TaxTMI 
TaxTMI 
2021 (5) TMI 946
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....this Applicant before Respondent No. 2 through Respondent No. 1 and for seeking appropriate directions of this Adjudicating Authority. 2. The Reserve Bank of India ("RBI") exercised its powers under Section 45-IE of Reserve Bank of India Act, 1934 and superseded the Board of Directors of DHFL by appointing Mr. R Subramaniakumar as the Administrator. RBI filed CP (IB) 4258 of 2019 for initiation of insolvency resolution process which was admitted by this Adjudicating Authority vide order dated 03.12.2019 and appointed Mr. R Subramaniakumar as the Administrator. Submissions Made by Applicant by way of Interlocutory Application: 3. The Applicant is a promoter of the Corporate Debtor, Dewan Housing Finance Limited (DHFL). On 20th November 2019, Respondent No. 3 (RBI), in exercise of its powers under Section 45-IE of the Reserve Bank of India Act, 1934, superseded the Board of Directors of DHFL and appointed Respondent No. 1 as the Administrator of the company. Thereafter, on 28th November 2019, Respondent No. 3 filed Company Petition No. 4258 of 2019 under the IB Code read with the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers....
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.... internal accruals of the Corporate Debtor. 6. In these circumstances, by a letter dated 13th December 2020, the Applicant forwarded a Settlement Proposal ("1st Settlement Proposal), which would ensure repayment in full of the principal amount due to all creditors of DHFL. No response was received either from Respondent No. 1 or Respondent No. 3 to this proposal. At the hearing of this application on 13th January, 2021, Respondent No. 1 for the first time claimed that the 1st Settlement Proposal had been rejected by the CoC. A copy of the Minutes by which the said proposal was purported to be rejected was made available for the first time only in the Affidavit in Reply filed by Union Bank of India on 12th January, 2021. A perusal of the said minutes would indicate that the said proposal was not rejected on the merits, but on purported legal advice as to the entitlement of the Applicant to submit such a proposal. 7. Unaware that the 1st Settlement Proposal had been rejected for the reasons indicated above, the Applicant by his letter dated 29th December 2020, forwarded a further proposal ("2nd Settlement Proposal") to Respondent Nos. 1 and 3 as well as the CoC. The Applicant h....
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....ehalf of the Respondents to the present application are misconceived. Section 60(5) of the IBC defines the powers of this Tribunal in the broadest possible terms and reads in relevant part: "Section 60: Adjudicating Authority for corporate persons- (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of- (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code." 11. Further, this Tribunal has the inherent power to make such order as may be necessary for meeting the ends of justice or to prevent the abuse of the process of the Tribunal. This would be apparent from Rule 11 of the National Company Law Tribunal Rules, 2016, which is reproduced hereinbelow: "11. Inherent Powers:- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abus....
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....e are not expressing any opinion on the same." 14. Similar directions were also issued in Vishal Vijay Kalantri v. Dighi Port Ltd. & Anr., where the Hon'ble NCLAT observed: "....We allow the Appellant 'Vishal Vijay Kalantri'/Promoters to settle the matter within two weeks. In the meantime, pending such settlement, the 'Committee of Creditors' will consider all the plans pending before it and after taking into consideration the viability and feasibility and other terms as fixed by the court and amended Section 30(2) & (4) will approve one or the other plan. While approving so 'Committee of Creditors' will consider as to whether the plan as may be approved is better than the proposal as given by the Promoters/Appellant, taking into consideration the viability and feasibility and financial matrix of all resolution plans. It is accepted that the matter will be decided within three weeks." 15. It is thus clear that a Resolution Professional or, as in the present case, an administrator is obliged to place a Settlement Proposal forwarded to him before the CoC for consideration. It is also clear that in the event he fails in this duty, th....
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....or the financial health or lack thereof of the Corporate Debtor, ought to be permitted to submit a Settlement Proposal is entirely misconceived. Indeed, only a promoter or a stakeholder in the company undergoing CIRP would be in a position to submit a Settlement Proposal. Each of the judgments referred to hereinabove concern cases where Resolution Professionals were directed to place for the consideration of the CoC proposals submitted by erstwhile promoters. The Applicant has already clarified, both in the body of the proposal itself as well as in the course of oral arguments, that the proposal is not premised on the Applicant being in management. The Respondents may choose, to put in charge of the Corporate Debtor, any persons in whom they may have confidence, with the Applicant being happy to act as a consultant if they so desire to ensure that the value of the assets is maximized. 18. The contention that the proposal does not satisfy the requirements of an application under Section 12A of the IBC or Regulation 30A of the IRPCP Regulations is also flawed. It is not the Applicant's case that the present Interlocutory Application is one under Section 12A. The present applic....
