2024 (2) TMI 1258 - AT - Insolvency and Bankruptcy

Prayer for direction for placing the Settlement Proposal submitted by the Appellant before the CoC for consideration - CoC unanimously decided to reject the proposal - HELD THAT - On looking into the minutes of the CoC, it is clear that the proposal submitted by the Appellant was duly considered and deliberated by the CoC. The reasons have also been noted in the minutes due to which the proposal did not find favour with the CoC. The decision to accept or reject the proposal under Section 12A is essentially a business decision and is in the domain of commercial wisdom of the CoC - the submission of learned counsel for the Appellant that proposal of the Appellant was not adequately considered by the CoC or there is any error in consideration or CoC has arbitrarily acted in rejecting the proposal of the Appellant, is not accepted. It is well settled that jurisdictional review of the decision of CoC for accepting or rejecting a proposal by the Adjudicating Authority is only on the ground that decision is arbitrary. The minutes of the CoC meeting does indicate that there is application of mind and CoC has rejected the proposal after due consideration and deliberation. There are no error in the order of the Adjudicating Authority rejecting the application - appeal dismissed.

Summary

Issues:
The judgment involves the consideration of a Settlement Proposal under Section 12A of the Code by the Committee of Creditors (CoC) and the subsequent rejection of the proposal, leading to a legal challenge by the Appellant.

Settlement Proposal Consideration:
The Adjudicating Authority dismissed the application filed by the Appellant, challenging the rejection of their Settlement Proposal by the CoC. The Appellant argued that the proposal, which aimed to satisfy claims of all stakeholders, was not adequately considered by the CoC. The Appellant contended that the CoC should have reasonably evaluated the proposal, which could have been beneficial to all stakeholders.

CoC Meeting Details:
The Settlement Proposal under Section 12A of the Code was presented to the CoC during its 13th meeting held on 19.05.2023. The minutes of the meeting revealed the details of the proposal submitted by the Appellant, which included proposed amounts for various stakeholders and the reasons for the rejection by the CoC. The CoC members deliberated on the proposal, highlighting concerns such as the deferred nature of payments, lack of clarity on financial sources, absence of a business plan, and doubts regarding the credibility of the Appellant.

Judicial Review and Decision:
Upon reviewing the CoC meeting minutes, the Tribunal found that the proposal had been duly considered and deliberated upon by the CoC. The Tribunal emphasized that the decision to accept or reject a proposal under Section 12A is a business decision within the commercial wisdom of the CoC. It was noted that the CoC had applied its mind and made a reasoned decision to reject the proposal. The Tribunal clarified that the jurisdictional review of the CoC's decision is limited to arbitrariness, and in this case, there was no indication of arbitrariness in the CoC's decision.

Resolution Plan Approval:
The Respondent No.2 informed the Tribunal that the Resolution Plan had also been approved on 04.01.2024. The Tribunal found no error in the Adjudicating Authority's decision to reject the application filed by the Appellant, ultimately dismissing the appeal.