Resolution plan and Section 12A settlement: further settlement window should not delay merits-based adjudication after CoC approval.

Once a resolution plan has been approved by the Committee of Creditors and a settlement proposal under Section 12A has already been considered and rejected, the Adjudicating Authority should not defer decision by granting a further settlement window unless the rejection is shown to be arbitrary or otherwise unsustainable on merits. The commentary explains that prior orders do not create an open-ended right for the suspended management to revive settlement proposals after plan approval. The proper course is to decide the pending resolution plan approval application and any settlement-related challenge expeditiously on their merits, rather than postponing adjudication through a last opportunity for settlement.

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Issues: (i) Whether, after approval of the resolution plan by the Committee of Creditors and pendency of the application for approval of the plan before the Adjudicating Authority, a further opportunity could be granted to the suspended management to pursue a settlement proposal under Section 12A; (ii) whether the Adjudicating Authority was justified in granting a last opportunity for settlement instead of deciding the pending applications on merits.

Issue (i): Whether, after approval of the resolution plan by the Committee of Creditors and pendency of the application for approval of the plan before the Adjudicating Authority, a further opportunity could be granted to the suspended management to pursue a settlement proposal under Section 12A.

Analysis: The approval of the resolution plan had already taken place with full voting support, and the settlement proposal had earlier been considered and rejected by the Committee of Creditors. The prior orders relied on by the respondent did not grant an open-ended right to keep reviving settlement proposals after approval of the plan; at most, they permitted a grievance to be placed before the Adjudicating Authority in accordance with law. The settled position in the cited authorities did not support reopening the process in the present facts, where the settlement proposal had already been evaluated alongside the resolution plan.

Conclusion: The further opportunity to pursue settlement after approval of the resolution plan was not justified, and the appellant's challenge on this aspect succeeded.

Issue (ii): Whether the Adjudicating Authority was justified in granting a last opportunity for settlement instead of deciding the pending applications on merits.

Analysis: The impugned order, by granting a last opportunity for an acceptable settlement, effectively deferred adjudication without disposing of the pending application for approval of the resolution plan or the challenge to the rejection of the settlement proposal. The proper course was to decide the pending applications expeditiously on their merits, particularly when the resolution plan had already been pending for consideration and the settlement proposal had already been rejected by the Committee of Creditors.

Conclusion: The direction granting a last opportunity for settlement was deleted, and the Adjudicating Authority was required to decide the pending applications expeditiously.

Final Conclusion: The impugned order was interfered with to the extent it deferred merits by granting a further settlement window, while leaving it open to the Adjudicating Authority to decide the pending resolution plan approval application and the settlement-related application in accordance with law.

Ratio Decidendi: Once a resolution plan has been approved by the Committee of Creditors and the settlement proposal has already been considered and rejected, the Adjudicating Authority should not defer decision by granting an additional settlement opportunity unless the rejection is found arbitrary or otherwise unsustainable on merits.

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