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....nt specifically admitted below, and nothing is deemed to be admitted merely for want of specific traverse. It is submitted that the Application is misconceived and deserves to be rejected at the threshold for the reasons set out in below, each of which are in the alternative and without prejudice to one another. 23. The entire basis for the Application and the relief sought is that the Applicant's proposal, as contained in its letter of December 29, 2020 ("Second Proposal"), is placed before the CoC. Respondent 1 submits that seeking such relief is infructuous since the CoC has already been made aware of the Second Proposal. 24. The Second Proposal was also addressed to the CoC, as is evident from Exhibit G annexed to the Application. Given that the Applicant itself has addressed the Second Proposal to the CoC, it is humbly submitted that considering this Application would lead to precious time of this Tribunal being expended considering an Application devoid of any merit. 25. In any event, without prejudice to the above, Respondent 1 uploaded the Second Proposal to the virtual data room accessed by all members of the CoC. Accordingly, no further actions remain to be t....
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.... refrained from submitting EOIs, it continued to address correspondence to the Administrator. The Applicant addressed letters (other than the ones specifically discussed above) on October 17, 2020, November 11, 2020, November 28, 2020, and December 1, 2020. After having discussed with the CoC, Respondent 1 addressed responses dated October 27, 2020, November 26, 2020, and December 10, 2020. The consistent position has been that the communications addressed by the Applicant could not be considered proposals as they did not meet the requirements set out in law or in the RFRP. Respondent 1 craves leave to refer to documents in this regard when produced. 32. There is no provision under the Code under which the various proposals submitted by the Applicant (including the Second Proposal) can be considered to be valid resolution plans under the Code. Regardless, and as set out above, Respondent No. 1 shared the contents all correspondence from the Applicant with the members of the CoC in the interests of transparency and full disclosure. 33. The Applicant recognises this fact, that the Application is unsustainable in law. The Applicant, at paragraph 27 of the Application, attempts t....
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.... Tribunal to evade the provisions of law ought not to be entertained. 40. Without prejudice to the generality of the above, Respondent 1 sets out in this section specific responses to certain factually incorrect and unsustainable allegations in the Application. 41. The contents of paragraph 1 are a matter of record and are denied to the extent contrary to the record. 42. The contents of paragraphs 2 to 4 are denied. The reference to interlocutory application 2709138/04498 of 2020 is irrelevant and misconceived. Through the interlocutory application 2709138/04498 of 2020, the Applicant sought to place a proposal formulated by the promoters of the Corporate Debtor in September 2019 ("September 2019 Proposal") before the CoC for its consideration. Note that this proposal was also in flagrant violation of Code and the CIRP Regulations. In fact, the CoC in its eighteenth meeting dated December 19, 2020 considered and rejected the September 2019 proposal. Respondent 1 reserves all its rights in regard to the said application. In any event, the application has become infructuous as the proposal formulated in September 2019 has since been replaced and superseded by the Second Prop....
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....nt and unsubstantiated. The question of commercials is a question solely between members of the CoC, and does not lie for the Applicant to agitate or this Tribunal to judge. As already set out above, the Applicant's proposal as contained in its letter of December 13, 2020 has been considered by the CoC, which has utilized its commercial judgment to choose not to proceed or accept the Applicant's proposal. As already submitted above, the public interest involved militates against disruptions of the CIRP through applications such as the present. 50. The contents of paragraph 29 to 30 are noted as the Second Proposal being in the nature of proceedings under Section 12A of the Code, and not in the nature of a resolution plan for resolution of the Corporate Debtor under CIRP. In these circumstances, Respondent 1 has no role to play, and the Application is entirely misconceived. It must be noted that the Applicant has no locus standi to approach the Tribunal under Section 12A of the Code since that is the sole preserve of the RBI, the relevant financial sector regulator which initiated CIRP against the Corporate Debtor. Additionally, the present Application cannot be considere....
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....ersons) Regulations, 2016 ("CIRP Regulations") are mandatory provisions which are required to be adhered to. Section 12A of the Code reads as under: "12A. Withdrawal of application admitted under section 7, 9 or 10- The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent voting share of the committee of creditors, in such manner as may be specified." 57. From a bare perusal of Section 12A and Regulation 30A of the CIRP Regulations ("Regulation 30A") it is amply clear that for any withdrawal of an admitted application it is the Original Applicant, that must present such withdrawal application for approval of the CoC. 58. It is submitted that it is clear from the process described above that under the scheme of the Code, what is required to come for approval before the CoC under Section 12 A read with Regulation 30A (4) is the actual application for withdrawal in Form FA of the Schedule to the CIRP Regulation (Format of Form FA is produced as Annexure A to these written submissions for ease of reference). It is this wi....
