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2022 (2) TMI 64
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....21 in IBA/453/2019, alongwith IA/647/IB.2020 in IAB/453/2019 alongwith IA/586/CHE/2021 in IBA/453/2019 at paragraph 22 to 28 observed the following:- 22. A Settlement simpliciter under Section 12A of IBC, 2016 is different from a Resolution Plan given under Section 30 and 31 of IBC, 2016. However, in the present case, the promoter of the Corporate Debtor who is ineligible to submit a Resolution Plan because of Section 29A of IBC, 2016 is trying to provide a Settlement proposal, which is similar to a Resolution Plan under Section 12A of IBC, 2016. In other words, the promoter of the Corporate Debtor is trying to restructure the loans granted by the Financial Creditor under the pretext of a Settlement proposal to be given under Section 12A of IBC, 2016. Further, there exists an uncertainty in relation to the default, if any, being committed by the promoters of the Corporate Debtor and that this Tribunal has already come to a view that the Corporate Debtor cannot be pushed into liquidation in case of a default committed under Section 12 of IBC, 2016. In the first case, this Tribunal is of the view that the CoC ought to have voted for the proposal only if they have received the money....
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.... Corporate Debtor and the Applicant will be at liberty to enforce the SARFAESI Proceedings against the mortgaged property. Further, it is averred that the Applicant Bank viz. State Bank of India does not appear to have any objection for the withdrawal of the CIRP, provided that the rights of the Applicant Bank over the mortgaged property should not get diluted. Considering the submissions made by the Learned Counsel for State Bank of India we are of the view that since we are not inclined to allow the relief as sought for in MA/43(CHE)/2021, seeking withdrawal of the CIRP process. The necessary consequence will be an order of Liquidation, which is also passed vide separate order, the Applicant Bank may exercise the security interest over the subject property and may intimate the same to the Liquidator in so far as whether they are relinquishing their security or standing outside the Liquidation process. With the above said directions IA/586/CHE/2021 stands disposed off. 27. In view of the above discussions, we conclude as follows: a. The purported Settlement Plan proposed by the promoter of the Corporate Debtor is not a Settlement simpliciter as envisaged under Section 12A of I....
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....ased on the Application filed by the Appellant had directed the Ex Resolution Professional to convene a Meeting with COC to consider the proposal submitted by the Appellant and report to it on 2.11.2020. 7. It is the version of the Appellant that after deliberations and discussions, the settlement plan proposed by the Appellant as per Section 12 A of the I&B Code was put to vote with an agenda for withdrawal of CIRP in tune with the settlement proposal which was initially voted by 70.63% of the Committee of Creditors in favour and later IARCL/one of the Financial Creditors through letter dated 05.03.2021 had intimated the 2nd Respondent that in the light of further discussions and in the interest of reserving the account and to enable the Corporate Debtor to revive, had decided to change their vote to approve the proposal submitted by the Appellant under Section 12 A of the Code. 8. The Learned Counsel for the Appellant points out that based on the request of IARCL/Financial Creditor to approach the Adjudicating Authority to permit the withdrawal under Section 12 A of the Code, the 2nd Respondent filed an application seeking directions in regard to the recasting of the vote and t....
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....nk Ltd basis the settlement proposal. On 08.02.2021 the voting results on the Settlement Proposal by the Committee of Creditors was 70.63. 14. On 08.03.2021, the financial creditor/International Assets Reconstruction Co Ltd having 23.60% voting shares wrote to the Resolution Professional stating that it had reconsidered its vote and had now approved the Resolution and accordingly requested the Resolution Professional to pray for appropriate directions from the 'Adjudicating Authority' for validation of the recasted vote or seek fresh voting on the One Time Settlement. 15 As a matter of fact, the Resolution Professional on 24.03.2021 filed MA/12(CHE)/2021 before the 'Adjudicating Authority' seeking necessary directions based on the letter and request of IARCL. On 29.03.2021 the 'Adjudicating Authority' had directed the Resolution Professional to hold a CoC Meeting and seek the vote of COC, basis the IARCL letter, within 10 working days. 16. In the 17th COC Meeting that took place on 01.04.2021 where the CoC was asked to vote on the seeking of withdrawal of the application filed by the IDBI Bank Ltd, basis the Settlement Proposal and the order of the Adjudicating Authority dated 2....
