CoC Can Seek Multiple Resolution Plan Revisions Despite Regulation 39(1A) Restriction on RP: NCLAT
- REEDLAW
- Aug 9
- 3 min read
Updated: Aug 12
REEDLAW Legal News Network reports: In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) clarified that Regulation 39(1A) of the IBBI (CIRP) Regulations, 2016, which limits a resolution professional from unilaterally negotiating or permitting modifications to a resolution plan, does not restrict the Committee of Creditors’ (CoC) authority to seek multiple revisions before approval. The Tribunal emphasised that the provision is directory regarding the CoC’s prerogative and that the commercial wisdom of the CoC prevails in deciding whether revised plans should be considered, thereby requiring the resolution professional to place such plans before the CoC when specifically directed.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, while adjudicating a batch of two Company Appeals, held that although Regulation 39(1A) of the IBBI (CIRP) Regulations, 2016 restricts the resolution professional from unilaterally negotiating or allowing modifications to a resolution plan, it does not diminish the CoC’s authority to seek multiple revisions prior to approval. The Tribunal clarified that the provision operates in a directory manner concerning the CoC’s powers, and the commercial wisdom of the CoC is decisive in determining whether such revised plans should be entertained. Accordingly, a resolution professional must place revised or modified plans before the CoC when expressly directed, notwithstanding the one-time negotiation restriction under Regulation 39(1A).
The National Company Law Appellate Tribunal (NCLAT) dismissed two appeals filed by the Appellant, a Resolution Applicant, challenging the order of the Adjudicating Authority dated 21.02.2025 in I.A. No. 4977/ND/2024 and I.A. No. 5769/ND/2024. The dispute arose during the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor, wherein resolution plans were invited and ten plans, including that of the Appellant, were considered by the Committee of Creditors (CoC). On 11.06.2024, the CoC approved the resolution plan of the Successful Resolution Applicant (SRA) with 100% voting share. The Appellant subsequently sought rejection of the approved plan and initiation of an enquiry against the Resolution Professional (RP), but both applications were rejected by the Adjudicating Authority.
The Appellant contended before the NCLAT that he was never informed of the rejection of his plan and the approval of the SRA’s plan. It was also argued that the CoC extended the time for consideration of the resolution plan without resorting to a challenge mechanism and that the plan was revised more than once in violation of Regulation 39(1A) of the CIRP Regulations, 2016. The RP countered that the Appellant had been informed of the CoC’s decision on 15.06.2024, both telephonically and via email, and had even congratulated the SRA through email correspondence.
The NCLAT held that the absence of a formal written communication regarding the rejection of the Appellant’s plan did not invalidate the CoC’s resolution approving the SRA’s plan. It was observed that the Appellant’s plan had been duly considered and that the CoC’s commercial wisdom in selecting the SRA’s plan was not open to judicial interference. Addressing the Regulation 39(1A) argument, the Tribunal clarified that while the provision restricts the RP from permitting more than one modification to a resolution plan, it does not impose such a limitation on the CoC. The CoC retains the discretion to seek multiple revisions or engage in repeated negotiations with resolution applicants if deemed necessary for value maximisation. The Tribunal further stated that the challenge mechanism is merely an enabling tool for the CoC and that its non-use cannot be a ground to question the validity of the approved resolution plan.
Mr. Vinod Chaurasia, Advocate, represented the respondents.
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