NCLT Allows Second Challenge Round In Frost International Insolvency To Maximise Value For Creditors

In connection with the ongoing insolvency proceedings of Frost International Limited(FIL), the National Company Law Tribunal (NCLT), Mumbai Bench, has permitted the Committee of Creditors (CoC) to conduct a second challenge mechanism for selecting a resolution plan, paving the way for fresh negotiations to maximise value for stakeholders.

The Tribunal, comprising Justice Virendrasingh Bisht (Retd.) and Technical Member Prabhat Kumar, passed the order on April 11, 2025, in response to an application filed by Resolution Professional Amit Chandrakant Shah. The resolution professional (RP) had sought clarification on whether a second challenge round could be held after new resolution plans emerged post the original bidding process.

The Corporate Insolvency Resolution Process (CIRP) was initiated against FIL in February 2023 after  the Bank of India had approached the Tribunal after the trading house had allegedly defaulted on its dues of about 2872 crore. Initially, 13 resolution plans were received, but the highest bid at the time fell below the liquidation value. A fresh Form G issued in August 2024 attracted 52 new resolution plans from 22 applicants.

“The court has reaffirmed that paramount importance must be accorded to the commercial wisdom of the Committee of Creditors in the assessment and approval of resolution plans under the insolvency framework,” said advocate Niyati Merchant (Associate Partner of MDP Legal, represented Committe of Creditors of FIL).

A challenge mechanism was held in January 2025 among seven potential resolution applicants (PRAs), but only two participated. Anuj Goyal and Mona Vij emerged as top bidders with an offer valued at Rs 159.54 crore. However, controversy arose when Greensward Enterprises submitted a new plan worth Rs 152.50 crore in February 2025—just before voting on five compliant resolution plans was to begin.

Although Greensward had not participated in the earlier challenge process, their revised plan showed a marginally higher Net Present Value (NPV) than the top bid, prompting the CoC to consider re-running the process. The CoC had already decided to vote on all six eligible plans, regardless of challenge participation.

In its order, the Tribunal referring to a few landmark judgments, including Vistra ITCL vs. Torrent Investments and K. Sashidhar vs. Indian Overseas Bank, maintained  that the CoC holds ultimate commercial discretion, including the right to renegotiate or restart the bidding process if it aids value maximization.

“The CoC is well within its right to enter further negotiation if it chooses to do so,” the order stated, but warned that such decisions must be objective, bona fide, and mindful of the CIRP’s April 23 deadline.

The Tribunal meanwhile  raised a concern over the potential leakage of confidential bid values, hinting at possible insider access that could undermine the integrity of the process.