Tribunal Upholds Applicant's Right to Submit Settlement Proposal Despite Objections

The Tribunal ruled in favor of the Applicant, a promoter of the Corporate Debtor, allowing them to submit a settlement proposal despite objections from the Respondents. The Tribunal emphasized the duty of the Administrator to present all settlement proposals to the Committee of Creditors (CoC) for evaluation. It highlighted the need for compliance with relevant regulations and directed the Administrator to ensure proper consideration of the Applicant's proposal, which offered a substantial amount compared to other bids. The Tribunal addressed procedural irregularities and instructed the CoC to vote on the proposal within a specified timeframe, underscoring the importance of fair evaluation and stakeholder interests.

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Issues Involved:
1. Entitlement of the Applicant to submit a settlement proposal.
2. Duty of the Administrator to place the settlement proposal before the CoC.
3. Jurisdiction and powers of the Tribunal.
4. Compliance with Section 12A of the IBC and Regulation 30A of the CIRP Regulations.
5. Consideration of the settlement proposal on its merits.
6. Procedural irregularities in handling the settlement proposal.
7. Role of the RBI post-commencement of CIRP.
8. Request for an independent valuation of the Corporate Debtor's assets.

Detailed Analysis:

1. Entitlement of the Applicant to Submit a Settlement Proposal:
The Applicant, a promoter of the Corporate Debtor (DHFL), forwarded a settlement proposal to the Administrator and CoC. Despite repeated requests, the Applicant was not allowed to participate in CoC meetings, and the settlement proposals were not considered on merits. The Respondents argued that the Applicant, being responsible for the Corporate Debtor's financial distress, should not be allowed to submit a proposal. However, the Tribunal rejected this contention, stating that promoters are generally allowed to offer settlement proposals and one-time settlements (OTS) to banks and creditors.

2. Duty of the Administrator to Place the Settlement Proposal Before the CoC:
The Tribunal emphasized that the Administrator is obliged to place any settlement proposal before the CoC for consideration. Previous judgments by the NCLAT (e.g., Sukhbeer Singh vs. Dinesh Chandra Agarwal) have established that the Resolution Professional must place the promoter's proposal before the CoC. The Tribunal noted that the Administrator's failure to do so in this case was procedurally irregular.

3. Jurisdiction and Powers of the Tribunal:
The Tribunal cited Section 60(5) of the IBC, which grants it broad jurisdiction to entertain or dispose of any question of law or facts arising out of insolvency resolution or liquidation proceedings. Additionally, Rule 11 of the NCLT Rules, 2016, allows the Tribunal to make necessary orders to meet the ends of justice or prevent abuse of the Tribunal's process.

4. Compliance with Section 12A of the IBC and Regulation 30A of the CIRP Regulations:
The Respondents argued that the settlement proposal did not comply with Section 12A and Regulation 30A, which require a withdrawal application to be filed by the original applicant (RBI) with the approval of 90% of the CoC. The Tribunal clarified that the present application is a precursor to a possible Section 12A application. If the CoC accepts the settlement proposal, a formal withdrawal application can be filed by the RBI.

5. Consideration of the Settlement Proposal on Its Merits:
The Tribunal observed that the Applicant's 2nd Settlement Proposal offered approximately Rs. 91,158 crores, significantly higher than the next highest bidder's offer of Rs. 37,250 crores. The proposal included upfront repayment of outstanding debts to small investors, NCD holders, and public depositors. The Tribunal directed the Administrator to place the 2nd Settlement Proposal before the CoC for consideration, voting, and decision, emphasizing that it should be evaluated on its merits.

6. Procedural Irregularities in Handling the Settlement Proposal:
The Tribunal noted procedural irregularities, including the Administrator's failure to properly communicate the settlement proposal to the CoC and FD/NCD holders. The Tribunal directed the Administrator to ensure that the proposal is considered and voted upon by the CoC, including all stakeholders.

7. Role of the RBI Post-Commencement of CIRP:
The RBI argued that its role ended with the initiation of CIRP and the appointment of the Administrator. The Tribunal agreed, stating that the RBI's involvement is limited to providing a 'no objection' under Rule 5(d) of the FSP Insolvency Rules once the CoC approves a resolution plan. The Tribunal dismissed the Applicant's request for the RBI to place the settlement proposal before the CoC.

8. Request for an Independent Valuation of the Corporate Debtor's Assets:
The Applicant requested an independent valuation of DHFL's assets. The Tribunal rejected this request, stating that the valuation process had already been completed as part of the CIRP.

Conclusion:
The Tribunal directed the Administrator to place the 2nd Settlement Proposal before the CoC for consideration, decision, and voting within 10 days. The Tribunal emphasized that the proposal should be evaluated on its merits, considering the interests of all stakeholders, including small investors and public depositors. The Tribunal also clarified that the settlement proposal is a precursor to a possible Section 12A application, which can be filed if the CoC approves the proposal. The matter was listed for further hearing on 31.5.2021.

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