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....has filed this present Application. The invitation for expression of interest in this matter was issued on January 28, 2020; since then neither has the Applicant filed an application under Section 12A nor has the Applicant filed a resolution plan, rather he chooses to come before this Tribunal at the last minute, after the voting on the duly submitted resolution plans has commenced, with a plea that his proposal which has not been filed under Section 12A be considered. The conduct of the Applicant reeks of malafides. 64. It has been contended on behalf of the Applicant that a proposal of withdrawal of the Company Petition can initiated at the instance of a promoter and a proposal by the promoter for settlement of the dues of all the creditors can and ought to be placed before the CoC for its consideration. The Applicant has placed reliance upon the following decision in support of the above submissions: i. Decision of the Hon'ble National Company Law Appellate Tribunal ("NCLAT") dated August 21, 2019 in the case of Vishal Vijay Kalantri vs. DBM Geotechnics & Constructions Pvt. Ltd. & Anr. [Company Appeal (AT) (Ins) No. 139 of 2018] ("Dighi Ports")-wherein without as....
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.... humbly submitted that once again the process under Section 12A has not been discussed in the Shaji order and the same is clearly distinguishable on facts and hence, the same has no applicability in the present Application. iii. Decision of the Hon'ble NCLAT dated August 7, 2019 in the case of Sukhbeer Singh vs. Dinesh Chandra Agarwal, (Resolution Professional), Maple Realcon Pvt. Ltd. [Company Appeal (AT) (Insolvency) No. 259 of 2019] ("Sukhbeer Singh")-In this order, the Hon'ble NCLAT inter alia held as under: "....It is the Promoters, who can settle the matter with all the 'Financial Creditors', 'Operational Creditors' including the Allottees and for that they may give their proposal and the 'Resolution Professional' is bound to place it before the 'Committee of Creditors', which is supposed to consider such application in the light of Section 12-A and the order of this Appellate Tribunal dated 16th July, 2019 as quoted above..." (para 2) The Sukhbeer Singh order has no applicability to the present Application inter alia on account of the following reasons: a) In the Sukhbeer Singh order, the Ho....
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....cussions with the CoC and the alleged concerns and proposals of the Applicant have been duly dealt with. It is noteworthy that in all its responses, the Administrator has time and again stated that the Applicant's letters and proposals are replete with falsehoods, inaccuracies and misrepresentations and written with the sole intention to prejudice the CIRP of DHFL. 66. Further, the letters of the Applicant as well as the First Proposal have been discussed in CoC Meetings as more particularly stated in paragraphs 23 and 25 of the UBI Reply [extracts of minutes of the CoC annexed as Exhibits- C to H of the UBI Reply]. Some of the key extracts are being reproduced below for ease of reference: i. As stated in the UBI Reply, in the said meetings, the Administrator has time and again stated that the statements made in the letters were misleading, legally non-tenable with the intention seems to be to create disruption in the CIRP. The said COC meeting considered and recorded that such letters could not be considered. "The CoC concluded the discussion by taking on record that the proposal sent by the ex-CMD cannot be accepted and appropriate response should be made....
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..... 68. Hence, no directions can be passed by this Tribunal for considering same proposal, while the Administrator and the CoC have already found all the contentions of the Applicant in the past unreliable, misrepresentative and false. 69. Catalyst Trusteeship Limited ("Catalyst"), the debenture trustee for approx. 85,000 debenture holders of the Corporate Debtor, Dewan Housing Corporate Limited ("DHFL"), under 34 Series, holding 52.13% voting share in the Committee of Creditors of DHFL has filed an Affidavit-in-Reply dated January 11, 2021 ("Catalyst Reply"). Catalyst is filing the present submissions in addition to the Catalyst Reply. The contents of the Catalyst Reply are not being reproduced for the sake of brevity however, the entire contents of the Catalyst should be deemed to a part of the present submissions. Submissions Made by Reserve Bank of India Respondent No. 3 by way of Affidavit in Reply: 70. I say that I have perused the captioned Interlocutory Application filed by Shri Kapil Wadhawan ("Applicant"). I say that I am acquainted with the facts of the present case based on the information and records provided to me and I am competent and able to depose herein....
