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2022 (1) TMI 1323
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.... the order dated 23.11.2022 passed by National Company Law Tribunal, New Delhi Bench, Court-II, dismissing IA No.5694 of 2022 filed by the Appellant - Ex-Promoter with prayer to keep in abeyance the hearing and decision on the application filed by Resolution Professional for approval of Resolution Plan. 2. Brief facts of the case necessary to be noticed for deciding this Appeal are: (i) On 10.05.2019, Corporate Insolvency Resolution Process ("CIRP") was initiated against the Corporate Debtor - Pawan Doot Estate Pvt. Ltd. by an order passed by the Adjudicating Authority. On 13.07.2019, advertisement was issued inviting Expression of Interest. Only one Resolution Plan was received, which was presented by Resolution Professional ("RP") in the 10th Meeting of Committee of Creditors ("CoC") dated 06.01.2020. On 17.01.2020, the CoC by 100% voting approved the Resolution Plan. On 18.01.2020, Letter of Intent was issued by the RP to the Successful Resolution Applicant - M/s Mehar Footwear Private Limited. The Letter of Intent was unconditionally accepted by the Successful Resolution Applicant and Performance Bank Guarantee amount was deposited on 02.02.2020. (ii) An IA No.1077 of 2020....
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....judicating Authority, to approve the liquidation of the Corporate Debtor. Hence, the CoC can certainly approve a Settlement Proposal under Section 12A. It is submitted that 100% CoC Members having given preapproval, the Adjudicating Authority ought to have kept in abeyance the hearing in IA No.1077 of 2020. The RP has erred in not submitting the proposal submitted by the Appellant under Section 12A for consideration and voting before the CoC. The Adjudicating Authority has full power to direct the CoC to consider the Revised Settlement Proposal, even at the stage when decision approving the Resolution Plan is pending consideration. 5. The learned Counsel for the RP, refuting the submissions of the learned Counsel for the Appellant submits that Resolution Plan having been approved by the CoC, as early as on 17.01.2020 and the Application to approve the Plan having been filed on 04.02.2020, there is no occasion to entertain any Settlement Proposal submitted by the Ex-Promoter. After Resolution Plan has been approved, no Settlement Proposal can be entertained. It is submitted that approved Resolution Plan also binds the CoC and the CoC itself cannot take any decision in this regard. ....
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....2), Resolution Professional is obliged to examine the Resolution Plan to find out whether it conform to provisions as laid down in Section 30, sub-section (2). Under Section 30, sub-section (3), the Resolution Professional, if satisfied himself that Plan is in accordance with the provisions, shall present the Plan to the Committee of Creditors for approval. Section 30, sub-section (4) provides that Committee of Creditors may approve the Resolution Plan by vote of not less than 60% of the voting share of the Corporate Debtors after considering its feasibility and viability and other factors. Under Section 30, sub-section (6), the Resolution Professional is to submit a Resolution Plan as approved by the Committee of Creditors to the Adjudicating Authority. 12. In the present case, the CoC have approved the Resolution Plan by voting share of 100% in voting held on 17.01.2020. The RP has submitted the Application before the Adjudicating Authority for approval of the Resolution Plan on 04.02.2020. The Settlement Proposal by the Ex-Promoter was submitted before the Financial Creditors by letter dated 11.08.2022. It is a case of the Appellant that in the Joint Lenders Meeting held on 18.....
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....he Adjudicating Authority on behalf of the applicant, within three days of such approval. (6) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (3) or (5). (7) Where the application is approved under sub-regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under sub-regulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code." 14. Regulation 30A has been substituted by Notification dated 25th July, 2019 to give effect to the provisions of Section 12A, which was inserted in the Code by Act No.26 of 2018. Regulation 30A(1) (b) proviso provides: "Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36....
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....lution professional costs. -- The committee shall fix the expenses to be incurred on or by the resolution professional and the expenses shall constitute insolvency resolution process costs. Explanation. - For the purposes of this regulation, "expenses" include the fee to be paid to the resolution professional, fee to be paid to insolvency professional entity, if any, and fee to be paid to professionals, if any, and other expenses to be incurred by the resolution professional." 18. In event Section 12A, Application was contemplated to be filed even after approval of the Resolution Plan by the CoC, Regulation 30A, sub-regulation (2), (a) and (b) ought to have included the expenses both under Regulations 33 and 34. Non-mention of Resolution Professional costs in Regulation 30A, sub-regulation (2) also give support to the contention that Scheme under the Regulation does not contemplate filing of Section 12A Application after approval of Resolution Plan by the CoC. 19. The learned Counsel for the Appellant has relied on the judgment of this Tribunal in Shaji Purushothaman vs. Union Bank of India & Ors. - Company Appeal (AT) (Insolvency) No.921 of 2019. In the above case, Section 7 A....
