Why did NCLT allow Liberty House’s bid for Bhushan Power & Steel?

An application filed by Liberty House for considering its resolution plan for the debt-ridden company, Bhushan Power and Steel (BPSL), was admitted by the NCLT, Principal Bench..Liberty House, in this case, had submitted its resolution plan after the deadline prescribed by the Committee of Creditors (CoC) and was therefore disregarded by the CoC..NCLT’s ruling admitting this application, however, does not necessarily set a binding precedent for future cases of delayed submission. This one is a case where, according to the NCLT, internal processes caused a delay..Insolvency proceedings against BPSL were initiated on July 26, 2017. Its 180-day deadline was due around January 22, 2018 which got further extended to April 22, 2018..The procedure followed by BPSL was as follows: A public announcement inviting expression of interest (EOI) was published on September 21, 2017. The EOI required prospective resolution applicants to submit bids/express interest..These prospective resolution applicants were required to submit documents (including confidentiality undertaking) confirming their eligibility by October 6, 2017. Thereafter, all further communication was made internally with those who expressed interest and qualified the eligibility criteria, through a ‘process document’..By the said deadline of October 6, 2017, seven applicants who had expressed interest, qualified the criteria laid down by the CoC. However, Liberty House wasn’t one of these applicants since it hadn’t formally submitted its bid..The process document outlining the terms, conditions, and deadlines for submission of resolution plans was issued on December 14, 2017, and then circulated only to the seven eligible candidates. Again, Liberty House wasn’t one of them..And this very much forms the basis for why Liberty House was still able to get its application at the NCLT admitted..Since this process document wasn’t circulated to applicants that did not submit the confidentiality undertaking and requisite fee, Liberty House claims it did not have this information given that the last date was revised more than three times within a month..After multiple revisions, the final date for submission of bid was February 8, 2018. Liberty House, however, failed to submit its bid by the said date and the CoC disregarded its bid due to late submission..Majority of the 84-page order by a bench comprising MM Kumar and SK Mohapatra is mostly a recording of the blame-game between Liberty House and the CoC/resolution professional..The NCLT’s decision to allow acceptance of Liberty’s late bid has a level of statutory backing, derived through the IBBI (CIRP) Regulations. It is further founded on the conduct of the resolution professional along with the CoC..Firstly, the NCLT observed the minutes of the third CoC meeting held on October 31, 2017, where it was decided that the process document would only be circulated to the bidders who qualified the criteria. Liberty’s oral interest had come a day before CoC meeting and its bid had come at much later stage. It was decided at the said CoC meeting that although the process document would not be circulated to Liberty House, it would not preclude Liberty House or any other potential resolution applicant from submitting a resolution plan..Secondly, Regulation 39 of the IBBI (CIRP) Regulations postulate that the resolution applicant shall ‘endeavour’ to submit plan 30 days before expiry of the deadline. Given that after the 90-day extension, the end date was close to April 22, 2017, Liberty’s plan submission date of February 20, 2018, was well within the prescribed time frame..The NCLT observed that the EOI process was opaque and restricted to those who qualified the eligibility criteria and that in the absence of a subsequent public notice, no timeline could be fixed and that delay was internal affairs..There NCLT further observed that there was no intimation to the rest of the world with respect to the last date for receipt of the resolution plan..This was despite the clear stipulation in the EOI dated September 21, 2017, according to which the detailed process and timeline for submission of resolution plans was to be separately communicated to ‘potential resolution applicants’ who met the qualification requirements as mentioned in the EOI..The NCLT thus believed that there was no ‘level playing field’ between those who had access to the process document and other ‘potential resolution applicants’..The NCLT, therefore, held, “The Resolution Plan of the Liberty House shall not be rejected on the ground of delay emanating from process document or any other document internally circulated by the RP or COC.”.Senior Advocates AS Chandhiok and Anand Chibbar appeared for Liberty House..Senior Advocate Ramji Srinivasan briefed by Cyril Amarchand Mangaldas appeared for the CoC and Senior Advocate Arun Kathpalia briefed by Shardul Amarchand Mangaldas appeared for the resolution professional..Senior Advocate Abhishek Manu Singhvi briefed by AZB & Partners Partner VP Singh appeared for Tata Steel..Read Order