2024 (1) TMI 528 - AT - Insolvency and Bankruptcy

Settlement proposal under Section 12A cannot be entertained after CoC approves Resolution Plan

The NCLAT held that a settlement proposal under Section 12A of IBC cannot be entertained after the CoC has already approved a Resolution Plan. The ... Settlement proposal under Section 12A of IBC - Resolution Plan already approved by the CoC - whether settlement proposal under Section 12A can be given at any stage even after approval of the Resolution Plan? - HELD THAT:- In the case of Shaji Purushothaman Vs. Union Bank of India & Ors. [2019 (9) TMI 1344 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], this Tribunal noted that Resolution Plan was approved but after noticing that it was observed that no direction can be issued but liberty was given to the Appellant to file an application under Section 12A and this Tribunal has observed that if application under Section 12A is filed COC may decide as to whether proposal given by the Appellant is better than the plan. Coming to the facts of the present case, proposal under Section 12A submitted by the Respondent No.1 was also directed by this Tribunal to be considered along with Resolution Plan as has been noticed above and CoC in its 14th CoC meeting has already considered the Resolution Plan along with settlement proposal submitted by Respondent No. 1. Thus the facts of the present case are entirely different where the Settlement proposal submitted by Respondent No.1 has already been considered by the CoC, the above Judgment does not help the Respondent No.1 in the present case. The Adjudicating Authority committed error in giving an opportunity to Respondent No. 1 to arrive at acceptable settlement. The application for approval of the Resolution Plan which has already been filed and pending consideration, the Adjudicating Authority ought to have considered and decided the Application for approval of the plan - The plan having been approved on 08th January, 2023 and application is pending for about last one year before the Adjudicating Authority, the Adjudicating Authority may proceed expeditiously to decide application filed by the Resolution Professional for approval of the plan i.e. I.A. No. 987 of 2023. Appeal disposed off. Issues Involved:1. Challenge to the Order dated 01.12.2023 by the National Company Law Tribunal.2. Approval of the Resolution Plan by the Committee of Creditors (CoC).3. Consideration of the Settlement Proposal under Section 12A of the Insolvency and Bankruptcy Code (IBC).4. Jurisdiction and authority of the Adjudicating Authority in granting further opportunity for settlement.Summary:1. Challenge to the Order dated 01.12.2023:The Successful Resolution Applicant filed an appeal challenging the Order dated 01.12.2023 passed by the National Company Law Tribunal, New Delhi, Court-V in I.A. No. 2594 of 2023 and I.A. No. 987 of 2023 in CP(IB) No. 1913(ND)2019.2. Approval of the Resolution Plan by the Committee of Creditors (CoC):The Resolution Plan submitted by the Appellant was approved with 100% vote share of CoC on 08th January, 2023, while the Settlement Proposal submitted by Respondent No.1 was dissented by 100% vote share. A Letter of Intent was issued on 10th January, 2023, which was accepted by the Appellant, and a performance bank guarantee of Rs. 12.1 Crores was submitted.3. Consideration of the Settlement Proposal under Section 12A of the IBC:Respondent No. 1, the Suspended Director, submitted a revised settlement proposal under Section 12A, which was reiterated multiple times but consistently rejected by the CoC. The Adjudicating Authority's order dated 01st December, 2023, granted a last opportunity to Respondent No. 1 for an acceptable settlement before the next hearing date on 11th January, 2024.4. Jurisdiction and authority of the Adjudicating Authority in granting further opportunity for settlement:The Appellant argued that after the approval of the Resolution Plan, there was no occasion for granting any opportunity to Respondent No.1 to enter into a settlement with the CoC. The Tribunal noted that the Settlement Proposal under Section 12A had already been considered and rejected by the CoC with 100% vote share. The Tribunal concluded that the Adjudicating Authority committed an error in granting further opportunity for settlement without allowing I.A. No. 2594 of 2023. The Tribunal directed the Adjudicating Authority to proceed expeditiously to decide the application for approval of the Resolution Plan and also consider I.A. No. 2594 of 2023 filed by Respondent No. 1.Conclusion:The appeal was disposed of with directions to the Adjudicating Authority to decide the application for approval of the Resolution Plan expeditiously and consider I.A. No. 2594 of 2023 filed by Respondent No. 1. The Tribunal deleted the observations in the Order dated 01st December, 2023, granting a last opportunity for settlement.