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....es, 2019 ("FSP Insolvency Rules"), RBI on November 29, 2019, initiated insolvency proceedings against DHFL by filing a Company Petition No. 4258 of 2019 before this Tribunal. This Tribunal by its order dated December 3, 2019 admitted the aforesaid petition and confirmed appointment of Mr. R Subramaniakumar as the Administrator of DHFL and initiated Corporate Insolvency Resolution Process ("CIRP") against DHFL. 75. Plans submitted in the CIRP process. Pursuant to the admission order dated December 3, 2019, the CIRP of DHFL commenced under the provisions of the Insolvency and Bankruptcy Code, 2016 ("Code"), which is a complete Code in itself. It is submitted that under the provisions of the Code, the Administrator of DHFL has been convening meeting of the Committee of Creditors from time to time. It is submitted that the CIR Process is enunciated under the provisions of the Code and Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations"). It is submitted that the Administrator of DHFL with the consent of the Committee of Creditors (Respondent No. 2) have run the process of CIRP, which is at an advanced s....
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....nt No. 2) has approved the Resolution Plan, the Administrator of the DHFL, has to obtain no-objection from RBI in accordance with Rule 5(d) of the FSP Insolvency Rules. Apart from the same, neither the Code nor the FSP Insolvency Rules, casts any other obligation on RBI vis-à-vis the CIRP process, which is left to be run by the resolution professional along with the CoC as per its commercial wisdom. The RBI cannot intervene in the CIRP process, and the reliefs as sought for by the Applicant qua RBI seeks RBI to intervene in the CIRP process, which is completely contrary and inconsistent with the spirit of the Code and will have the effect of derailing the CIR Process. Without prejudice to the aforesaid, it is pertinent to mention herein that the Applicant is the ex-promoter of DHFL against whom various proceedings, civil and/or criminal, have been filed, alleging cheating, fraud, siphoning of funds and such other serious offences. The Applicant is presently in judicial custody and most regulatory agencies like CBI, EOW, ED etc. are at present investigating against the Applicant. This being so, affording the Applicant even an opportunity of presenting a purported settlement o....
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....he Respondents that the Applicant, as one of the Promoters, was purportedly responsible for the present financial health of the Corporate Debtor and that no proposal ought to be entertained from such a Promoter, if we accept this contentions of the respondent, settlement proposal, One Time Settlement proposal cannot be offered by the Promoters and cannot be accepted by Banks, Financial institutions, Creditors which is a generally prevailing practice and not an acceptable proposition. 84. From, the Settlement Proposals it is noted that the Applicant has offered approx. Rs. 91,158 crores which is more than Rs. 54,512 crores of the next highest bidder who offered Rs. 37,250 Crores. Since this settlement proposal is substantially higher/more than 1 1/2 times of the value of the highest bidder the same needs due consideration/reconsideration by the Administrator/COC. Upon perusal of his letters/Settlement Proposal it is noted that an amount of approx. Rs. 9,062 crores lying with the Corporate Debtor as on 30 September 2020 as per the balance sheet of the Company will be utilised fully for upfront repayment of the outstanding debts of small investors and the major breakup would be to ....
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....tiations were held then voted upon. 87. Further the applicant also mentioned that the proposal is not made available to FD, NCD holders who constitute more than 65% of vote share of members of COC, apparently the same is not disputed by the respondents like the Administrator, COC. If the 2nd Settlement Proposal is viable, feasible and acceptable after exercising Commercial Wisdom of COC it would immensely benefit the members of COC and in turn would benefit the Public Depositors, NCD holders etc. COC by exercising their commercial wisdom can decide suitably. This direction is being issued by this Adjudicating Authority because the same would be in the interest of justice, equity, balancing of interest, interest of various stakeholders, in the interest of maximisation of value of assets of the corporate debtor, the special situation and to avoid further litigations by the applicant approaching appellate forums and smooth process of considering the Plan. By this direction 10 days' time is granted to the Administrator to place the 2nd Settlement Proposal of the applicant before the members of COC including the FD, NCD holders for consideration, decision, voting and to submit th....
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....ly accepted by the CoC then a withdrawal application is to be moved through the petitioner, Reserve Bank of India and/or as per the provisions of IBC and Regulations. 91. That apart Hon'ble Supreme Court in its decision in the matter of Swiss Ribbon Vs. Union of India, has pleased to held that Corporate Debtor may come for settlement in post admission stage before the constitution of CoC and the Adjudicating Authority may exercise its power conferred to the NCLT under rule 11 of the NCLT Rules. After constitution of the CoC an application can be entertained under the procedure of section 12A of the IB Code. Hence the present application appears to be a pre-stage process of an application under section 12A. That can be considered by this AA, if it is filed by the main petitioner in the IB Petition (RBI/Administrator) with having requisite majority of more than 90% voting of the Members of the CoC. Hence there can be no prejudice to either parties if CoC gives due consideration as per norms and in its commercial wisdom to examine feasibility of such proposal of settlement for Approx. Rs. 91,000/- Crores (Rupees Ninety-one Thousand Crores) and above. The CoC may take appropriat....