Resolution plan submitted with belated EMD in violation of RFRP is non-responsive and legally invalid.

The Corporate Debtor (CD), Manjeera Constructions Limited, acted as a corporate guarantor for the Principal Borrower, MRHPL. Both entities were admitted into Corporate Insolvency Resolution Process (CIRP) on 18.07.2023

The Appellant, a minority Financial Creditor with a 3.3% voting share, challenged the approval of a resolution plan submitted by Valentis Laboratories Private Limited (SRA)

The Request for Resolution Plan (RFRP) set 09.02.2024 as the deadline for plan submission and Earnest Money Deposit (EMD)

While Valentis submitted its plan on time, the EMD was credited only on 12.02.2024 due to alleged technical issues

Despite Valentis offering only ₹83.54 crore compared to higher bids of ₹230.12 crore and ₹271.26 crore from other applicants, the Committee of Creditors (CoC)—dominated by Catalyst Trusteeship and Fedbank (74.19% share)—approved Valentis's plan

Notably, these majority creditors had already secured 100% recovery of their dues through the separate CIRP of the Principal Borrower (MRHPL)

The NCLT dismissed the Appellant's challenge to the plan on 30.07.2024, prompting this appeal

1. Whether the resolution plan of Valentis was non-responsive and liable for rejection due to the belated submission of the EMD in violation of RFRP Clause 12

2. Whether the majority CoC members acted in a manner contrary to the objective of value maximization by approving a significantly lower bid while their own dues were already satisfied elsewhere

3. Whether the Resolution Professional (RP) failed in his statutory duties by accepting a non-responsive bid and failing to disclose the late EMD to the CoC

4. Whether a dissenting minority Financial Creditor has the locus standi to challenge the resolution plan on grounds of procedural irregularity and lack of value maximization

Section 25(1) of the Insolvency and Bankruptcy Code (IBC), which mandates the RP to preserve and protect the assets of the CD

Strictly interpreted Regulation 36B of the CIRP Regulations, 2016, and Clause 12 of the RFRP, which stipulates that non-submission of EMD alongside the resolution plan renders the plan non-responsive

Principle of value maximization as established in Swiss Ribbons Pvt. Ltd. v. Union of India

M.K. Rajagopalan v. Dr. Periasamy Palani Gounder, which held that commercial wisdom must be exercised for the purpose of insolvency resolution and value maximization

Section 30(2) regarding the mandatory legal requirements for plan approval

The Tribunal found that Clause 12 of the RFRP was "crystal clear" in requiring EMD submission within the stipulated timeline; mere debiting of the bidder's account is insufficient if the funds are not credited to the CD’s account by the deadline

The RP's acceptance of Valentis’s bid was held to be a gross error and "reprehensible," especially as the late submission was not disclosed to the CoC during the voting meeting

The majority creditors (Catalyst and Fedbank) used their "brute majority" to precipitate the CIRP of a solvent guarantor even after their dues were fully covered by the Principal Borrower’s plan

This was deemed a violation of the "propriety" and the core objective of the IBC—value maximization—as the CoC ignored significantly higher bids

The RP awarded arbitrary scores in the evaluation matrix to ensure Valentis emerged as the H1 bidder

The Appellant had the locus standi to challenge the plan as a dissenting creditor when the sanctity of the CIRP process and value maximization were compromised

The RP was directed to: (i) evaluate the remaining resolution plans

The RP was directed to: (ii) examine whether the CIRP against the CD is still subsisting given that the initiating creditors' dues were satisfied by the Principal Borrower’s plan, and seek directions from the NCLT accordingly