Dismissal of CIRP Withdrawal Application due to Settlement Proposal Not Meeting IBC Requirements

The Adjudicating Authority dismissed the application seeking withdrawal of Corporate Insolvency Resolution Process (CIRP) under Section 12A of the Insolvency and Bankruptcy Code, 2016. The settlement proposal was deemed more akin to a business restructuring plan rather than a simple settlement under the Code. The Authority highlighted that the Committee of Creditors' decision to withdraw CIRP without receiving any payment did not align with the IBC provisions. As there was no final offer or acceptance between the Corporate Debtor's promoter and the CoC, the application was dismissed, emphasizing that the proposed liquidation terms exceeded the IBC's scope.

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Issues Involved:
1. Urgent hearing request under Section 60(5) of IBC, 2016.
2. Application for withdrawal of CIRP under Section 12A of IBC, 2016.
3. Settlement proposal by the promoter of the Corporate Debtor.
4. Voting and approval by the Committee of Creditors (CoC).
5. Legal implications and compliance with IBC, 2016.

Detailed Analysis:

1. Urgent Hearing Request under Section 60(5) of IBC, 2016:
IA/647/IB/2020 was filed by the promoter of the Corporate Debtor under Section 60(5) of IBC, 2016, seeking urgent hearing of MA/43(CHE)/2021 to consider the settlement proposed by the Applicant. Since MA/43(CHE)/2021 was taken up for hearing and disposal along with this application, the prayer became infructuous, and IA/647/IB/2020 was closed.

2. Application for Withdrawal of CIRP under Section 12A of IBC, 2016:
MA/43(CHE)/2021 was filed by the Resolution Professional (RP) of the Corporate Debtor under Section 12A of IBC, 2016, seeking withdrawal of the original application filed under Section 7 of the Code and implementation of the approved Settlement Plan. The application also sought the initiation of liquidation proceedings in the event of failure to adhere to the terms of the Settlement Proposal.

3. Settlement Proposal by the Promoter of the Corporate Debtor:
The sequence of facts leading to the filing of the application included the initiation of CIRP by IDBI Bank Limited, public announcements, constitution of CoC, and submission of claims by creditors. The RP issued Form-G inviting Expressions of Interest (EoI) for submission of the Resolution Plan. The only prospective Resolution Applicant, RPIFL, failed to receive the requisite majority of votes for its Resolution Plan. Subsequently, a shareholder of the Corporate Debtor proposed a One Time Settlement Offer, which was considered by the CoC but failed to garner the requisite 90% approval.

4. Voting and Approval by the Committee of Creditors (CoC):
The CoC, in its 17th meeting, approved the withdrawal of CIRP with a 94.23% majority. However, the settlement proposal was not put to vote by the CoC members, and the CoC did not receive any payment from the promoter of the Corporate Debtor at the time of voting.

5. Legal Implications and Compliance with IBC, 2016:
The Adjudicating Authority observed that the settlement proposal appeared more like a Business Restructuring Plan rather than a settlement simpliciter under Section 12A of IBC, 2016. The Authority emphasized that the "commercial wisdom" of the CoC cannot override the judicial scrutiny of the Adjudicating Authority. The Authority also noted that the CoC's decision to withdraw CIRP without receiving any payment was not in conformity with the provisions of IBC, 2016.

Conclusion:
The Adjudicating Authority concluded that the Settlement Proposal was not a settlement simpliciter as envisaged under Section 12A of IBC, 2016, and there was no final offer or acceptance between the promoter of the Corporate Debtor and the CoC. The prayer for liquidation in case of default in the proposed Settlement Plan transcended beyond the scope of IBC, 2016. Consequently, MA/43(CHE)/2021 was dismissed.

Separate Judgment:
IA/586/CHE/2021 filed by State Bank of India sought to ensure that its mortgage rights over the immovable property offered by the Corporate Debtor would not be diluted upon withdrawal of CIRP. The Adjudicating Authority directed that the Applicant Bank may exercise its security interest over the subject property and intimate the Liquidator regarding its decision to relinquish or stand outside the Liquidation process.

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