NCLT on late submission of bids and exaggerated insolvency resolution costs

While dismissing two applications filed against a resolution professional for wrongful conduct, Judicial Member Jinan K.R of the Kolkata Bench of NCLT has also reflected his views on the exaggerated insolvency resolution cost of a dying corporate debtor..On an application filed by Punjab National Bank, Divyajyoti Sponge Iron Ltd. was placed under the corporate insolvency resolution process in August, 2017, with Arun Kumar Gupta as its resolution professional..On February 14, the creditors committee of Divyajyoti, by a 100% vote, selected the resolution plan submitted by CP Ispat Pvt Ltd. Two other resolution applicants, who had submitted their bids, however, raised objections..Omkara Infraprojects Pvt Ltd, said that a creditors’ meeting held on February 2, 2018 had already approved its resolution plan, and their decision to subsequently chose another plan “is irregular and violates the provisions of the IBC”..Secondly, Omkara alleged that its bid was leaked by the resolution professional to CP Ispat, giving them an opportunity to enhance their bid..Simplex Credits and Insurance Industries Ltd, was simply aggrieved by the decisions of the creditors to disregard their resolution plan due to late submission..While upholding the decisions of the creditors, the single member bench said that Omkara’s allegations were devoid of any merits as it wasn’t able to produce evidence to suggest that its bid was leaked. It further ruled that the creditors’ need not consider a plan, which has been submitted after the fixed deadline..The NCLT ruled,.“what can be screened by the bench is whether the plan approved by the CoC meets the requirements as referred to in sub-section(2) of Section 30 of the IBC”.The bench said that if it is convinced that all requirements of Section 30(2) were fulfilled by the resolution professional before getting creditor committee’s approval, there was no reason why it would interfere with their commercial wisdom..The NCLT further said that section 217 of the IBC provides these two aggrieved parties with the option of approaching the IBBI..As a parting thought, the NCLT also made some observations on “fixation of exaggerated insolvency resolution cost of a dying corporate debtor”, without applying mind in regards the fate of corporate debtor, the volume, nature and complexity of the corporate insolvency resolution process..The NCLT made it clear that the payment of resolution process cost would be made priority to all other debts of corporate debtor..The NCLT was of the view that it is time to have legitimate guidelines or regulation, so as to safeguard and ensure the prospects of revival of a dying corporate debtor not be at a high cost, which cannot be afforded by the corporate debtor..To that extent, it recorded that the IBBI may consider the above factors to frame the necessary regulations or guidelines in regard of fixation of fees and resolution cost by a resolution professional..(Read the order)