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2021 (8) TMI 1282 - Tri - Insolvency and BankruptcyWithdrawal of application u/s 12A of IBC, 2016 - Consideration of settlement proposed by the Applicant - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of National Company Law Tribunal Rules, 2016 - HELD THAT - The collective commercial wisdom of the CoC cannot be called in question by this Adjudicating Authority only when the said decision has been taken by the CoC in conformity within the framework of IBC, 2016. However, in the present case, instead, without even receiving single penny from the promoter of the Corporate Debtor, the CoC has voted under Section 12A of IBC, 2016 for the withdrawal of the CIRP in relation to the Corporate Debtor, which is not a settlement simpliciter rather than a Business Restructuring Plan , as submitted by the Learned Senior Counsel for the Corporate Debtor. Whether based upon a Business Restructuring Plan submitted by the promoter of the Corporate Debtor and in an Application filed under Section 12A of IBC, 2016 can this Adjudicating Authority allow for the withdrawal of the CIRP in relation to the Corporate Debtor? - HELD THAT - It should also be noted that the powers of this Adjudicating Authority cannot be circumscribed on the ground that commercial wisdom of the CoC would prevail over any other provisions of the IBC, 2016. Further, it should also be borne in mind that this Adjudicating Authority is not a mere stamping authority so as to endorse the decision of the CoC and is required to examine whether such decision is falling within the contours of IBC, 2016. The Financial Creditor has full freedom to decide on the quantum of amount which they are willing to accept in respect of the overall dues pending against the Corporate Debtor and this Adjudicating Authority consciously restrains from making any observation in this regard and leaves the same to the commercial wisdom of the CoC. However, this Adjudicating Authority is duty bound to examine the consequences of a purported Settlement proposal which is proposed by the promoter of the Corporate Debtor and the position of the Corporate Debtor once the application for withdrawal of the CIRP is allowed and also the default if any committed by the promoter of the Corporate Debtor in respect of the repayment of the money which is spread over a period of 180 days. In the present Application, the Applicant has prayed for the Liquidation of the Corporate Debtor in case of the failure of the terms of the Settlement proposal as given by the promoter of the Corporate Debtor - once the Petitioning Creditor has agreed to withdraw the Petition, there cannot be any strings attached to the same. In the event of a subsequent default, an application seeking revival of the same cannot be filed, since it must be borne in mind that the Application filed under Section 7, 9 and 10 of IBC, 2016 is for Insolvency Resolution of the Corporate Debtor and not for the recovery of the money from the Corporate Debtor. 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 - this Tribunal is of the view that the CoC ought to have voted for the proposal only if they have received the money in full as per the Settlement proposal given by the promoter of the Corporate Debtor and if such being the case, the apprehension of default on the part of the promoter of the Corporate Debtor would not have arisen and that the Tribunal would have no difficulty in approving the proposal under Section 12A of IBC, 2016. The Settlement Proposal as given by the Corporate Debtor and the approval of the withdrawal of the CIRP in relation to the Corporate Debtor by the CoC in its 17th meeting, is not in conformity with the provisions of IBC, 2016 and also not in line with the judicial conscientiousness of this Adjudicating Authority and also transcends beyond the scope of IBC, 2016 - the purported Settlement Plan proposed by the promoter of the Corporate Debtor is not a Settlement simpliciter as envisaged under Section 12A of IBC, 2016 rather than it is a Business Restructuring Plan . As per the settlement Plan, there is no final offer made by the promoter of the Corporate Debtor and also the acceptance made by the CoC in this regard. There is no finality reached between the promoter of the Corporate Debtor and the CoC as per Clause 2 of Chapter VIII of the Settlement proposal; hence based on ambiguity of terms of settlement, we cannot order for withdrawal of the CIRP - prayer seeking for liquidation of the Corporate Debtor in case of any default in the proposed Settlement Plan transcends beyond the scope of IBC, 2016. The Applicantion under Section 12A of IBC, 2016 stands dismissed.
Issues Involved:
1. Urgent hearing request under Section 60(5) of IBC, 2016. 2. Application for withdrawal of CIRP under Section 12A of IBC, 2016. 3. Settlement proposal by the promoter of the Corporate Debtor. 4. Voting and approval by the Committee of Creditors (CoC). 5. Legal implications and compliance with IBC, 2016. Detailed Analysis: 1. Urgent Hearing Request under Section 60(5) of IBC, 2016: IA/647/IB/2020 was filed by the promoter of the Corporate Debtor under Section 60(5) of IBC, 2016, seeking urgent hearing of MA/43(CHE)/2021 to consider the settlement proposed by the Applicant. Since MA/43(CHE)/2021 was taken up for hearing and disposal along with this application, the prayer became infructuous, and IA/647/IB/2020 was closed. 2. Application for Withdrawal of CIRP under Section 12A of IBC, 2016: MA/43(CHE)/2021 was filed by the Resolution Professional (RP) of the Corporate Debtor under Section 12A of IBC, 2016, seeking withdrawal of the original application filed under Section 7 of the Code and implementation of the approved Settlement Plan. The application also sought the initiation of liquidation proceedings in the event of failure to adhere to the terms of the Settlement Proposal. 3. Settlement Proposal by the Promoter of the Corporate Debtor: The sequence of facts leading to the filing of the application included the initiation of CIRP by IDBI Bank Limited, public announcements, constitution of CoC, and submission of claims by creditors. The RP issued Form-G inviting Expressions of Interest (EoI) for submission of the Resolution Plan. The only prospective Resolution Applicant, RPIFL, failed to receive the requisite majority of votes for its Resolution Plan. Subsequently, a shareholder of the Corporate Debtor proposed a One Time Settlement Offer, which was considered by the CoC but failed to garner the requisite 90% approval. 4. Voting and Approval by the Committee of Creditors (CoC): The CoC, in its 17th meeting, approved the withdrawal of CIRP with a 94.23% majority. However, the settlement proposal was not put to vote by the CoC members, and the CoC did not receive any payment from the promoter of the Corporate Debtor at the time of voting. 5. Legal Implications and Compliance with IBC, 2016: The Adjudicating Authority observed that the settlement proposal appeared more like a Business Restructuring Plan rather than a settlement simpliciter under Section 12A of IBC, 2016. The Authority emphasized that the "commercial wisdom" of the CoC cannot override the judicial scrutiny of the Adjudicating Authority. The Authority also noted that the CoC's decision to withdraw CIRP without receiving any payment was not in conformity with the provisions of IBC, 2016. Conclusion: The Adjudicating Authority concluded that the Settlement Proposal was not a settlement simpliciter as envisaged under Section 12A of IBC, 2016, and there was no final offer or acceptance between the promoter of the Corporate Debtor and the CoC. The prayer for liquidation in case of default in the proposed Settlement Plan transcended beyond the scope of IBC, 2016. Consequently, MA/43(CHE)/2021 was dismissed. Separate Judgment: IA/586/CHE/2021 filed by State Bank of India sought to ensure that its mortgage rights over the immovable property offered by the Corporate Debtor would not be diluted upon withdrawal of CIRP. The Adjudicating Authority directed that the Applicant Bank may exercise its security interest over the subject property and intimate the Liquidator regarding its decision to relinquish or stand outside the Liquidation process.
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