2024 (10) TMI 294 - AT - IBC

NCLAT upholds Committee of Creditors' rejection of settlement proposal during insolvency proceedings

REC Ltd. (Largest Member of the Committee of Creditors of Hiranmaye Energy Ltd.) Versus Power Trust, (Promoter of Hiranmaye Energy Ltd.) & Anr. And Committee of Creditors of Hiranmaye Energy Ltd. Through Rec Ltd. Versus Power Trust Promoter of Hiranmaye Energy Ltd. & Anr.

The NCLAT dismissed an application challenging the Committee of Creditors' rejection of a settlement proposal during Corporate Insolvency Resolution ... Seeking directions challenging the decision of CoC rejecting the proposal for settlement - Consideration of settlement proposal in Corporate Insolvency Resolution Process (CIRP) - HELD THAT:- Settlement proposal was initially rejected but revised proposal have been submitted and pending which needs to be considered by CoC in accordance with law. It will be open for the CoC to consider the resolution plan as well as the settlement proposal simultaneously - it is not necessary for CoC to either hear the respondent no.1 unless CoC itself decides to call the respondent no.1 for necessary negotiations and deliberations. The revised settlement proposal having been submitted by respondent no.1 there is no occasion to submit any evidence or any further material unless required by the CoC or the IRP. CIRP has neither been stayed by the Supreme Court which is clearly from the order dated 03.05.2024. Application dismissed. Issues:1. Challenge to orders passed by National Company Law Tribunal, Kolkata Bench in I.A. No. 1049/KB/2024 and I.A. No. 1178/KB/2024.2. Consideration of settlement proposal in Corporate Insolvency Resolution Process (CIRP).3. Dispute over the rejection of settlement proposal by the Committee of Creditors (CoC).4. Appeal against the order directing stay of CIRP process.5. Evaluation of revised settlement proposal by CoC and Adjudicating Authority.Detailed Analysis:1. The Appeals were filed challenging the orders passed by the National Company Law Tribunal, Kolkata Bench in two separate applications. The Corporate Insolvency Resolution Process (CIRP) against the corporate debtor commenced earlier, leading to subsequent legal challenges and appeals.2. The key issue revolved around the submission and consideration of settlement proposals within the CIRP framework. The respondent, a promoter of the corporate debtor, filed various appeals and proposals, leading to directions from the Hon'ble Supreme Court and the Adjudicating Authority.3. The Committee of Creditors (CoC) rejected a settlement proposal submitted by the respondent, resulting in further legal challenges and applications seeking directions to reconsider the proposal. The Adjudicating Authority directed a hearing and consideration of the revised proposal to avoid substantial financial losses.4. An appeal was made against the order directing the stay of the CIRP process, with arguments presented regarding the necessity and legality of such a stay, especially in the absence of a specific directive from the Supreme Court.5. The final decision emphasized the need for the CoC to evaluate both resolution plans and settlement proposals simultaneously, highlighting the commercial wisdom and autonomy of the CoC in making decisions. The modified order clarified the process for considering proposals and plans within the CIRP framework, ultimately dismissing certain appeals as infructuous.This comprehensive analysis encapsulates the legal intricacies and proceedings outlined in the judgment, addressing the various issues and decisions made by the Appellate Tribunal.