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....el for the Appellant submits that the 'Settlement Plan' was irrelevant to the determination of the withdrawal application filed under Section 12A of the Code and inspite of the fact that no arguments were advanced regarding the terms itself and no querries were raised before the 'Adjudicating Authority' and yet the said Authority had passed the impugned order on a mistaken premises. 22. The Learned Counsel for the Appellant urges that the 'Adjudicating Authority' had omitted to advert to Clause 4 of Chapter VIII of the Code under the Caption Binding Effect which takes that the 'Settlement Plan' is binding on the company and such Members of the Committee of Creditors who had approved the withdrawal application on the basis of the 'Settlement Plan' upon the approval of 90% voting shares of the Committee of Creditors and upon the receipt of the Adjudicating Authority's approval order. 23. The Learned Counsel for the Appellant urges this 'Tribunal' that the Adjudicating Authority fell into an error in sitting in judgement over the Committee of Creditors reasons for entering into a Contract of Settlement which is neither within its ambit nor power especially under Section 12A of the C....
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....of such approval. (5) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (4). This Court, by its order dated 14.12.2018 in Brilliant Alloys Pvt. Ltd. v. Mr. S. Rajagopal & Ors., SLP (Civil) No. 31557/2018, has stated that Regulation 30A(1) is not mandatory but is directory for the simple reason that on the facts of a given case, an application for withdrawal may be allowed in exceptional cases even after issue of invitation for expression of interest under Regulation 36A. 52. It is clear that once the Code gets triggered by admission of a creditor's petition under Sections 7 to 9, the proceeding that is before the Adjudicating Authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a committee of creditors is constituted (as per the timelines that are specified, a committee of creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution pro....
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....ng as the Adjudicating Authority, may permit a withdrawal of an application made under Rule 4 (by the financial creditor), Rule 6 (by the operational creditor) or Rule 7 (by the corporate applicant) on the request made by the applicant before its admission. Regulation 30-A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 contains provisions for the withdrawal of an application. Under Regulation 30-A, as it originally stood, an application for withdrawal under Section 12-A was required to be submitted before the issuance of an invitation for the expression of interest under Regulation 36-A. In the decision of this Court in Swiss Ribbons (supra), which was rendered on 25 January 2019, it was contemplated that an application for withdrawal may be presented between the period commencing from the admission of the application and the date of the constitution of the CoC. This led to the substitution of the Regulation 30-A on 25 July 2019. As substituted, Regulation 30-A stipulates that an application for withdrawal under Section 12-A may be made to the adjudicating authority: (a) before the constitution of the CoC, by ....
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.... financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the Committee of Creditors do not have the last word on the subject. If the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, NCLT, and thereafter, NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12-A also passes constitutional muster." Distinction between a withdrawal simpliciter and scheme of arrangement 73. The submission is that on the withdrawal of the application under Sections 7, 9 and 10, as the case may be, the company goes back to the same promoter in spite of such a pro....
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....ul resolution applicant starts running the business of the corporate debtor on a fresh slate as it were. In SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17 SCC 394 : (2019) 2 SCC (Civ) 458] , this Court relying upon Section 31 of the Code has held: (SCC p. 411, para 25) "25. Section 31 of the Act was also strongly relied upon by the respondents. This section only states that once a resolution plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, under Section 133 of the Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the resolution plan, which has been approved, may well include provisions as to payments to be made by such guarantor. This is perhaps the reason that Annexure VI(e) to Form 6 contained in the Rules and Regulation 36(2) referred to above, require information as to personal guarantees that have been given in relation to the debts of the corporate debtor. Fa....
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....thdrawal of an application under Section 12-A. There is a clear distinction between these processes, in terms of statutory context and its consequences and the latter cannot be equated with the former." 29. The Learned Counsel for the Appellant adverts to the Judgement of this Tribunal in Vipul Dilip Shah & Others V. Parinee Developers Pvt Ltd through 'Resolution Professional' Subhash Chadra Modi & Ors (vide Company Appeal (AT)(Ins) No.451 and 442 of 2021 wherein at paragraph 12 and 13 it is held as under:- "12. We have considered the ground for dismissal of the Application. We are of the considered view that the legislation has provided a procedure for withdrawal of Application under Section 7, 9 or 10 of the IBC. In this case, the CoC has been constituted, therefore, the Application for withdrawal approved by the 99.9% voting shares of the CoC and the Application has been filed through the RP as provided under Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (Regulations). 13. We have gone through the settlement deed. There is a provision in the settlement deed that in case the settlement fails, the lenders may file Applicati....
