Consortium Conflicts and Commercial Wisdom: Lessons from Myotic Trading v. Deepak Maini (RP) on CIRP Integrity and Procedural Clarity

The judgment of the National Company Law Appellate Tribunal (NCLAT) in Myotic Trading Pvt. Ltd. v. Deepak Maini (RP) & Ors (Company Appeal (AT) (Insolvency) No. 859 of 2025 with Company Appeal (AT) (Insolvency) No. 877 of 2025 , Decided on 25.07.2025), deal with the limited but significant issue of role of the Resolution Professional (RP), commercial wisdom of the Committee of Creditors (CoC), and procedural discipline in relation to consortium applicants, eligibility evaluations under Section 29A, and the handling of investigative developments impacting the corporate debtor.

The dispute arose during the CIRP of Amzen Transportation Industries Pvt. Ltd., where Myotic Trading Pvt. Ltd. had initially submitted an Expression of Interest (EoI) as part of a consortium with Fortune Global Solutions. Following Fortune’s subsequent withdrawal and revocation of its Power of Attorney, Myotic sought to continue in the CIRP process either individually or by attempting to replace its consortium partner. Simultaneously, Myotic challenged the eligibility of a competing Prospective Resolution Applicant (PRA), Cosmic CRF Limited, under Section 29A of the Code. The challenge was based on alleged links between Cosmic CRF and an entity whose resolution plan had earlier been approved in a separate CIRP, and also relied upon adverse findings of the Enforcement Directorate and other investigative agencies.

The Adjudicating Authority dismissed Myotic’s applications on the ground that it lacked locus standi to maintain the proceedings after its consortium dissolved, and this decision was affirmed by the Appellate Tribunal. The NCLAT held that Myotic, without Fortune, did not satisfy the minimum tangible net worth criteria of INR 100 crore specified in the invitation for EoIs. Since the Request for Resolution Plan (RFRP) did not provide for substitution of consortium partners, Myotic’s attempt to introduce new partners midway through the process was legally impermissible. Consequently, Myotic could not assert rights either to challenge the eligibility of another PRA or to seek remedies such as replacement of the RP or reconstitution of the CoC.

In a broader context, the judgment provides valuable clarification on how eligibility of PRAs is to be tested and what limitations bind RPs and the CoC. The NCLAT reaffirmed the principle laid down in ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta [(2019) 2 SCC 1], wherein the role of the RP is described as facilitative, not adjudicatory, with the final determination on eligibility resting with the CoC. In this case, the CoC initially declared Cosmic CRF as ineligible under Section 29A based on due diligence reports from two independent firms and legal opinions. However, upon reconsideration and on the basis of a fresh legal opinion declaring Cosmic CRF eligible, the CoC reversed its earlier decision. The Appellate Tribunal held that such reconsideration was within the domain of the CoC’s commercial wisdom, particularly as it had been directed by the Adjudicating Authority to re-examine the issue after granting Cosmic CRF a fair opportunity.

The judgment also addressed an important procedural dimension that challenges to inclusion or exclusion of PRAs in the provisional list under Regulation 36A(11) of the CIRP Regulations must be made within five days. Myotic’s challenge, filed after nearly ten months, was rejected as being hopelessly delayed. This reaffirms that parties must adhere strictly to prescribed timelines in the CIRP to preserve the speed and integrity of the process.

On the issue of allegations of fraud, concealment of investigations, and provisional attachment by the Enforcement Directorate, the NCLAT clarified that neither it nor the Adjudicating Authority under IBC has jurisdiction to examine the findings of the ED or orders under the Prevention of Money Laundering Act, 2002 (PMLA). The Tribunal relied on Kalyani Transco v. Bhushan Power & Steel Ltd. to hold that disputes or concerns arising from ED orders must be pursued before appropriate forums under the PMLA and cannot form the basis for adjudication under IBC proceedings.

From a practical standpoint, the judgment lays down several guiding principles for RPs and CoCs. First, it emphasizes the necessity of strict compliance with eligibility criteria for PRAs and discourages substitution of consortium members unless explicitly allowed by the RFRP. RPs must ensure that disclosures regarding ongoing investigations or regulatory proceedings, such as those by CBI, SFIO or ED, are properly incorporated into the Information Memorandum and RFRP. Failure to do so may not render the process void, but it can raise serious concerns regarding transparency and fairness.

Second, CoCs must exercise their commercial wisdom with caution, particularly when reversing an earlier decision. If the CoC decides to accept a new legal opinion which contradicts prior expert reports, the rationale for such acceptance must be recorded clearly in the minutes. While the Tribunal does not sit in appeal over CoC’s commercial decisions, arbitrary or unreasoned reversals can invite judicial scrutiny if they result in procedural impropriety.

Finally, the judgment is a reminder that only parties with valid locus standi under the Code can seek relief in CIRP proceedings. PRAs whose eligibility lapses due to consortium dissolution, or who seek to rely on post facto consortium reconstitution without express provision in the process documents, cannot be permitted to disrupt or delay the process by seeking far-reaching orders such as RP removal or CoC reconstitution. The Tribunal rightly held that such remedies are reserved for stakeholders like financial creditors, acting within the procedural framework of IBC.

In the light of the observation of the NCLAT, it becomes imperative for both the Committee of Creditors and the Resolution Professional to revisit and strengthen the language and procedural safeguards in the Request for Resolution Plan (RFRP) and related CIRP documents, especially in cases where Expressions of Interest (EoIs) or resolution plans are submitted by consortiums or groups of entities. The RFRP must explicitly specify that where a consortium submits an EoI or resolution plan, the eligibility criteria, such as net worth, experience, and other conditions, must be satisfied collectively by the consortium at the time of submission and remain so throughout the process. Moreover, the RFRP should make it unambiguously clear whether substitution, induction, or withdrawal of consortium members will be permitted after the provisional list of PRAs is issued, and under what conditions. Absent such a provision, any unilateral substitution attempt by a remaining partner should be deemed impermissible, as was rightly concluded by the Tribunal in this case. The RFRP should also include a declaration from all consortium members acknowledging that the withdrawal of any member would result in automatic disqualification unless otherwise permitted under specific clauses.

Furthermore, while the CoC retains full discretion under the IBC to exercise its commercial wisdom, including in matters of eligibility under Section 29A, this judgment underscores the need for that discretion to be exercised judiciously and in a reasoned manner. When the CoC obtains conflicting expert or legal opinions on a critical issue like eligibility, it is incumbent upon it to evaluate those opinions holistically and record the rationale for preferring one over the other. A bare reliance on a second legal opinion, without addressing why prior expert reports and due diligence findings are being set aside, may not withstand judicial scrutiny. The Tribunal in Myotic Trading noted that the CoC had failed to record why it accepted the subsequent legal opinion declaring a previously disqualified PRA as eligible. This serves as a cautionary reminder that commercial wisdom, though non-justiciable in substance, must still reflect procedural fairness, informed deliberation, and consistency with the objectives of the IBC.

Accordingly, both the RP and CoC must ensure that the RFRP and accompanying documentation provide not only process clarity but also safeguard the integrity of the resolution process. They must also resist arbitrary reversals of earlier decisions, especially where they pertain to ineligibility under Section 29A, unless compelling new facts or interpretations are placed on record and discussed transparently.

We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.comor write to our authors:

Mukesh Chand, Senior Counsel – Email – mukeshchand@elp-in.com