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2022 (2) TMI 64 - AT - Insolvency and BankruptcySeeking withdrawal of main Insolvency and Bankruptcy Application - seeking to consider the settlement proposal initially circulated by the Appellant with the creditor - Section 12A of IBC - HELD THAT - Considering the fact that the COC was in the last stage of finalising the Resolution Plan of RPIFL the Committee of Creditors opined that unless the CIRP period was extended (the same would come to an end on 29.02.2020) and that they might not provide them an opportunity to consider and vote on the Resolution Plan of RPIFL. Hence the Committee of Creditors in its Meeting dated 25.02.2020 adjourned to 26.02.2020 with 98.32% vote had authorised the Resolution Professional to file an Application before the Tribunal seeking exclusion of a period of 30 days in CIRP and that the application was filed on 28.02.2020. The Tribunal through an exclusion order dated 1303.2020 but delivered on 16.03.2020 had excluded a period of 30 days from CIRP time frame of the Corporate Debtor. Section 12A of the I B Code applies to an application for Insolvency Resolution which was admitted by the Adjudicating Authority and all the more when there is no challenge to the admission of the petition/application - Section 12A of the Code came into effect on 06.06.2018. Rule 8 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules 2016 is quite relevant for withdrawal of an application under Section 12A of the Code. Besides this Regulation 30A of the Insolvency Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016 is also relevant for withdrawal of application under Section 12A of the Code. It is well settled that a Resolution Plan is not an Auction/Sale/Recovery/Liquidation . A Resolution Applicant as per Section 30 of the Code is to scrutinise the Resolution Plan and to find out whether it fulfils the requirements of Section 30(2) of the Code. If the Plan satisfies the requirements of Law then the same is to be placed before the Committee of Creditors for its approval as per Section 30(3) of the Code and this can be approved by the Committee of Creditors as per requirement of Section 30(4) of the Code. If the Plan is approved by the Committee of Creditors the Resolution Plan is to be placed before the Adjudicating Authority as per Section 31 of the Code and the said Authority is to apply his thinking judicial mind to the Resolution Plan so furnished and on being satisfied with the Plan that it fulfils the ingredients or does not meet the ingredients or Section 30 of the Code may either accord approval to the Plan or negative the same - In the instant case on hand the Committee of Creditors had voted under Section 12A of the Code without even getting a single sum from the promoter of the Corporate Debtor in respect of the withdrawal of the CIRP pertaining to the Corporate Debtor. As a matter of fact the Adjudicating Authority had in the impugned order had categorically observed that the Settlement Proposal is not a Settlement Simpliciter but it is a business restructuring plan. This Tribunal comes to the consequent conclusion that the Settlement Proposal as projected by the Corporate Debtor and the approval of the withdrawal of the CIRP pertaining to the Corporate Debtor by the Committee of Creditors in its 17th Meeting dated 01.04.2021 was not quite in tune with the relevant provisions of the I B Code 2016 and to put it precisely it is out of bounds of the Insolvency Bankruptcy Code 2016 - the observations and the conclusion arrived at by the Adjudicating Authority to the effect that the projected settlement proposal plan of the promotor of the Corporate Debtor is not a settlement simpliciter as envisaged under Section 12-A of the Code 2016 rather it is a business restructuring plan and further that no finality was reached between the Promotor of the Corporate Debtor and Committee of Creditors as per Clause 2 of Chapter VIII of the Settlement proposal and hence based on ambiguity of the terms of the settlement it cannot order for withdrawal of CIRP are free from legal infirmities. Appeal dismissed.
Issues Involved:
1. Applicability and interpretation of Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016. 2. Validity of the Settlement Plan proposed by the promoter of the Corporate Debtor. 3. Approval and withdrawal of the Corporate Insolvency Resolution Process (CIRP). 4. Liquidation of the Corporate Debtor. Issue-Wise Detailed Analysis: 1. Applicability and Interpretation of Section 12A of IBC, 2016: The Tribunal examined Section 12A of the IBC, which allows withdrawal of an application admitted under Sections 7, 9, or 10 with the approval of 90% voting share of the Committee of Creditors (CoC). The Tribunal noted that Section 12A does not explicitly mention a "Settlement Plan" but mandates CoC's approval for withdrawal. The Tribunal emphasized that once an application is admitted, the proceedings become "action in rem" rather than "action in personam." 2. Validity of the Settlement Plan Proposed by the Promoter of the Corporate Debtor: The Tribunal observed that the Settlement Plan proposed by the promoter was not a "Settlement simpliciter" under Section 12A but a "Business Restructuring Plan." The Tribunal noted that the promoter, ineligible under Section 29A of IBC, attempted to restructure loans under the guise of a settlement proposal. The Tribunal highlighted that the Settlement Plan lacked finality and clarity, leading to ambiguity in terms of implementation. 3. Approval and Withdrawal of CIRP: The Tribunal scrutinized the CoC's decision to approve the withdrawal of CIRP based on the Settlement Plan. It was noted that the CoC approved the withdrawal without receiving any upfront payment from the promoter. The Tribunal emphasized that the CoC should have voted for the proposal only upon receipt of the full settlement amount to avoid potential defaults by the promoter. The Tribunal concluded that the approval of the withdrawal was not in conformity with the provisions of IBC, 2016. 4. Liquidation of the Corporate Debtor: The Tribunal upheld the Adjudicating Authority's decision to order the liquidation of the Corporate Debtor under Section 33(1)(a) of IBC, 2016. The Tribunal noted that the Resolution Plan submitted during CIRP failed to receive the requisite majority of 66% votes, leading to the initiation of the liquidation process. The Tribunal emphasized that timely liquidation is preferred over fruitless and endless resolution proceedings. Conclusion: The Tribunal concluded that the Settlement Proposal was not in line with the relevant provisions of IBC, 2016 and dismissed the appeals. The Adjudicating Authority's decision to order the liquidation of the Corporate Debtor was upheld, emphasizing that the Settlement Proposal was more akin to a Resolution Plan rather than a settlement simpliciter under Section 12A of IBC, 2016. The Tribunal reiterated the importance of adherence to the statutory framework and the necessity of CoC's approval based on concrete financial transactions to avoid legal uncertainties.
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