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....or example, if case is settled before the constitution of the 'Committee of Creditors' or in terms of Section 12A on the basis of offer given by Promoter, in such case, all other procedure for calling of application of 'Resolution Applicant' etc are not followed. If the Promoter satisfy all the creditors and is in a position to keep the 'Corporate Debtor' as a going concern, it is always open to 'Committee of Creditors' to accept the terms of settlement and approve it by 90% of the voting shares. The same principle can be followed in the case of MSME." 32. The Learned Counsel for the Appellant adverts to the Judgement dated 29.08.2019 of this 'Tribunal' in Bhaskar Biswas V. M/s Devi Trading and Holding Pvt Ltd & another (vide Comp App (AT)(INS) No.823/2019) wherein at paragraph 4 & 5 it is observed as under:- 4. "Normally, before the constitution of 'Committee of Creditors' if on behalf of the 'Corporate Debtor' a shareholder or Director settles the claim of the Applicant who files an application u/s 7 or 9 of the 'I&B' Code, the Adjudicating Authority in normal course can exercise its inherent power under Rule 11 of the NCLT Rules, 2016. However, it is seen that when allowing a....
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....dated 06.09.2019 in Shaji Purushothaman V. Union Bank of India & Ors (vide Comp App (AT)(Ins) No.921/2019) wherein at paragraph 8 and 9 it is observed as under:- 8. "In the circumstances, while we are not inclined to issue any specific direction, give liberty to the Appellant to move an application u/s 12A for settling the claims of all the Creditors including the guarantors. 9. If an application u/s 12A is filed by the Appellant, the 'Committee of Creditors' may decide as to whether the proposal given by the Appellant for settlement in terms of Section 12A is better than the 'Resolution Plan' as approved by it, and may pass appropriate order. However, as such decision is required to be taken by the 'Committee of Creditors', we are not expressing any opinion on the same." ASSESSMENT 35. It comes to be known that the CIRP of the 'Corporate Debtor' started on 04.07.2019. Pursuant to the public announcement, the Interim Resolution Professional among other things had invited all the creditors of the 'Corporate Debtor' to submit their claims by 22.07.2019. The 'Committee of Creditors' was constituted by the Interim Resolution Professional in respect of the 'Corporate Debtor' and o....
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....rder stating that "the period of lockdown as ordered by the Central Government and the State Government shall be excluded for the purpose of counting the period for 'Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016 in all cases where Corporate Insolvency Resolution Process' has been initiated and pending before any Bench of the National Company Law Tribunal or in Appeal before this Appellate Tribunal" and in the teeth of said order etc., the CIRP was extended till five days from the removal of the lock down. 42. According to the Appellant, the first version of the Resolution Plan was given by RPIFL on 16.12.2019 and RPIFL had not submitted an earnest money deposit of INR 5 crores as required under the provisions of 'RFRP' and had instead requested for the earnest money deposited to be reduced to INR 50 lakhs and the Performance Security as per 'RFRP' to be reduced to INR 3 crores. Further, on receipt of the Resolution Plan, while the compliance of the Resolution Plan with a requirement of the Code was being undertaken by the 'Resolution Professional', in the interest of time, the COC constituted a Committee with the Members to undertake negotiations ....
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.... a period of 30 days from CIRP time frame of the Corporate Debtor. 46. The Resolution Professional convened the 12th Meeting of the Committee of Creditors on 16.03.2020 and inter alia presented the compliant Resolution Plan before the CoC for its approval and post discussions at the Meeting, the Plan was put up for e-voting and the results were declared on 04.03.2020 and the Resolution Plan of 'RPIFL' failed to receive requisite majority of 66% of the voting share of the Members of the Committee of Creditors and was rejected by Committee of Creditors on account of the receipt of 60.90% vote, in favour of the Resolution Plan which does not cross the minimum threshold as required under Section 30(4) of the Code. 47. After the expiry of the Corporate Insolvency Resolution Process of the Corporate Debtor, an application was filed by the Resolution Professional before the 'Adjudicating Authority' under Section 33(1)(a) of the I&B Code, 2016 for initiation of the liquidation process of the Corporate Debtor. 48. On behalf of the Appellant it is brought to the notice of this 'Tribunal' that the shareholder of the 'Corporate Debtor' submitted a detailed settlement plan before the entire ....
