Delhi High Court: In a writ petition filed by Gateway Investment Management Services Ltd (‘Gateway Investment’) to invoke the writ jurisdiction of the Court under Article of the , seeking, among other reliefs, a writ/order/direction against the Reserve Bank of India (‘RBI’) to develop a framework under the (‘Regulation’) for financial institutions to act in a fair, transparent, and reasonable manner while exercising decision making power in approving a resolution plan to ensure public interest and maximization of recovery, a Single Judge Bench of Dharmesh Sharma, J. abstained from exercising the power of judicial review and said that the commercial wisdom of the Committee of Creditors (‘CoC’), whereby the resolution plan of Gateway Investment was rejected, must be inquired into by the National Company Law Tribunal (‘NCLT’).
Background
Apart from the abovementioned relief, Gateway Investment also sought a writ/order/direction against respondents 2-6 to initiate the process of fresh voting on Gateway Investment’s resolution plan after considering the email dated 05-09-2024 and to abide by the principle of equality and fairness while considering the resolution plan.
Gateway Investment claimed that even though it was the highest bidder in the Corporate Insolvency Resolution Process (‘CIRP’) in respect of Helios Photo Voltaic Private Ltd, the Corporate Debtor (‘CD’) both in terms of monetary value and net present value, its bid was not accepted by the CoC (respondent 2, 4, and 5) in the meeting held on 05-09-2024.
Gateway Investment mentioned that it had taken part in the e-auction held on 29-07-2024 and had offered revival plan by infusion of Rs. 109,87,50,000/- payable to the secured creditors over a period of 12 months. It was said that this bid had been declined by the CoC on 18-09-2024 in an arbitrary manner, exhibiting complete lack of ‘commercial wisdom’.
The National Asset Reconstruction Company Limited (respondent 2) submitted that in the realm of a ‘private contract’ between the parties and the bidding process, the bidder is only entitled to be considered but there is no thumb rule which says that the highest bidder should also be accorded priority for the resolution plan.
It was vehemently argued that under Sections and of the (‘IBC’), the resolution plan accepted by the CoC should be placed for approval before the Adjudicating Authority/NCLT and the bidder is at liberty to air his grievances by filing objections before the NCLT but cannot approach the Court in writ jurisdiction.
It was also submitted that when the CoC was convening a meeting, a fresh offer was made to infuse funds within 90 days just when voting was going to take place on the three bids that had been submitted due to systematic leakage from some disgruntled members.
Analysis and Decision
The Court perused the record and stated that at the outset, it was not inclined to issue notice because Gateway Investment had an alternative and efficacious remedy to assail the impugned action or inaction on the part of CoC before NCLT.
The Court mentioned that only the Adjudicating Authority 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 said that the resolution plan decided by the CoC should be put up for consideration before the Adjudicating Authority which would finally decide whether the CoC had performed its fiduciary duty as per the legislative mandate of IBC.
After perusing the guidelines framed by the Insolvency and Bankruptcy Board of India for functioning of the CoC coupled with the relevant provisions of the IBC, the Court was not urged to exercise its power of judicial review and usurp the powers of NCLT to inquire into the commercial wisdom of CoC whereby the Resolution Plan of Gateway Investment was rejected vide impugned letter dated 18-09-2024.
The Court noted the desperate attempt made by Gateway Investment whereby it was willing to match the offer given by successful applicant, but the same could not be entertained by the Court. The Court stated that the bottom line was that the decision of the CoC should definitely be considered by NCLT in a just and expedient manner and if found fit, it may even allow ‘Open Court Bidding’ as per law.
The Court, while dismissing the petition, gave Gateway Investment the liberty to take appropriate recourse before NCLT which would alone decide the objections of Gateway Investment.
[Gateway Investment Management Services v. Reserve Bank of India, W.P.(C) 13278 of 2024, Decided on 23-09-2024]
Advocates who appeared in this case :
For Petitioner — Senior Advocate Rajiv Nayar, Advocate Vaibhav Mishra, Advocate Ekansh Mishra, Advocate Ashu Kansal, Advocate Akash Shrivastav, Advocate Devika Mohan, Advocate Udita Singh
For Respondent — Advocate Ayush Srivastava, Senior Advocate Jayant Mehta, Advocate Dhruv Malik, Advocate Aditi Sinha, Advocate Rajnandini Singh, Advocate Prashant Mehta, Advocate Raghav Marwaha
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