plan of the Appellant received 98.55 percent of the voting shares when two plans were presented to the CoC for approval during the CIRP. Furthermore, Respondent No. 3 first expressed interest in the matter in an email sent on December 13, 2021, by which time the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor had reached a more advanced stage, with the Resolution Plan of the Appellant having been approved and being considered by the NCLT. The NCLAT pointed out that the Hon'ble Supreme Court ("SC") held that the resolution plan is binding on the CoC and the successful resolution applicant even before the NCLT has given it its blessing in Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited and Another [2021 SCC OnLine SC 707]. In the aforementioned instance, it was highlighted that the Bankruptcy Law Reforms Committee's report said that the resolution expert must present a legally enforceable agreement to the adjudicator prior to the default maximum date. The SC had also emphasised the timetable. The NCLAT highlighted that such excessive delays lead to commercial uncertainty, a decrease in the value of the corporate debtor, and a costly, ineffective insolvency process. The NCLAT noted that the current case was not one in which the CoC's commercial judgement regarding approval or disapproval of the plan was being debated. With a voting percentage of 98.55 percent, the CoC has already approved the appellant's plan in an exercise of business sense. Additionally, the CoC cannot claim that it is prepared to evaluate the plan of Respondent No. 3, which in its opinion may be a better plan with a much greater value, after the Resolution Plan has been approved by the CoC by the necessary vote and after the CIRP has expired. The NCLAT noted that the CoC had occasionally extended the deadline for submitting the resolution plan. In addition, the CoC had given all resolution applicants on the final list a single opportunity to submit a resolution plan or a revised plan until May 9, 2021. In light of the aforementioned, the Respondent No. 3's argument that the Appellant's Resolution Plan was also not submitted by the deadline was without merit.
The NCLAT ruled that after the Appellant's Resolution Plan was approved, the CoC could not, under the terms of the statute in effect, consider the Resolution Plan of Respondent No. 3. Additionally, the CoC was not given a good basis to evaluate Respondent No. 3's resolution plan, which was presented after the Resolution Plan had been approved, according to the Impugned Order. The contested order was dismissed after being deemed unworkable. As a result, the appeal was granted. The NCLAT determined that the Respondent No. 3's application and resolution plan had been improperly considered by the NCLT.
The NCLAT categorically stated that,
“In view of the above decision of the CoC, there is no substance in the submission of the Counsel for the Respondent No.3 that plan of Appellant was also not submitted within the time fixed. We, thus, are of the view that there was no valid reason indicated in the order of the Adjudicating Authority dated 18.01.2022 for permitting the CoC to consider the Resolution Plan of the Respondent.”