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....olution Professional was directed to convene a Committee of Creditors and seek approval of the COC within 10 working days from the date of the order. 53. The Resolution Professional had convened the 17th COC Meeting on 01.04.2021 and the voting lines for the Committee of Creditors to vote on the following agenda was opened up:- "To take approval of the Committee of Creditors for the voting agenda item voted upon in the sixteenth meeting of the committee of creditors.: To approve the application for withdrawal of Section 7 application admitted for CIRP of the Corporate Debtor in terms of Section 12A of the IBC and authorise the 'Resolution Professional' to file the application for withdrawal with the NCLT on behalf of IDBI Bank in terms of Regulation 30A(5) upon receipt of bank guarantee in terms of Regulation 30A(2)(b) with leave to the creditors to seek liquidation of the Corporate Debtor in case of default in compliance with the terms of the settlement proposal dated 14 December 2020 and addendums dated 5 January 2021 and 14 January 2021 submitted by Mr. Vallal RCK and placed before the COC on the basis of which withdrawal of the application admitting the CIRP of the Corporate....
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....en there is no challenge to the admission of the petition/application. WITHDRAWAL OF APPLICATION 60. It is to be remembered that as per Rule 8 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, the 'Adjudicating Authority' may allow withdrawal an application based on the applicant's request. By virtue of the 2nd amendment to the I&B Code, 2016 (during the year 2018) an 'Adjudicating Authority' may permit the withdrawal of an application under Section 7, 9 and 10 of the Code, even after admission, on an application made by an applicant with the approval of 90% voting share of the COC. 61. It cannot be ignored that if the 'CIRP' is initiated by admitting the application under Section 7 or 9 or 10, it cannot be set aside or withdrawn except for any illegality, to be exhibited or if it is without jurisdiction or for some other justiciable ground just because a promoter desires to pay all dues including the default amount cannot be a ground to set aside the CIRP. 62. Section 12A of the Code came into effect on 06.06.2018. Rule 8 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 is quite relevant for withdrawal o....
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....rhad) 40.55 Total 501.57 66. Under Clause 3.2 detailed lenderwise Settlement Proposal it is mentioned as follows: (Amount in INR Cr) S.No Financial Creditor Name Admitted amount Trance-I Payment Trance- II Payment Settlement Amount 1 Central Bank of India 402.95 4.77 40.23 45.00 2 Life Insurance Corpn of India 354.36 22.50 137.50 160.00 3 State Bank of India 280.50 2.50 22.50 25.00 4 Union Bank of India 645.17 3.00 27.00 30.00 5 International Asset Reconstruction Co Pvt Ltd 1,147.69 2.33 13.22 15.55 6 IDBI Bank Ltd 876.07 5.00 32.00 37.00 7 Punjab National Bank 305.83 0.62 3.52 4.14 8 Bank of India 74.42 0.15 0.85 1.00 9 Masdar Energy Ltd, UAE 776.88 1.58 8.94 10.52 Total 4,863.88 42.45 285.76 328.21 67. From the above Settlement Proposal, it is latently and patently quite clear that the said proposal was taken into account and considered by the Committee of Creditors and that the nine financial creditors pertaining to the Corporate Debtor had agreed to receive an amount of Rs. 328.21 crores towards the settlement sum, as against the total admitted claim of Rs. 4,863.88 crores. 68. In the Set....
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....e is to scrutinise the Resolution Plan and to find out whether it fulfils the requirements of Section 30(2) of the Code. If the Plan satisfies the requirements of Law, then the same is to be placed before the Committee of Creditors for its approval as per Section 30(3) of the Code and this can be approved by the Committee of Creditors as per requirement of Section 30(4) of the Code. If the Plan is approved by the Committee of Creditors, the Resolution Plan is to be placed before the 'Adjudicating Authority' as per Section 31 of the Code and the said Authority is to apply his thinking judicial mind to the Resolution Plan so furnished, and on being satisfied with the Plan that it fulfils the ingredients or does not meet the ingredients or Section 30 of the Code may either accord approval to the Plan or negative the same. 72. In the instant case on hand, the Committee of Creditors had voted under Section 12A of the Code without even getting a single sum from the promoter of the Corporate Debtor, in respect of the withdrawal of the CIRP pertaining to the Corporate Debtor. As a matter of fact, the Adjudicating Authority had in the impugned order had categorically observed that the 'Set....