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....s Resolution Plan, which order was set aside by this Appellate Tribunal holding that Adjudicating Authority has no jurisdiction to permit such withdrawal. The order of this Tribunal was challenged before the Hon'ble Supreme Court. The Hon'ble Supreme Court considered the Scheme of the Code and held that Resolution Plan even prior to the approval of the Adjudicating Authority is binding inter se the CoC and the Successful Resolution Applicant. Following observations have been made by the Hon'ble Supreme Court in paragraphs 112, 113 and 125: "112 While the above observations were made in the context of a scheme that has been sanctioned by the Court, the Resolution Plan even prior to the approval of the Adjudicating Authority is binding inter se the CoC and the successful Resolution Applicant. The Resolution Plan cannot be construed purely as a 'contract' governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the Adjudicating Authority. Even at that stage, its binding effects are produced by the IBC framework. The BLRC Report mentions that "[w]hen 75% of the creditors agree on a revival plan, this plan would be binding on all the remain....
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.... enabled a framework where a draft Resolution Plan would involve several rounds of negotiations and revisions between the Resolution Applicant and the CoC, before it is approved by the latter and submitted to the Adjudicating Authority. However, this statutorily-enabled room for commercial negotiation is not enough to over-power the other elements of regulation that detract from the view that CoC-approved Resolution Plans are contracts. CoC-approved Resolution Plans, before the approval of the Adjudicating Authority under Section 31, are a function and product of the IBC's mechanisms. Their validity, nature, legal force and content is regulated by the procedure laid down under the IBC, and not the Contract Act. The voting by the CoC also occurs only after the RP has verified the contents of the Resolution Plan and confirmed that it meets the conditions of the IBC and the regulations therein. The amended Regulation 39(3) further regulates the conduct of the CoC on voting on Resolution Plans and has introduced the requirement of simultaneous voting. The IBBI's Discussion Paper issued on 27 August 2021 has invited comments on regulating the process on revisions that can be made to res....
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....o consider the terms of settlement as proposed by him. The Settlement Plan was approved by the CoC by 90% voting share. The RP filed an Application before the NCLT seeking withdrawal of the CIRP. The Adjudicating Authority rejected the Application against which an Appeal was filed, that too, was dismissed and the matter was taken before the Hon'ble Supreme Court. The Hon'ble Supreme Court in the above case referring to Section 12A and Regulation 30A, laid down following in paragraphs 18, 19, 20, 21 and 24: "18. A perusal of the said Regulation would reveal that where an application for withdrawal under Section 12A of the IBC is made after the constitution of the Committee, the same has to be made through the interim resolution professional or the resolution professional, as the case may be. The application has to be made in Form - FA. It further provides that when an application is made after the issue of invitation for expression of interest under Regulation 36A, the applicant is required to state the reasons justifying withdrawal of the same. The RP is required to place such an application for consideration before the Committee. Only after such an application is approved by t....
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.... that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. A reference in this respect could be made to the judgments of this Court in the cases of K. Sashidhar v. Indian Overseas Bank and Others, Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Others, Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others, Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another, and Jaypee Kensington Boulevard Apartments Welfare Association and Others v. NBCC (India) Limited and Others. 24. When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of....
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....f the Committee of Creditors. In paragraph 81, following has been laid down: "81. As has been held in this judgment, it is clear that Explanation 1 has only been inserted in order that the Adjudicating Authority and the Appellate Tribunal cannot enter into the merits of a business decision of the requisite majority of the Committee of Creditors. As has also been held in this judgment, there is no residual equity jurisdiction in the Adjudicating Authority or the Appellate Tribunal to interfere in the merits of a business decision taken by the requisite majority of the Committee of Creditors, provided that it is otherwise in conformity with the provisions of the Code and the Regulations, as has been laid down by this judgment." 27. There cannot be any dispute to the proposition laid down by the Hon'ble Supreme Court in the above case. In the present case, decision of the CoC to approve the Resolution Plan on 17.01.2020 was taken in its commercial wisdom. Whether the CoC can rescind from its decision and accept Settlement Proposal of Ex-Promoter submitted after two and a half years of approval of Resolution Plan, is a question which has arisen in the present case. The present is no....