IBC – Salutary order of the Supreme Court for value maximization of Corporate Debtor.

The article  of the distinguished authors of JSA Prism Insolvency Law and analysis in simple language on Regulation 39A(1A) of CIRP Regulations is informative.

Supreme Court interprets Regulation 39(1A) of the CIRP Regulations to hold that prior modification/ amendment of resolution plans received does not bar the committee of creditors from taking recourse to a challenge mechanism to enable resolution applicants to improve/ better their plans – Lexology

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In the Order dated 25.8.2023 in Civil Appeal No.5430 of 2023 (Diary No.27746 of 2023) of the Supreme Court, the word “or” in Regulation 39A(1A) of CIRP Regulations is interpreted to mean “in addition to” and “to the exclusion of”.

Sub-regulation (1A) of Regulation 39A of CIRP Regulations, 2006, provides as follows-

“The resolution professional may, if envisaged in the request for resolution plan –

(a)  allow modification of the resolution plan received under sub-regulation (1), but not more than once; or

(b)  use a challenge mechanism to enable resolution applicants to improve their plans.”

The above provision is salutary to enable the RP to use challenge mechanism for value maximisation of CD.   However, the