CoC’s commercial wisdom to annul resolution process overrides procedural challenge mechanisms stipulated in RFRP.

The Corporate Debtor (Somerset Construction Pvt. Ltd.) was admitted into CIRP on 25.07.2023

The Appellant was one of four Prospective Resolution Applicants (PRAs) and improved its resolution plan five times at the request of the Resolution Professional (RP) and the Committee of Creditors (CoC)

On 29.03.2025, the existing financial creditor assigned its debt to Respondent No. 2 (CFM Asset Reconstruction)

Following an order by the Adjudicating Authority (AA) directing the CoC to decide on the plans, the RP informed the Appellant on 14.05.2025 that the CoC had voted to reject its plan

The Appellant challenged this rejection in I.A. No. 2767 of 2025, alleging that the CoC failed to follow the "Challenge Mechanism" prescribed in the Request for Resolution Plan (RFRP) and CIRP Regulations, acted without assigning reasons, and violated the principles of natural justice by not allowing the Appellant to present its plan

The AA dismissed the IA on 01.12.2025, leading to this appeal

1. Whether the CoC’s decision to reject all resolution plans and annul the resolution process without conducting a "Challenge Mechanism" was impermissible or violative of the RFRP and CIRP Regulations

2. Whether the rejection of the resolution plan was arbitrary or opaque due to an alleged failure to record reasons or provide participative rights to the Resolution Applicant

Section 30(4) of the IBC regarding the CoC's duty to evaluate the feasibility and viability of plans

Section 30(5) concerning the rights of resolution applicants to attend CoC meetings

IBBI (CIRP) Regulation 39(1A) regarding the "Challenge Mechanism"

Regulation 36B(7) regarding the re-issue of RFRP

Doctrine of "Commercial Wisdom of the CoC" as established in K. Sashidhar v. Indian Overseas Bank and Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, holding that CoC decisions are not subject to judicial review except on limited grounds under Section 30(2)

The Tribunal followed Vistra ITCL (India) Ltd. v. Torrent Investment Pvt Ltd, which clarified that Regulation 39(1A) does not fetter the CoC’s power to annul a process or modify negotiations

The Tribunal observed that while Clause 4 of the RFRP mentioned a Challenge Mechanism under Regulation 39(1A), Clause 12 of the same document expressly reserved the CoC's "absolute right" to annul the bid process and reject any or all plans at any time without assigning reasons

The Tribunal found that the Appellant had actively participated in multiple CoC meetings (5th to 12th) and had been given ample opportunity to revise its plan, thereby satisfying the requirements of Section 30(5)

Regarding the lack of reasons, the Tribunal noted that the 17th CoC meeting specifically recorded that the plans were rejected due to "financial non-viability" as the offers were lower than the liquidation value

The Tribunal reasoned that the CoC's power to maximize value and decide on the viability of a plan is a collective business decision

Following the Vistra ITCL precedent, the Tribunal held that CIRP Regulation 39(1A) cannot be read as a fetter on the CoC’s authority to reset or cancel the process if the plans do not meet their expectations

The Tribunal affirmed that an unsuccessful Resolution Applicant has no vested right to have its plan approved or to challenge the CoC’s business judgment unless a statutory violation under Section 30(2) is shown

The Adjudicating Authority’s order dismissing the Appellant's challenge was upheld