NCLAT upholds CoC's rejection of settlement proposal, bars suspended management from forcing reconsideration during CIRP

NCLAT dismissed appeal challenging denial of opportunity to submit Section 12A settlement proposal during ongoing CIRP. Appellant sought withdrawal after CoC had already rejected their earlier settlement proposal with 80.22% voting against it, while simultaneously approving SRA's resolution plan with 80.84% votes. NCLAT held that once CoC exercises commercial wisdom through voting, suspended management cannot force reconsideration of rejected proposals. Court emphasized primacy of CoC's business decisions and noted proceedings had exceeded five years, making further delays contrary to IBC objectives. Appeal dismissed without interference to lower court's order.

---

---

Issues Involved:

1. Whether the Adjudicating Authority erred in denying the Appellant an opportunity to submit a settlement proposal under Section 12A of the IBC.
2. Whether the resolution plan approved by the CoC can be subjected to further amendments.
3. The implications of multiple settlement proposals submitted by the Appellant.
4. The role and supremacy of the CoC's commercial wisdom in the CIRP process.
5. The impact of judicial precedents on the application of Section 12A of the IBC.

Issue-Wise Detailed Analysis:

1. Opportunity to Submit Section 12A Proposal:
The Appellant contended that Section 12A of the IBC, read with CIRP Regulation 30A, permits the submission of multiple settlement proposals. The argument was based on the premise that the resolution plan had not attained finality. The Appellant cited the Supreme Court's judgment in "Brilliant Alloys Pvt. Ltd. Vs S. Rajagopal and Ors." which states that CIRP Regulation 30A is directory and allows for a Section 12A proposal to be filed at any stage. However, the Adjudicating Authority dismissed IA No. 188 of 2024, noting that the suspended management had not shown bona fide intentions in their previous proposals and viewed the application as an attempt to derail the CIRP process. The Tribunal upheld this decision, emphasizing that the CoC had already rejected the settlement proposal with an 80.22% vote against it.

2. Amendments to the Resolution Plan:
The Appellant argued that the resolution plan had been subjected to impermissible amendments after CoC approval. The Respondents countered that the amendments were necessary to ensure compliance with legal requirements and were not revisions of the plan itself. The Tribunal refrained from commenting on this issue, as the plan was still under consideration by the Adjudicating Authority.

3. Multiple Settlement Proposals:
The Appellant had submitted several settlement proposals, all of which were rejected by the CoC. The Tribunal noted that the repeated attempts by the suspended management to invoke Section 12A were viewed as attempts to impede the CIRP process. The Tribunal found no merit in the Appellant's contention that the Adjudicating Authority should have directed the CoC to reconsider the settlement proposal.

4. Supremacy of CoC's Commercial Wisdom:
The Tribunal emphasized the paramount status of the CoC's commercial wisdom, as upheld by the Supreme Court in "K. Sashidhar Vs. Indian Overseas Bank and Ors." The CoC's decision, made after thorough deliberation and voting, represents a collective business decision that is non-justiciable. The Tribunal found that the Adjudicating Authority did not err in respecting the CoC's decision to reject the settlement proposal and proceed with the resolution plan.

5. Judicial Precedents on Section 12A:
The Tribunal relied on precedents such as "Hem Singh Bharana Vs Pawan Doot Estate Pvt. Ltd." and "Nehru Place Hotels and Real Estates Pvt. Ltd. Vs Sanjeev Mahajan & Ors.," which held that a Section 12A proposal cannot be entertained after the CoC has approved a resolution plan. These judgments, upheld by the Supreme Court, reinforced the Tribunal's decision to dismiss the appeal. The Tribunal clarified that the Appellant's reliance on "Brilliant Alloys" was misplaced, as the judgment predated the substituted Regulation 30A, which requires justification for withdrawal after the issue of invitation for expression of interest.

In conclusion, the Tribunal dismissed the appeal, upholding the Adjudicating Authority's decision to deny the Appellant's Section 12A proposal. The Tribunal reiterated the importance of adhering to the timelines and objectives of the IBC, emphasizing the supremacy of the CoC's commercial wisdom in the CIRP process.

---