NCLAT Dismisses Unsuccessful Bidder's Challenge, Upholds Manglam Multiplex's Resolution Plan for Varutha Developers

New Delhi: The National Company Law Appellate Tribunal (NCLAT), presided over by Justice Ashok Bhushan, has dismissed an appeal filed by Ganga Construction (Consortium), an unsuccessful resolution applicant, challenging the approval of a resolution plan for Varutha Developers Private Ltd. The tribunal upheld the decision of the NCLT Kolkata, affirming the eligibility of the Successful Resolution Applicant (SRA), Manglam Multiplex Private Ltd., under Section 29A of the Insolvency and Bankruptcy Code (IBC), 2016.

The NCLAT ruled that an applicant who opts out of the final stages of the resolution process has no locus to challenge the eligibility of the successful bidder or the process itself, especially when the plan has been approved by the Committee of Creditors (CoC) with a 100% vote share and has already withstood a legal challenge from another bidder.

Background of the Case

The Corporate Insolvency Resolution Process (CIRP) was initiated against Varutha Developers Private Ltd. on December 20, 2023, following a default on a Rs. 300 crore loan from SREI Equipment Finance Ltd. The primary asset of Varutha Developers is a 9.26-acre plot of land in Sector 62, Gurgaon.

The case involved complex prior agreements, including a Share Purchase Agreement (SPA) where M3M India Pvt. Ltd.'s group companies (New Era Propcon and Swastik Infrasolutions) had agreed to acquire 100% shareholding in Varutha Developers. However, this SPA was never fully executed, primarily because the land was provisionally attached by the Enforcement Directorate in February 2020.

During the CIRP, both Ganga Construction and Manglam Multiplex submitted Expressions of Interest. However, Ganga Construction failed to participate in the final "challenge mechanism" and did not submit a final resolution plan, effectively withdrawing from the race. Subsequently, the CoC, with SREI as the sole financial creditor, approved Manglam Multiplex's plan with a 100% majority.

Arguments of the Parties

Appellant's Contentions (Ganga Construction): - Ganga Construction alleged that the entire CIRP was engineered by M3M India to acquire Varutha's assets through Manglam Multiplex. - They argued that Manglam Multiplex was ineligible under Section 29A (c), (h), and (j) of the IBC due to its alleged connection with M3M. - The appellant claimed that the unfulfilled Share Purchase Agreement gave M3M's group companies de facto control over the corporate debtor, thus disqualifying any related entity from submitting a resolution plan.

Respondents' Contentions (Resolution Professional, CoC, and Manglam Multiplex): - The respondents collectively argued that Ganga Construction had no locus standi to challenge the process as it had abandoned its bid by not submitting a final plan. - They contended that the Share Purchase Agreement never fructified, and no shares were ever transferred to M3M's group companies. Therefore, M3M never had de jure or de facto control over Varutha Developers. - It was highlighted that M3M's group companies had themselves unsuccessfully challenged the initiation of CIRP, which was dismissed by the NCLAT and subsequently by the Supreme Court, reinforcing the fact that they held no control. - The respondents also pointed out that the resolution plan had already been upheld by the NCLAT in a separate appeal filed by another unsuccessful bidder, Consortium of Sakshi Chandana.

Tribunal's Analysis and Ruling

The NCLAT meticulously examined the appellant's claims, particularly the ineligibility argument under Section 29A of the IBC.

On Locus Standi: The tribunal first established that Ganga Construction, having failed to participate in the challenge mechanism and submit a final resolution plan, could not be entertained in its challenge against the CIRP. The judgment noted: > "We are of the view that any submission of the Appellant regarding process of CIRP not having conducted in accordance with CIRP Regulations cannot be entertained."

On Ineligibility under Section 29A: The core of the appellant's argument rested on the Share Purchase Agreement. The NCLAT dismantled this by referring to its own prior judgment in the same CIRP, which was affirmed by the Supreme Court. The tribunal reiterated that the SPA was never given effect, and no shares were transferred.

In its judgment, the NCLAT stated: > "This Tribunal, thus, did not accept the claim of the Respondent No. 8 and 9 [M3M's group companies] claiming right and interest in the assets of the Corporate Debtor and appeal came to be dismissed... The order of this Tribunal holding that the Share Purchase Agreement in favour of New Era Propcon and Swastika was never given effect to has also been affirmed by the Hon’ble Supreme Court."

The tribunal concluded that since M3M's group never acquired control, the grounds for ineligibility under Section 29A (c), (h), and (j) were non-existent.

Final Decision

Finding no merit in the appeal, the NCLAT dismissed it, upholding the NCLT's order which rejected Ganga Construction's application. The tribunal highlighted that the resolution plan's approval had already received judicial affirmation in a prior appeal, adding another reason to dismiss the current challenge. The judgment brings finality to the resolution of Varutha Developers, paving the way for the implementation of the approved plan by Manglam Multiplex.