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2022 (1) TMI 1323 - AT - Insolvency and BankruptcyApproval of Resolution Plan - Whether after approval of the Resolution Plan by Committee of Creditors under Section 30, sub-section (4) and filing an Application before the Adjudicating Authority for its approval, any Settlement Proposal under Section 12A (filed by Ex-Promoter) can be entertained deferring consideration of approval of Resolution Plan by the Adjudicating Authority? HELD THAT - 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 not a case where the Adjudicating Authority has interfered with any decision of the CoC. When the invitation was issued inviting Expression of Interest, it was open for all who were eligible to submit the Resolution Plan under Section 29A. Whether the Promoter, who has now submitted Settlement Proposal was eligible or not under Section 29A, is also a relevant question and after approval of Resolution Plan, these enquiries cannot be entertained and embarked upon to find out the eligibility of the Applicant. The learned Counsel for the Appellant lastly submitted that no reason has been given by the Adjudicating Authority in rejecting the Application filed by the Appellant for keeping in abeyance the proceedings for approval of Resolution Plan. The Adjudicating Authority being in seize of Application for approval of Resolution Plan, there had to be strong reason to keep the Application in abeyance. The Adjudicating Authority being not satisfied that there is adequate reason to accept the prayer of the Appellant, no error has been committed by the Adjudicating Authority in rejecting the Application. Appeal dismissed.
Issues Involved:
1. Whether a Settlement Proposal under Section 12A can be entertained after the approval of the Resolution Plan by the Committee of Creditors (CoC) and before the approval of the Adjudicating Authority. Issue-wise Detailed Analysis: 1. Whether after approval of the Resolution Plan by Committee of Creditors under Section 30, sub-section (4) and filing an Application before the Adjudicating Authority for its approval, any Settlement Proposal under Section 12A (filed by Ex-Promoter) can be entertained deferring consideration of approval of Resolution Plan by the Adjudicating Authority? The statutory scheme under the Insolvency and Bankruptcy Code (IBC) and relevant regulations were examined. Section 30 outlines the submission and approval process of a resolution plan, requiring the Resolution Professional (RP) to present the plan to the CoC for approval by at least 60% of the voting share. In this case, the CoC approved the Resolution Plan with 100% voting on 17.01.2020, and the RP filed an application for its approval on 04.02.2020. The Appellant submitted a Settlement Proposal on 11.08.2022, claiming pre-approval from financial creditors constituting over 84% of the vote shares. However, the RP and the Successful Resolution Applicant argued that post-approval of the Resolution Plan by the CoC, no Settlement Proposal can be entertained. Regulation 30A of the CIRP Regulations, 2016, details the procedure for withdrawal of application under Section 12A. The proviso to Regulation 30A(1)(b) mandates special reasons for withdrawal after the issue of invitation for Expression of Interest (EOI). The regulation does not contemplate the filing of a Section 12A application after the approval of the Resolution Plan by the CoC. Additionally, Regulation 30A(2) does not include expenses under Regulation 34, which pertains to RP costs, further supporting the contention that Section 12A applications post-CoC approval are not envisaged. The Tribunal referred to the Supreme Court's judgment in *Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Limited and Anr.*, which held that a Resolution Plan approved by the CoC is binding and not purely contractual, thus preventing the CoC or the Successful Resolution Applicant from reneging on its terms. This binding nature is crucial for maintaining the finality and timelines prescribed by the IBC. The Tribunal also considered the Supreme Court's judgment in *Vallal Rick vs. M/s Siva Industries and Holdings Limited and Ors.*, which allowed withdrawal under Section 12A when no Resolution Plan was approved, distinguishing it from the present case where a Resolution Plan was already approved by the CoC. The Tribunal emphasized that allowing a Settlement Proposal post-CoC approval would breach the timelines and finality of the resolution process. The commercial wisdom of the CoC in approving the Resolution Plan is paramount, and the CoC cannot rescind its decision after such approval. The Tribunal concluded that the Adjudicating Authority did not err in rejecting the Appellant's application to keep the proceedings for approval of the Resolution Plan in abeyance, as there were no adequate reasons to do so. Conclusion: The appeal was dismissed, affirming that post-CoC approval, a Settlement Proposal under Section 12A cannot be entertained, and the decision of the CoC is binding and final. The commercial wisdom of the CoC and adherence to the timelines prescribed by the IBC are crucial for the integrity of the resolution process.
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