The National Company Law Appellate Tribunal (NCLAT) has ruled that the National Company Law Tribunal (NCLT) cannot accept a revised offer from a bidder who enters the fray late even if the offer is higher than that of other bidders that have adhered to the bidding timeline.
The issue of revised offers after the deadline for submission of bids has crossed has seen many prolonged legal battles, including in the recent case of Dewan Housing and Finance Limited (DHFL) and an earlier case involving Binani Cement.
The judgment, delivered on January 11 and made available later on the website, has held that the only power the NCLT has is to adjudicate whether the bids that were placed in time and approved by the Committee of Creditors (CoC) of the corporate debtors stand the test of the rules of plan approval under the Insolvency and Bankruptcy Code (IBC).
“We are of the view that when the application for approval of resolution plan is pending before the adjudicating authority at that time the adjudicating authority cannot entertain an application of a person who has not participated in CIRP (Corporate Insolvency Resolution Process) even when such person is ready to pay more amount in comparison to the successful resolution applicant,” a three-member bench headed by acting NCLAT chairperson Justice Bansi Lal Bhat said.
In some of earlier cases that have seen legal battles, bidders have accused the resolution professional (RP) and CoC of various corporate debtors of siding with the bidders whose bid, even though low, are placed well within the stipulated time frame approved by the CoC.
Limiting role of the tribunal
While IBC provides for the idea of maximisation of value of assets of a corporate debtor, it says all bids must be in by deadline. The NCLAT has limited the role of the tribunal to testing whether bids submitted within time stand the test of approval under the IBC.
In the recent case of insolvency of DHFL, bidders such as the Adani Group, which had initially submitted a smaller bid with an intent to buy only the wholesale and Slum Rehabilitation Authority (SRA) portfolio of the non banking finance company, later revised its stance, offering a total of Rs 30,000 crore, plus Rs 3000 crore in interest, for entire DHFL loan book.
The revised bid did not sit well with rival bidders such as the Piramal Group and Oaktree Capital Management, which alleged that the Adani Group was late in submitting the bids.
The Adani Group had, while revising the bid offer, said that its only intent was to “provide an unconditional offer and potential value maximisation for all the stakeholders”.
In the case of Binani Cement, the NCLT had asked UltraTech Cements to revise its bid and extended the deadline for three days. This, too, had not gone down well with other bidders such as the Dalmia Group, which had submitted their bids in time.
In the January 11 judgment, during the insolvency process of Bindals Sponnge Industries, the NCLAT flayed the idea of bidders coming late under the pretext of maximisation of value of assets of a corporate debtor and said that if this process was allowed, the NCLT would always have to direct the CoC to consider the plan which is the highest, even if it was not within the stipulated timeline.
“Once the resolution plan has been opened and fundamentals and financials of the plan and offer made therein were disclosed to all the participants including RP…Then anyone can enhance its offer before the adjudicating authority in the guise of maximization of realisation. Therefore, no further fresh bid or offer could have been accepted,” the NCLAT said in its judgment.