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....de, 2016 rather it is a 'business restructuring plan' and further that no finality was reached between the Promotor of the Corporate Debtor and Committee of Creditors as per Clause -2 of Chapter VIII of the Settlement proposal and hence, based on ambiguity of the terms of the settlement it cannot order for withdrawal of CIRP are free from legal infirmities. Consequently, the Appeal fails. COMPANY APPEAL (AT)(CH)(INSOLVENCY) NO.212/2021 PREAMBLE: 77. The Appellant has filed the present Company Appeal (AT)(CH)(Ins) No. 212/2021 questioning the impugned order dated 12.08.2021 in I.A./837/IB/2020 in IBA/453 OF 2019 ordering liquidation of the 'Corporate Debtor' in continuation of the dismissal order passed through a common order 12.08.2021 passed by the 'Adjudicating Authority' in MA/43/CHE/2021 and IA/647/IB/2020 and I.A./586/CHE/2021 in IBA/453/19 wherein MA/43/CHE/2021 was filed by the 2nd Respondent with the approval of 94.23% voting share of the 'Committee of Creditors' of the 'Corporate Debtor' for withdrawal main Insolvency and Bankruptcy Application No. IBA/453/2019, pursuant to Section 12A of the I&B Code read with Regulation 30A of the IRPCP Regulations. APPELANT'S CONTEN....
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....that the terms of the Settlement is an ambiguous one since there is no final offer made by the Appellant and also the acceptance made by the CoC etc. 84. The Learned Counsel for the Appellant proceeds to point out that it is not the duty of the 'Adjudicating Authority' to investigate commercial ramification of the Committee of Creditor's decisions, especially when it is not in the nature of a 'Resolution Plan', but a 'Withdrawal Simpliciter'. 85. The Learned Counsel for the Appellant submits that the impugned order is an excessive one and suffers from non-application of mind by the 'Adjudicating Authority'. 86. According to the Learned Counsel for the Appellant, there is no requirement that money is need to be paid in advance for exercising the power under Section 12A of the Code. Also that the 'Settlement Plan' was an irrelevant one to the determination of the 'Withdrawal Application' filed under Section 12A of the Code. 87. Added further, it is a version of the Appellant that the 'Adjudicating Authority' had failed to advert to Class 4 of Chapter VIII under the caption 'Binding Effect' which states that a 'Settlement Plan' is binding on the Company and such Members of the 'Co....
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....hich were declared on April 4, 2020. Copy of the minutes of the CoC meeting held on 16.03.2020 is annexed and marked as 'Annexure A-13'. 29. In terms of the e-voting results as on April, 4, 2020, the Resolution Plan of RPIFL failed to receive the requisite majority of 66% of the voting share of the members of the CoC and was consequently rejected by the CoC on account of having received only a vote of 60.90% in favour of the Resolution Plan, which does not cross the minimum threshold as required under Section 30(4) of the Code. Copy of the voting results is annexed hereto and marked as 'Annexure A-14'. 30. In view of no resolution plan having received the requisite approval of the CoC under S.30(4) of the Code despite all efforts having been undertaken to achieve a resolution and the expiry of the CIRP of the Corporate Debtor, the present Application has been filed by the Resolution Professional before this Hon'ble Tribunal under Section 33(1)(a) of the Code for initiation of the liquidation process of the Corporate Debtor. 31. At the 12th CoC meeting held on 16.03.2020, the Resolution Professional tabled the agenda of discussing and approving to provide finding for the liqui....
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....rity of voting shares where the 'Corporate Debtor' is to be liquidated, then, the liquidation may follow suit. If the 'Corporate Debtor' breaches the conditions of the Resolution Plan and upon an Application by individual (other than the Corporate Debtor), whose interest are prejudicially affected by such breach, the 'Adjudicating Authority' can arrive at a conclusion that the 'Corporate Debtor' had violated the condition of the Resolution Plan, in which event, the Code visualises initiation of the 'Liquidation Process' in the considered opinion of this 'Tribunal'. Suffice it for this 'Tribunal' to make a pertinent mention that if any of the aforesaid situations exist, the 'Adjudicating Authority is empowered to pass an order requiring the 'Corporate Debtor' to be liquidated as per the relevant provisions Code. 94. If the time period for CIRP was extended but the Resolution Plan was not accepted by the 'Adjudicating Authority' then, liquidation of the Company can be ordered under Section 33 of the I & B Code. Timely liquidation is preferred over fruitless and endless Resolution proceeding. 95. In the instant case on hand, the Applicant/Resolution Profession of the First Responden....