2022 (1) TMI 1323 - AT - IBC

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

Hem Singh Bharana Versus M/s Pawan Doot Estate Private Limited Through Sh. Darshan Singh (Resolution Professional), Sumedha Management Solutions Pvt. Ltd., Sh. Darshan Singh Resolution Professional, Sumedha Management Solutions Pvt. Ltd., Edelweiss Asset Reconstruction Company Limited, Canara Bank, Bank of India

NCLAT dismissed appeal challenging rejection of settlement proposal under Section 12A filed by ex-promoter after Committee of Creditors approved ... Approval of Resolution Plan - Whether after approval of the Resolution Plan by Committee of Creditors under Section 30, sub-section (4) and filing an Application before the Adjudicating Authority for its approval, any Settlement Proposal under Section 12A (filed by Ex-Promoter) can be entertained deferring consideration of approval of Resolution Plan by the Adjudicating Authority? HELD THAT:- In the present case, decision of the CoC to approve the Resolution Plan on 17.01.2020 was taken in its commercial wisdom. Whether the CoC can rescind from its decision and accept Settlement Proposal of Ex-Promoter submitted after two and a half years of approval of Resolution Plan, is a question which has arisen in the present case. The present is not a case where the Adjudicating Authority has interfered with any decision of the CoC. When the invitation was issued inviting Expression of Interest, it was open for all who were eligible to submit the Resolution Plan under Section 29A. Whether the Promoter, who has now submitted Settlement Proposal was eligible or not under Section 29A, is also a relevant question and after approval of Resolution Plan, these enquiries cannot be entertained and embarked upon to find out the eligibility of the Applicant. The learned Counsel for the Appellant lastly submitted that no reason has been given by the Adjudicating Authority in rejecting the Application filed by the Appellant for keeping in abeyance the proceedings for approval of Resolution Plan. The Adjudicating Authority being in seize of Application for approval of Resolution Plan, there had to be strong reason to keep the Application in abeyance. The Adjudicating Authority being not satisfied that there is adequate reason to accept the prayer of the Appellant, no error has been committed by the Adjudicating Authority in rejecting the Application. Appeal dismissed. 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.