Table of Contents
The Delhi High Court has held that in matters of public funds auction the best methodology for discovering fair value and the principle criteria is to ensure maximising the recovery, the bottom line is that the decision of the CoC shall definitely be considered by the NCLT in a just and expedient manner, and if it deems fit it, may even allow “Open Court Bidding” in accordance with law.
The bench of Justice Dharmesh Sharma has observed that the Adjudicating Authority maintains a supervisory role over the entire CIRP proceedings and is empowered under Section 60 of the IBC to take action on any issue relating to the insolvency proceedings. Thus, the resolution plan decided by the CoC shall be put up for consideration before the Adjudicating Authority, which forum alone shall finally decide whether the CoC has performed its fiduciary duty as per the legislative mandate of the IBC.
Background
The petitioner, Gateway Investment Management Services Ltd. claimed that it was the highest bidder in the Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor, Helios Photo Voltaic Private Limited, both in terms of monetary value and net present value and yet its bid has not been accepted by the CoC in the meeting held o throwing all commercial norms & financial prudence to the wind. It is pertinent to mention that Punjab National Bank is lead secured creditor.
Arguments
The petitioner contended that the petitioner as one of the Resolution Applicant bided in the e-auction and had offered revival plan by infusion of Rs. 109,87,50,000 payable to the secured creditors over a period of 12 months, which was the highest bid and yet it has been declined by the CoC on 18.09.2024 in an arbitrary manner, exhibiting complete lack of “commercial wisdom” despite the fact that the Successful Resolution Applicant (SRA) had offered to infuse Rs. 99 crores in thirty days besides overlooking the fact that the petitioner had made a revised offer to make payment of the second instalment of Rs. 75 crores within 90 days during the time deliberations were going in the CoC.
The respondent, National Asset Reconstruction Company Limited, contended that in the realm of a ‘private contract’ between the parties and the bidding process, the petitioner/bidder is only entitled to be considered but there is no rule of thumb that the highest bidder should also be accorded priority or be preferred for the Resolution Plan.
The IBC is a complete Code in itself which cannot be by-passed and this is a case where the CoC, after a series of deliberations, in its ‘commercial wisdom’, accepted the Resolution Plan bided/submitted by department envisaging a total payment of Rs. 99 crores within a period of 30 days.
The respondent argued that in terms of Sections 31 and 34 of the IBC, the Resolution Plan accepted by the CoC shall be placed for approval before the Adjudicating Authority/NCLT and the petitioner is at liberty to air his grievances by filing objections before the NLCT and cannot approach this Court in writ jurisdiction.
Although the respondent is not enjoined upon to justify the decision arrived at by the CoC, it could be appreciated that the petitioner initially made a bid for revival and reconstruction of the CD by infusing funds over a period of 12 months, whereas the respondent No.4 offered infusion of funds within 30 days.
Conclusion
The court held that the Adjudicating Authority alone has the jurisdiction to regulate the conduct of the CoC and finally adjudicate upon the resolution plan through the powers of judicial review and thereby ensure that the CoC functions as per the role and responsibilities delineated under the IBC.
The court dismissed the writ petition with liberty to the petitioner to take appropriate recourse before the NCLT, which forum alone shall decide the objections of the petitioner, if any preferred, on its own merits in accordance with law.
FAQs
What is a public funds auction called?
The public funds auction is the the best methodology for discovering fair value and the principle criteria is to ensure maximising the recovery, the bottom line is that the decision of the CoC shall definitely be considered by the NCLT in a just and expedient manner, and if it deems fit it, may even allow “Open Court Bidding” in accordance with law.
Case Details
Case Title: Gateway Investment Management Services Ltd Versus RBI
Case No.: W.P.(C) 13278/2024 & CM APPL. 55477/2024
Date: 23/09/2024
Counsel For Petitioner: Rajiv Nayar
Counsel For Respondent: Ayush Srivastava
