TaxTMI 
TaxTMI 
2022 (2) TMI 64
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....e impugned order dated 12.08.2021 in MA/43/CHE/2021 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 vot....
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....pplicant Bank is having exclusive mortgage rights over the immovable property of the 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 pr....
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.... the Code. 6. The Learned Counsel for the Appellant brings it to the notice of this Tribunal that the Adjudicating Authority based 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 un....
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....ng took place, where the Committee of Creditors was asked to vote on the praying for withdrawal of Section 7 application projected by the IDBI Bank 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....
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....ted by the Original Applicant is admitted and Committee is formed the proceedings become 'action in rem' rather than 'action in personam'. 21. The Learned Counsel 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 judgeme....
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....ed by the committee with ninety percent voting share, the resolution professional shall submit the application under sub-regulation (1) to the Adjudicating Authority on behalf of the applicant, within three days 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 w....
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....e applicant with the approval of a 90 per cent voting share of the CoC in such manner as may be specified. Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, on the other hand, contemplates that the NCLT, functioning 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 C....
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....d and considering all relevant factors on the facts of each case. 83. The main thrust against the provision of Section 12-A is the fact that ninety per cent of the Committee of Creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all 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....
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....king for the three judge Bench of this Court, observed: "105. Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful 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....
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....s well as the liquidator (appointed under the Act of 2013 or the IBC). Both, the resolution plan upon being approved under Section 31 of the IBC and a scheme of compromise or arrangement upon being sanctioned under Sub-section (6) of Section 230, represent the culmination of the process. This must be distinguished from a mere withdrawal 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 ....
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....easibility, viability and such other requirements as has been specified by the Board. If it proposes maximisation of the assets and is found to be feasible, viable and fulfil all other requirements as specified by the Board, the company being MSME, it is not necessary for the 'Committee of Creditors' to follow all the procedures under the 'Corporate Insolvency Resolution Process'. For 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....
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....ority having failed to notice the aforesaid provisions issued long order discussing regulations and provisions of the Code. The Adjudicating Authority should have allowed application of withdrawal filed by the Applicant-Punjab National Bank, the Committee of Creditors having approved the Settlement with 100% voting share." 34. The Learned Counsel for the Appellant points out the Judgement of this Tribunal 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 o....
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....ssional' to prefer an application before the 'Adjudicating Authority' for an exclusion of a period of 30 days in CIRP. 40. Based on the application which was filed on 28.02.2020 the 'Adjudicating Authority' on 13.03.2020 has passed an order excluding a period of 30 days from the CIRP time frame of the Corporate Debtor. 41. Added further, the Appellate Authority, on 30.03.2020 had passed in suo moto Company Appeal (AT) No.1/2020 an order 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....
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....tunity to consider and vote on the Resolution Plan of RPIFL. Hence the Committee of Creditors, in its Meeting dated 25.02.2020 adjourned to 26.02.2020, with 98.32% vote had authorised the Resolution Professional to file an Application before the Tribunal seeking exclusion of a period of 30 days in CIRP and that the application was filed on 28.02.2020. The Tribunal through an exclusion order dated 1303.2020 but delivered on 16.03.2020 had excluded 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 ....
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....o be considered by the Hon'ble Adjudicating Authority after necessary directions/orders would reach the requisite 90% of voting threshold. The Resolution Professional intimated the 'Committee of Creditors' of the said letter and the request stated therein through email dated 09.03.2021. 52. The 'Resolution Professional' (based on the letter of IARCL) had filed an application on 24.03.2021 before the 'Adjudicating Authority' and by an order dated 29.03.2021 the Resolution 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 ....
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.... on 14.12.2021 to update the stakeholders on the progress so far made in the liquidation process of the Corporate Debtor, appointment of valuers and other professionals to assist the liquidator and to arrive at a strategy to be adopted for the sale of the assets of the Corporate Debtor. APPLICABILITY OF SECTION 12A 59. To be noted that, Section 12A of the I&B Code applies to an application for Insolvency Resolution which was admitted by the 'Adjudicating Authority' and all the more, when 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 admit....
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....ar Energy Ltd UAE 920.43 776.88 143.55 11 Tata Capital Financial Services Ltd 446.95 - 446.95 12 Indian Renewable Energy Development Agency Ltd 88.73 - 88.73 Total 5,666.06 4,863.87 802.20 65. The Clause 1.3 of the Settlement Proposal/Plan reads as under: S.No. Operational Creditors Admitted Amount (INR in Crores) 1 Vendors ( 9Nos) 5.14 2 Related Parties (1 Nos) 48.89 3 Statutory Authorities (Income Tax 406.89 4 Other Creditors )Maxis Communications Berhad) 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 64....
