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2022 (7) TMI 149 - AT - Insolvency and BankruptcyFinancial Creditors seeking to realise an amount more than offered by the Appellant either in the insolvency resolution process by Resolution Plan or a liquidation process - Section 12A of IBC - HELD THAT - The primary object of the IBC is to revive the Corporate Debtor and to ensure that it starts running. The Hon ble Supreme Court has observed that the settlements have to be encouraged because the ultimate purpose of the IBC is to facilitate the continuance and rehabilitation of a Corporate Debtor - The law has been clearly laid down by the Hon ble Supreme Court that although settlement has to be encouraged in the IBC but no direction can be issued to the Financial Creditor to positively grant the benefit of OTS to a borrower. The debt and default having been found by the Adjudicating Authority by admitting Application which debt and default having not been questioned before us, there are no error in the order of the Adjudicating Authority admitting Section 7 Application. The statutory scheme under the IBC delineated under Section 12A of the Code as well as Regulation 30 A of the CIRP Regulations, 2016 which has been brought in the statute w.e.f. 06.06.2018 is a clear recognition of provisions and procedures for settlement in the IBC proceedings. In the facts of the present case and sequence of the events which is noticed above, thus one more opportunity be given to the Appellant to submit an Application under Section 12A to the IRP/ RP for being placed before the CoC which is in place in view of our order dated 15.03.2022 vacating the interim order on constitution of the CoC. Since the offer of Rs. 81 Crores of the Appellant is not accepted by the Bank, the Application may be filed by the Appellant only if it makes an offer under Section 12A Application for an amount of more than Rs.81 Crores. The CoC under the IBC has been given full freedom to grant an approval of 90% voting share to a proposal under Section 12A only thereafter Application can be filed before the Adjudicating Authority. The freedom of decision of the CoC is unfettered. However, in the facts of the present case, the CoC while taking a decision for accepting or rejecting of proposal under Section 12A may also take following factors into consideration - (i) The Bank had issued a proposal for sale of NPA of the Corporate Debtor to the Asset Reconstruction Companies (ARC s)/ Non-Banking Financial Companies (NBFC s)/ Financial Institution (FI s) for an amount of Rs.81 Crores. (ii) Whether the Financial Creditor looking to the assets of the Corporate Debtor shall be able to realise an amount more than offered by the Appellant either in the insolvency resolution process by Resolution Plan or a liquidation process. (iii) The maximisation of the assets of the Corporate Debtor is one of the objectives, equally important is the recovery of the financial dues of the Bank and we have no doubt that CoC while taking a decision shall take decision under which it shall be able to realise its dues to the maximum. (iv) The CoC having been constituted after our order dated 15.03.2022 may also proceed to issue Form-G and receive the Resolution Plans. However, till the decision on proposal under Section 12A is not taken, CoC shall not proceed to take a vote on any of the Resolution Plans. Appeal disposed off.
Issues Involved:
1. Admission of Section 7 Application under the Insolvency and Bankruptcy Code, 2016. 2. Rejection of One Time Settlement (OTS) proposal by the Financial Creditor. 3. Rights and obligations under Section 12A of the Insolvency and Bankruptcy Code, 2016. 4. Role and discretion of the Committee of Creditors (CoC) in the insolvency resolution process. Issue-wise Detailed Analysis: 1. Admission of Section 7 Application under the Insolvency and Bankruptcy Code, 2016: The appeal was filed against the order dated 24.12.2021 by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench, which admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by the Indian Bank (Respondent No.1). The Corporate Debtor, a hospitality business entity, had defaulted on a compromise proposal accepted by the Bank for Rs.260 Crores. Despite partial payment of Rs.156 Crores, the balance Rs.102 Crores remained unpaid, leading to the filing and subsequent admission of the Section 7 Application by the Bank. 2. Rejection of One Time Settlement (OTS) proposal by the Financial Creditor: The Corporate Debtor made several OTS proposals to the Bank, including an offer of Rs.81 Crores, which was rejected by the Bank on 06.12.2021. The Appellant contended that the Bank's refusal to accept the OTS proposal, which matched the amount offered to Asset Reconstruction Companies (ARCs), was unjustified. The Bank argued that the offer to ARCs involved 100% cash payment and was part of a combined offer for other NPAs, and thus, the Appellant could not claim settlement on the same terms. The Bank maintained that no borrower has the right to demand OTS acceptance, and the grounds raised in the appeal could not be the subject matter under the IBC. 3. Rights and obligations under Section 12A of the Insolvency and Bankruptcy Code, 2016: The Appellant had also approached the Interim Resolution Professional (IRP) for submitting an application under Section 12A to withdraw the insolvency proceedings, which was not accepted by the CoC. The Tribunal emphasized that the primary objective of the IBC is to revive the Corporate Debtor and facilitate its rehabilitation. The Tribunal cited the Supreme Court's judgment in "ES Krishnamurthy & Ors. vs. M/s. Bharath Hi Tech Builders Pvt. Ltd." to support the encouragement of settlements under the IBC. 4. Role and discretion of the Committee of Creditors (CoC) in the insolvency resolution process: The Tribunal acknowledged the CoC's discretion in accepting or rejecting proposals under Section 12A, which requires a 90% voting share for approval. The Tribunal directed the Appellant to submit a fresh application under Section 12A with an offer exceeding Rs.81 Crores for consideration by the CoC. The CoC was instructed to consider factors such as the Bank's earlier proposal for NPA sale and the potential realization of dues through the insolvency resolution process or liquidation. Conclusion: The Tribunal disposed of the appeal with specific directions for the Appellant to file a fresh Section 12A application and for the CoC to consider the proposal within two months, without interfering with the Adjudicating Authority's order admitting the Section 7 Application. The CoC was advised to consider the factors mentioned in the judgment while taking a decision on the Section 12A application.
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