He ran two rival bids for the same hotel. The Supreme Court said: not allowed.

He submitted two rival bids for the same bankrupt hotel—one in his name, one as a trustee. The Court called it a conflict of interest. By the time the Supreme Court finished with the case, two things had become clear: a fiduciary cannot play both sides in an insolvency auction, and a creditor committee's approval does not cure a broken process.

The courtroom in New Delhi was still, the air thick with the weight of old files and the quiet shuffle of papers. On the bench were Justice Dinesh Maheshwari and Justice Vikram Nath, hearing Civil Appeal Nos. 1682-1683 of 2022. Before them lay the tangled remains of a hotel company in Tamil Nadu—Appu Hotels Limited—and a resolution process that had fractured under the weight of its own contradictions.

The hotel that sank under debt

Appu Hotels Limited ran a hotel business in Tamil Nadu. It had taken project loans. It defaulted. In May 2020, a financial creditor dragged the company to the National Company Law Tribunal (NCLT) under Section 7 of the Insolvency and Bankruptcy Code (IBC)—the provision that lets a lender start the corporate insolvency resolution process (CIRP) against a defaulting company. The NCLT admitted the case. The company was now in the hands of a resolution professional, and creditors began hunting for a buyer who could revive it.

The hotel itself, once a going concern, now sat in a kind of legal limbo. Its doors may have been closed, its rooms empty, its balance sheets bleeding red. But on paper, it was still an asset—one that multiple parties wanted to control.

One man stepped forward: M.K. Rajagopalan. He submitted a resolution plan—a detailed proposal to take over and restructure the hotel's debts. The Committee of Creditors (CoC), the group of lenders who decide the fate of a bankrupt company, liked what they saw. On January 22, 2021, they voted. 87.39% of creditors said yes. The plan was approved. The documents were signed, the numbers checked, the future seemed bright for the bidder.

When one bidder becomes two

But here is where the story gets strange. While Rajagopalan was pursuing the hotel through his personal bid, he was also running a second bid—through a Trust where he served as Managing Trustee. The Trust had submitted a competing resolution plan for the same hotel. Rajagopalan was effectively bidding against himself. He was the individual applicant. He was also the fiduciary (a person in a position of trust) who controlled the Trust's bid. The dual roles sat on the same desk, in the same file, and the Court would later find that this was a conflict that could not be ignored.

The promoter of Appu Hotels, Dr. Periasamy Palani Gounder, tried to settle the debts under Section 12-A of the IBC (a provision that lets a corporate debtor withdraw from insolvency if all creditors agree). The CoC refused. The promoter then challenged Rajagopalan's plan before the NCLT, arguing that the dual bids violated the Indian Trusts Act, 1882. The NCLT dismissed the objection and approved the plan on July 15, 2021. The bench in Chennai, perhaps swayed by the creditor majority, saw no fatal flaw.

The promoter appealed to the National Company Law Appellate Tribunal (NCLAT). The NCLAT took a different view. It reversed the NCLT's order, rejected the resolution plan, and sent the matter back. Both Rajagopalan and the resolution professional appealed to the Supreme Court. The file, now thick with arguments and counter-arguments, landed in the highest court of the land.

Why the Supreme Court said no

The Supreme Court upheld the NCLAT's rejection on two grounds. The first was Section 88 of the Indian Trusts Act, 1882. That section says a fiduciary—a trustee, for example—cannot use his position to gain an advantage for himself at the expense of the person who placed trust in him. Rajagopalan, as Managing Trustee of the Trust that submitted a competing bid, was in a position where his duty to the Trust conflicted with his personal interest in the other bid. The Court held that this dual role made him ineligible to be a resolution applicant.

The Court's reasoning was stark: "A resolution applicant who submits two competing plans—one individually and one as Managing Trustee of a Trust—is ineligible under Section 88 of the Indian Trusts Act as the fiduciary cannot gain advantage from the dual capacity." The words hung in the air, a clear warning to anyone who might try to play both sides in an insolvency auction.

The second ground was procedural—and it matters for every insolvency case in the country. After the CoC approved Rajagopalan's plan, the plan was revised. The revised version was never placed back before the CoC for a fresh vote. It was filed directly before the NCLT. The Supreme Court called this an incurable material irregularity. "There is no concept of post facto approval of a resolution plan by CoC which had not been placed before it prior to filing before the Adjudicating Authority," the Court said. The requirement that the CoC must see and approve the final version of a resolution plan, the Court said, must be scrupulously complied with. The revised plan, sitting in the NCLT file without the CoC's final nod, was a dead document.

The commercial wisdom trap

The resolution professional argued that the CoC had approved the plan with an overwhelming majority, and the Court should respect the commercial wisdom of creditors. The Supreme Court rejected that argument. The principle of commercial wisdom, the Court said, cannot brush aside shortcomings where the decision-making process itself contravenes a law in force. If the law says a fiduciary cannot bid in two hats, the CoC's approval does not fix that. If the regulations say a revised plan must go back to the CoC, the creditors' enthusiasm for the original plan does not waive that requirement.

The Court also clarified one other point. The NCLAT had found Rajagopalan ineligible under Section 164(2)(b) of the Companies Act, 2013—a provision that disqualifies a person from being a director if certain conditions are met. The Supreme Court disagreed. It held that there is no concept of deemed disqualification under that section. A person cannot be rendered ineligible under the IBC by assuming a disqualification unless a categorical order has been passed by the competent authority. On this point, the Court gave Rajagopalan a partial win—but it did not change the outcome. The plan was dead on the other two grounds.

The precedents cited by the Court—from Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta to K. Sashidhar v. Indian Overseas Bank—reinforced the message: the commercial wisdom of creditors is not a blank cheque. It operates within the four corners of the law.

What this means for every resolution applicant

The judgment is a sharp reminder that insolvency law cares about process as much as outcome. A resolution applicant who submits competing bids through different legal entities—one personal, one fiduciary—runs straight into Section 88 of the Trusts Act. And a resolution professional who files a revised plan without returning it to the CoC has committed an error that no amount of creditor support can cure.

The Court's operative order was clear: the resolution plan was rejected on twin grounds—ineligibility under Section 88 of the Indian Trusts Act and the failure to place the revised plan before the CoC before NCLT approval. The NCLAT order was substantially upheld. The appeals were dismissed in part.

THE PLAY: If you revise a resolution plan after the CoC has voted, take it back to the CoC for a fresh vote—or the plan is dead on arrival at the NCLT.

The hotel's fate remains undecided. The resolution process goes back to the beginning, with one clear rule now on the books: one bidder, one hat. The file, once thick with hope and numbers, now sits closed, a lesson in the cost of cutting corners.