ONE PAGE 36 – In the matter of M/s Ricoh India Ltd

ONE PAGE 36 – In the matter of M/s Ricoh India Ltd  
What prevails …? Illegal exercise of power of RP Vs Commercial Wisdom of COC !!
Court:  NCLT Mum & NCLAT Delhi Bench AT# 344&345/2020, 05.08.2020

1. Background: Appeal filed by unsuccessful RA against RP & successful RA seeking rejection of approved Rplan based on illegalities committed in the conduct of CIRP. Advertisement was given by RP calling for EOI with last date as 08.01.19 & the Rplan was received only from two RAs before the last date. Appellant challenged:

a. RP accepting the Rplans from 2 other RAs, one of them being the successful RA, after the deadline without issuing fresh EOI and that too after the RP & COC opened the plans and financial were disclosed. NCLT rejected the Application by Appellant placing reliance upon judgment of K Sashidhar v IOS Bank & Ors & observed that due opportunity was granted to all RAs.

b. Single member bench heard the matter at NCLT but the order was passed by Division Bench, Technical Member has not heard the matter, against principles of natural justice.

c. Respondent inter alia contented maintainability of the Appeal on limitation issue.

2. Questions of Law & NCLAT Observations:

SNo Question of Law NCLAT Observations
1 Whether RP with approval of COC is authorised to Rplans after expiry of deadline without extending the timeline of submission of EOI?
Whether the act of RP with approval of COC in accepting the Rplan after expiry of deadline can be treated as an act under commercial wisdom of the COC?
CoC indeed, has the power to exercise its commercial wisdom in approval or rejection of the RPlan. However, that does not mean that the RP, whether with the approval of CoC or without that, or in pursuance of IM under the guise of maximization of value, is empowered to adopt a procedure in the conduct of CIRP which is, ab-initio illegal, arbitrary and against the Principles of Natural Justice. Act of RP cannot be justified by any means and it cannot be treated as an act within the commercial wisdom of the CoC.
2 Whether Reg 36A (invitation for expression of interest) which came into effect form 04.07.2018 will be applicable where CIRP of CD is initiated before it came into force? Reg 36A (6) was introduced vide the Notification which clearly states that the amended CIRP Regulations shall apply to CIRP commencing on or after 04.07.18. CD was admitted to CIRP on 14.05.18, and hence, those amendments under Reg 36A (6) are not applicable to CD’s CIRP.
3 Whether judgement of the Bench consisting of Member (Technical) who has not heard the argument is valid?  One who hears the matter must decide“. Merely because the presiding member of Single Member Bench heard, it does not mean that he can give order as a part of the reconstituted Division Bench, even if it is together with another IA.

3. Case Laws:

a. Essar Steel v Satish Kumar Gupta – Powers of NCLT & NCLAT in the approval of Rplan.

b. K Sashidhar v IOS Bank – Commercial decision of CoC for approval of RPlan is non-justiciable

c. Binani Industries Ltd – NLAT upheld the principle of maximization of value of assets.

4. NCLAT Judgment: Illegal exercise of power RP in conducting CIRP cannot be treated as an exercise of power for maximization of value under Commercial Wisdom. COC to take fresh decision and consider the Rplans already submitted within 10days if no decision is communicated, then NCLT will pass a liquidation order. This order was subsequently reversed by SC in CA #2943-2944 of 2020.

MS Mano Ranjani

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