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.... the Adjudicating Authority directs any material amendment to the Approved Settlement Plan, which results in an adverse effect or increased financial liability for the Promoters. 70. In view of the above covenant, it is crystalline clear that despite the proposal being approved, the promoter of the Corporate Debtor can vary the clauses of the proposal Settlement Plan. Apart from that, a mere glance of the terms of the implementation, it unerringly, in the considered opinion of this Tribunal, points out that it is more like that of a contemplated/Resolution Plan, proposed in terms of the ingredients of Section 30 of the Code and in short, it cannot be characterised as a 'Settlement' in a stricto sense of the one, envisaged as per Section 12A of Code. 71. It is well settled that a Resolution Plan is not an 'Auction/Sale/Recovery/Liquidation'. A Resolution Applicant as per Section 30 of the Code 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....
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....larity in regard to the manner in which one is to proceed further, especially in the teeth of Corporate Debtor being out of the CIRP. 76. In view of the foregoing detailed qualitative and quantitative discussions, this Tribunal comes to the consequent conclusion that the Settlement Proposal, as projected by the Corporate Debtor and the approval of the withdrawal of the CIRP pertaining to the Corporate Debtor by the Committee of Creditors in its 17th Meeting dated 01.04.2021 was not quite in tune with the relevant provisions of the I&B Code, 2016 and to put it precisely, it is out of bounds of the Insolvency & Bankruptcy Code, 2016. Looking at from any angle, the observations and the conclusion arrived at by the 'Adjudicating Authority' to the effect that the projected settlement proposal plan of the promotor of the Corporate Debtor is not a settlement simpliciter as envisaged under Section 12-A of the Code, 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 set....
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....ance of a Resolution Plan. 81. Advancing his argument the Learned Counsel for the Appellant comes out with a plea that the 'Settlement Plan' merely provides the basis for the approval by the 'Committee of Creditors' which was accepted in entirety by them based on the terms mention therein. In fact, the 'Adjudicating Authority' had committed an error in sitting over the Judgment of the Committee of Creditors reasons for entering into a contract of settlement, which is neither its scope nor power under the Code, especially under Section 12A. 82. It is represented on behalf of the Appellant that there is no discretion under Section 12A of the Code for the 'Adjudicating Authority' to refuse to allow withdrawal of a case, based on the reason that 'CIRP would have to undergone again'. 83. The other contentions raised on behalf of the Appellant is that the 'Adjudicating Authority' was not correct in arriving at a conclusion 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 'Adjudicatin....
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....rder has erroneously recorded the 240th day of CIRP duration, the date post such exclusion has been erroneously recorded 20.03.2020, whereas the correct date post such 30 day exclusion from the last date of CIRP, i.e. 29.02.2020 would fall on 30.03.2020. A memo/application, making submission of the afore mentioned facts and figures, requesting for a correction in the Exclusion Order to record the end of the 30 day period as 30.03.2020 has been filed with this Hon'ble Tribunal. 28. In light of the NCLT having granted the 30 day exclusion of the CIRP pursuant to the Exclusion Order and, subject to the correction as submitted in the memo submitted with NCLT, the RP convened the 12th meeting of the OC on 16.03.2020 and amongst others, presented the compliant Resolution Plan before the COC for its approval. Post discussions at the meeting in relation to the final compliant version of the Resolution Plan, the plan was put for e-coting, the results for which 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 RP....
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....he next objective is 'Maximisation Of the Value of Assets of the Corporate Debtor. The other one being 'Promoting of Entrepreneurship', 'Availability of Credit' and 'Balancing the Interests'. LIQUIDATION: 92. It is to be remembered that the I & B Code, 2016 is not permitting 'Liquidation Of a Corporate Debtor' in a direct manner. Upon failure of the 'Corporate Insolvency Resolution Process', the Code allows liquidation. 93. It is pointed out that Section 33 of the I & B Code, 2016 enjoins 'Liquidation of the Corporate Debtor' if the 'Adjudicating Authority' comes to the conclusion that the Resolution Plan does not satisfy the ingredients of Section 30(2) of the Code. 94. If the 'Adjudicating Authority' is not receipt of Resolution Plan on or before the expiry of the Maximum Period allowed for completion of the Insolvency Resolution Plan, then, liquidation of the 'Corporate Debtor' is to ensue. If at any time prior to the confirmation of a Resolution Plan, the 'Committee of Creditor' resolve by a 66% majority 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 R....