2022 (1) TMI 1323 - AT - IBC

NCLAT upholds rejection of ex-promoter's settlement proposal under Section 12A filed after resolution plan approval

NCLAT dismissed appeal challenging rejection of settlement proposal under Section 12A filed by ex-promoter after Committee of Creditors approved ... Section 12A withdrawal/settlement - Regulation 30A withdrawal procedure - Finality of Committee of Creditors' approval of a Resolution Plan - Resolution Plan binding inter se the Committee of Creditors and the Successful Resolution Applicant - Commercial wisdom of the Committee of Creditors - Limited judicial interference by Adjudicating Authority/Appellate TribunalSection 12A withdrawal/settlement - Regulation 30A withdrawal procedure - Finality of Committee of Creditors' approval of a Resolution Plan - Resolution Plan binding inter se the Committee of Creditors and the Successful Resolution Applicant - Entitlement to entertain a Section 12A settlement application after the Committee of Creditors has approved a Resolution Plan and the Resolution Professional has filed the plan for approval before the Adjudicating Authority - HELD THAT: - The Tribunal held that the statutory scheme and the Regulations do not contemplate entertaining a Section 12A withdrawal/settlement application after a Resolution Plan has been approved by the CoC and submitted to the Adjudicating Authority for approval. Regulation 30A and its proviso demonstrate that special justification is required only where withdrawal is sought after issuance of invitation for expression of interest, and the structure of Regulation 30A (including the absence of RP costs in the bank guarantee requirement) indicates that Section 12A was not intended to be invoked post-CoC approval of a Resolution Plan. The Supreme Court's decision in Ebix Singapore establishes that a CoC-approved Resolution Plan is binding inter se the CoC and the successful applicant and that the timelines and finality under the Code must be respected; consequently, the CoC and the successful applicant are restrained from reneging after CoC approval. Authorities and principles recognising the primacy of the CoC's commercial wisdom and the limited scope for judicial interference support the conclusion that a belated settlement proposal by an ex-promoter, filed after CoC approval of a plan (and years later in this case), cannot displace the CoC-approved plan or justify deferring consideration of the plan by the Adjudicating Authority. [Paras 16, 21, 22, 24]Application under Section 12A filed after approval of the Resolution Plan by the CoC and submission of the plan for approval could not be entertained and does not justify deferring consideration of the Resolution Plan by the Adjudicating Authority.Commercial wisdom of the Committee of Creditors - Limited judicial interference by Adjudicating Authority/Appellate Tribunal - Whether the Adjudicating Authority erred in refusing to keep the hearing and decision on the application for approval of the CoC-approved Resolution Plan in abeyance - HELD THAT: - The Tribunal found no error in the Adjudicating Authority's refusal to keep the approval proceedings in abeyance. The Adjudicating Authority was entitled to require strong reasons to interrupt the statutory process and timelines once the CoC had approved a Resolution Plan and the plan had been filed for approval. Given the binding effect of CoC approval, the finality required by the IBC, and absence of any adequate justification to stall the approval process, the Adjudicating Authority properly declined to accede to the appellant's prayer. The Tribunal therefore found the rejection of the appellant's interlocutory application to be justified. [Paras 31, 32]No error in the Adjudicating Authority's order rejecting the appellant's application to keep the approval proceedings in abeyance; the appeal is dismissed.Final Conclusion: The appeal is dismissed. The Tribunal concluded that a belated Section 12A settlement application cannot be entertained after CoC approval of a Resolution Plan and submission of the plan for approval, and that the Adjudicating Authority did not err in refusing to keep the approval proceedings in abeyance; no costs. 1. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this judgment was whether a Settlement Proposal under Section 12A, filed by an Ex-Promoter, can be entertained after the Committee of Creditors (CoC) has approved a Resolution Plan under Section 30(4) and an application for its approval is pending before the Adjudicating Authority.2. ISSUE-WISE DETAILED ANALYSISThe core issue revolves around the timing and permissibility of entertaining a Settlement Proposal under Section 12A after the CoC has approved a Resolution Plan. The relevant legal framework includes Section 30 of the Insolvency and Bankruptcy Code (IBC), which outlines the submission and approval of Resolution Plans, and Section 12A, which allows for withdrawal of applications under certain conditions. The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, particularly Regulation 30A, also provide guidance on the procedure for withdrawal of applications.The Court's interpretation emphasized the binding nature of a Resolution Plan once approved by the CoC, as established in the Supreme Court case of Ebix Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions Limited. The Court held that a CoC-approved Resolution Plan is not merely a contract but a binding agreement under the IBC framework, which cannot be altered or withdrawn by the CoC or the Resolution Applicant post-approval.Key evidence and findings include the timeline of events: the CoC approved the Resolution Plan with a 100% vote on 17.01.2020, and the application for its approval was filed on 04.02.2020. The Ex-Promoter submitted a Settlement Proposal on 11.08.2022, well after the CoC's approval of the Resolution Plan. The Court noted that the IBC and its regulations do not contemplate the filing of a Section 12A application after the CoC's approval of a Resolution Plan.The Court addressed competing arguments by examining precedents and the statutory framework. The Appellant argued that the CoC's commercial wisdom allowed for reconsideration of the Settlement Proposal. However, the Court emphasized the importance of adhering to the IBC's timelines and the finality of the CoC's decision once a Resolution Plan is approved.In conclusion, the Court found no merit in the Appellant's arguments and upheld the Adjudicating Authority's decision to reject the application for keeping the approval proceedings in abeyance.3. SIGNIFICANT HOLDINGSThe Court reiterated the principle that once a Resolution Plan is approved by the CoC, it binds both the CoC and the Successful Resolution Applicant, as established in the Ebix Singapore case. The Court emphasized that the IBC's timelines and procedural finality must be respected to ensure timely resolution processes.The final determination was that the Settlement Proposal under Section 12A could not be entertained after the CoC's approval of the Resolution Plan, and the appeal was dismissed. The Court underscored that the Adjudicating Authority did not err in rejecting the application to keep the approval proceedings in abeyance, as no adequate reason was presented to justify such a delay.