2021 (2) TMI 54 - SCH - Insolvency and Bankruptcy

Supreme Court Upholds NCLAT Decision on Insolvency Appeal, Emphasizes Genuine Disputes and Voting Requirements

The Supreme Court upheld the NCLAT's decision in an appeal under the Insolvency and Bankruptcy Code, emphasizing the need for genuine disputes and ... Resolution for approval of Settlement Proposal - Section 12A of the I&B Code - HELD THAT:- The facts on record indicate that a notice invoking arbitration was issued on 29.07.2016 by respondent no.1 in relation to Contract No.2 whereafter an application under Section 11(6) of the Arbitration & Conciliation Act, 1996 was filed in the High Court of Bombay on 15.12.2016. A notice was also issued on 23.03.2017 invoking arbitration in relation to Contract No.1. Thereafter, Consent Terms dated 29.03.2017 were entered into, in terms whereof, the Notice dated 23.03.2017 stood withdrawn. It appears that Consent Terms did not fructify and completely failed. On 16.06.2017 a Notice under Section 8 of the Code was issued. In its response dated 29.06.2017, respondent No.2 submitted inter alia that the Terms of Consent were void and unenforceable - thereafter, the application under Section 11(6) as aforesaid was withdrawn on 14.09.2017. The Adjudicating Authority admitted the petition under Section 9 of the I.B. Code vide Order dated 25.03.2018 against which an appeal was preferred. The appeal was dismissed by the NCLAT - appeal dismissed. Issues involved: Appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 against the order of the National Company Law Appellate Tribunal (NCLAT) regarding rejection of Settlement Proposal under Section 12A of the I&B Code, compliance of Resolution Plan with Section 30(2) of the I&B Code, withdrawal of corporate insolvency resolution process, invocation of arbitration, response to arbitration notice, admission of petition under Section 9 of the I&B Code, non-decision of crystallized issue by NCLAT, claims amount, and voting pattern among claimants.Analysis:1. The appeal was filed against the NCLAT's order rejecting the Settlement Proposal under Section 12A of the I&B Code. The NCLAT observed that the withdrawal resolution under Section 12A was rejected by the Committee of Creditors as it did not meet the requisite 90% voting share. However, the Resolution Plan submitted by another party was approved by 99.68% votes of the Committee of Creditors, indicating near unanimity among claimants.2. The facts revealed the issuance of arbitration notices, submission of response challenging the enforceability of Consent Terms, withdrawal of an application under Section 11(6) of the Arbitration & Conciliation Act, and subsequent admission of the petition under Section 9 of the I&B Code. The NCLAT dismissed the appeal against the Adjudicating Authority's order, emphasizing the significant claims disparity between the arbitration notice amount and the claims received by the Committee of Creditors.3. The Senior Advocates for both parties argued regarding the crystallized issue not decided by the NCLAT and the substantial difference in the claims amount. The Supreme Court, citing precedent, emphasized the necessity of a genuine dispute and upheld the NCLAT's decision not to consider the issue framed in previous orders, concluding that no interference was warranted. The appeal was dismissed, and no costs were awarded.4. Given the dismissal of the appeal, the Supreme Court deemed no separate orders necessary, thereby concluding the judgment without further directions. The decision highlighted the importance of genuine disputes and the need for substantial differences in claims to warrant judicial intervention.By analyzing the issues involved in the appeal, the Supreme Court upheld the NCLAT's decision, emphasizing the importance of genuine disputes and substantial differences in claims to justify judicial interference in insolvency and bankruptcy matters.