NCLAT overturns order requiring creditors to reconsider settlement proposal after resolution plan approval citing procedural unfairness

The NCLAT set aside an order directing the Committee of Creditors to consider a fresh settlement proposal from ex-directors after a resolution plan had already been approved by the CoC. The tribunal held that the adjudicating authority erred by not providing the successful resolution applicant an opportunity to respond to the settlement application before directing reconsideration. The NCLAT ruled that since the resolution plan approval was pending before the adjudicating authority, proper procedural fairness required allowing the appellant to object to the fresh settlement proposal before any directive to the CoC.

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Issues involved:
The judgment involves the consideration of an appeal by a Successful Resolution Applicant against an order passed by the National Company Law Tribunal, New Delhi Bench, regarding the approval of a Resolution Plan and the subsequent filing of an application by an Ex. Director seeking withdrawal of the Corporate Insolvency Resolution Process (CIRP) under Section 12A of the Insolvency and Bankruptcy Code, 2016.

Issue 1: Approval of Resolution Plan and Consideration of Fresh Settlement Proposal
The Appellant challenged the order directing consideration of a fresh settlement proposal submitted by Ex. Directors after the Resolution Plan was approved by the Committee of Creditors (CoC). The Appellant argued that there was no jurisdiction for the Adjudicating Authority to consider any application under Section 12A after the approval of the Resolution Plan. The Adjudicating Authority's order was based on a previous judgment but failed to give the Appellant an opportunity to respond to the application, violating principles of natural justice.

Issue 2: Jurisdiction of Adjudicating Authority
The Resolution Professional and Respondent Nos.1 and 2 supported the Appellant's arguments, stating that the approval of the Resolution Plan by the CoC should have precluded the consideration of the Ex. Directors' settlement proposal. They emphasized that the Adjudicating Authority's direction to place the application before the CoC was unwarranted after the Resolution Plan was already approved. They cited relevant judgments to support their position.

Judgment:
The Appellate Tribunal set aside the Adjudicating Authority's order, granting the Appellant two weeks to file objections to the Ex. Directors' application. The Tribunal emphasized that the Adjudicating Authority should have allowed the Appellant to respond to the application before directing the CoC to consider the plan. The decision aimed to prevent further delays in the matter and instructed the Adjudicating Authority to consider the application along with the Appellant's objections in accordance with the law. The Appeal was disposed of without any costs being awarded.

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