NCLAT Holds: Shortlisted PRA Who Failed to Submit Plan Has No Locus to Challenge CoC-Approved Resolution Plan
- REEDLAW
- 2 hours ago
- 4 min read
REEDLAW Legal News Network reports: In a pivotal ruling, the National Company Law Appellate Tribunal reaffirmed that a shortlisted Prospective Resolution Applicant who does not submit a resolution plan within the prescribed timeline loses procedural standing in the CIRP. The Tribunal held that such an applicant cannot challenge the Committee of Creditors’ approval of a resolution plan or impede the process by raising objections at a belated stage. The ruling strengthened the framework of procedural discipline governing resolution applicants and clarified the limited window for raising concerns affecting the integrity of the process.
The National Company Law Appellate Tribunal, New Delhi Bench, comprising Justice N. Seshasayee (Judicial Member) and Mr. Arun Baroka (Technical Member), observed that a Prospective Resolution Applicant that refrains from submitting a resolution plan within the stipulated period no longer retains a meaningful role in the CIRP. The Bench clarified that only a procedurally relevant PRA, or one that promptly identifies a material irregularity impacting the sanctity of the process, may raise such issues before the Adjudicating Authority when the plan comes for scrutiny under Section 31 of the IBC. The Appellate Tribunal held that belated objections cannot undermine the CIRP or cast uncertainty over a duly approved resolution plan.
The appeal had been filed by a Prospective Resolution Applicant challenging the order of the Adjudicating Authority, which had dismissed its application seeking rejection of the resolution plan submitted by another applicant on the ground of ineligibility under Section 29A of the Insolvency and Bankruptcy Code. The challenge arose during the Corporate Insolvency Resolution Process of the Corporate Debtor, where the Resolution Professional had issued Form G three times due to failure of earlier attempts at resolution. Although the Appellant had submitted Expressions of Interest in all three rounds, it did not submit any resolution plan in the first two and again failed to submit a plan in the third round despite being shortlisted as a Prospective Resolution Applicant.
During the third round, the Appellant was invited, along with another shortlisted applicant, to submit their plans by the stipulated date. While the other applicant submitted its resolution plan on time, the Appellant repeatedly sought extensions and ultimately failed to file a plan even after the Committee of Creditors granted an additional extension until 13.09.2023. Despite conveying its willingness to submit a plan, the Appellant did not submit any plan before the resolution plan of the other applicant was considered, negotiated, and eventually approved by the Committee of Creditors in its subsequent meetings.
The Appellant later filed an application seeking rejection of the approved plan, alleging that the Successful Resolution Applicant did not meet the net-worth criteria specified in Form G, that certain individuals associated with it were related to a wilful defaulter and thereby attracted ineligibility under Section 29A, that the Resolution Professional failed to conduct due diligence under Regulation 36A(8), and that meetings of the Committee of Creditors were convened without the statutory minimum notice period. It also claimed that the minutes of key meetings did not record substantive deliberations, thereby suggesting non-application of mind by the Committee of Creditors.
The Resolution Professional and the Successful Resolution Applicant contended that the Appellant had no locus standi to challenge the resolution plan, as it had repeatedly failed to submit a plan despite opportunities. They argued that the net-worth requirement related to effective net worth, which the Successful Resolution Applicant satisfied, and that the alleged disqualification under Section 29A could not apply, as the personal relationship with a wilful defaulter did not establish a business relationship attracting ineligibility. They also asserted that no material irregularity existed in the conduct of the Committee of Creditors.
The Appellate Tribunal examined the Appellant’s conduct and found that it had consistently abandoned its participation during multiple rounds of the resolution process, thereby rendering itself irrelevant in the procedural framework of the CIRP. The Tribunal emphasised that while CIRP proceedings are proceedings in rem, a Prospective Resolution Applicant has only a limited procedural right to raise objections, and such right exists only if the applicant remains relevant at the stage where the alleged irregularity occurred. The Tribunal noted that the Appellant had not submitted any plan even by the extended deadline and had not participated at the stage when the plan of the other applicant was considered. Consequently, it held that the Appellant lacked locus standi to challenge the approval of the resolution plan.
The Tribunal concluded that the Appellant had engaged in dilatory tactics and that its objections did not establish any material irregularity capable of vitiating the resolution plan approved by the Committee of Creditors. The findings of the Adjudicating Authority, including the conclusion that the Appellant’s attempt was mala fide and that the exemption applicable to MSMEs shielded the Successful Resolution Applicant from the alleged disqualification under Section 29A(c), were upheld. Accordingly, the appeal was dismissed.
Mr. Amey Hadwale, Advocate, represented the Appellant.
Mr. Abhira Raj and Mr. Shivesh Kaushik, Advocates, appeared for the Respondent No. 3.
This is premium content available to our subscribers.
To access the full content related to this article — including the complete judgment, detailed legal analysis, ratio decidendi, headnotes, cited case laws, and updates on relevant statutes and notifications — we invite you to subscribe to REEDLAW’s premium research platform.
Click here to Subscribe and unlock exclusive access to structured legal analysis, judicial summaries, and a comprehensive legal research database.
REEDLAW Legal Intelligence & Research is India’s most trusted legal publishing and research platform, empowering professionals with structured judicial insights and authoritative legal intelligence since 1985.
The platform offers comprehensive resources spanning Corporate Insolvency, Bankruptcy, Company Law, SARFAESI, Debt Recovery, Contract, MSMEs, Arbitration, Banking, and Commercial Laws. Through curated journals like IBC Reporter and Bank CLR, and an advanced Online Legal Research Database, REEDLAW simplifies complex legal research for professionals, institutions, and academia across India.
Comments