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2022 (9) TMI 567 - AT - Insolvency and BankruptcySeeking issuance of directions by this Tribunal, to the Resolution Professional, to communicate the revised Settlement Proposal to the Committee of Creditors - Rule 31 of the NCLAT Rules, 2016 - prime contention of the Applicant/Appellant is that the Settlement Agreement is to be placed before the Committee of Creditors and in any event the Appellant is required to abide by the decision taken by the Members of the Committee of Creditors - HELD THAT - It cannot be gainsaid that an inherent power of a Tribunal/Court of Law, cannot be exercised in violation or in conflict with or upon ignoring express and specific provision of Law. It is pertinently pointed out that the Object of the I B Code, 2016, is to reorganised and evolve Insolvency Process of Corporate Persons in a time bound manner for maximisation of such Persons. If there is a delay, in regard to the maximisation of value of assets of the Corporate Debtor, it will debilitate the value of realisation of Potential Creditors, in the considered opinion of this Tribunal. No wonder, Time is the essence of the I B Code, 2016. Without any simmering doubt, Speed is the gist of the Code. A timely Liquidation is preferred over endless Resolution Proceedings, as opined by this Tribunal. This Tribunal, taking note of the primordial fact, that there is no provision under the I B Code, 2016, authorising this Tribunal, to grant the relief of issuance of direction to the Resolution Professional, in communicating the Settlement Proposal of the Applicant/Appellant to the Committee of Creditors and to place the same for e-voting and since I.A. No.558 of 2022 in the instant Appeal is not filed by the ₹ 1st Respondent/Association at whose behest, the Corporate Insolvency Resolution Process was initiated, added further, the said application is not accompanied with the mandatory Form FA (Application for withdrawal of CIRP under 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, as prescribed, all the more, the Draft Settlement Agreement/Proposal has not received the ascent /consent/ approval of the Home Buyers, especially, forming part of the ₹ 1st Respondent/Association who hold approximately ₹ 56% voting share in the Committee of Creditors, and considering the whole gamut of the matter in a holistic fashion, comes to an irresistible, inevitable and inescapable conclusion that application filed by the Applicant/Appellant (under Rule 31 of NCLAT Rules, 2016), is not a Bonafide one. The appeal filed by the Applicant/Appellant is dismissed to prevent an aberration of justice and in furtherance of substantial cause of justice.
Issues Involved:
1. Communication of the revised Settlement Proposal to the Committee of Creditors (CoC). 2. The role and responsibilities of the Resolution Professional (RP) in the settlement process. 3. The legal framework under the Insolvency and Bankruptcy Code (IBC), 2016, regarding settlement and withdrawal of Corporate Insolvency Resolution Process (CIRP). 4. The validity and enforceability of the Draft Settlement Agreement. 5. The inherent powers of the Tribunal under Rule 31 of the NCLAT Rules, 2016. 6. The commercial wisdom of the CoC and judicial intervention. Issue-wise Detailed Analysis: 1. Communication of the Revised Settlement Proposal to the CoC: The Applicant/Appellant sought directions from the Tribunal to the Resolution Professional to communicate the revised Settlement Proposal to the CoC. The Appellant argued that the revised Settlement Plan was crucial for Home Buyers and would end all litigations, ensuring the delivery of apartments. The Appellant contended that the RP had not taken action to communicate the Settlement Proposal to the CoC, which was necessary for resuming construction. 2. The Role and Responsibilities of the RP in the Settlement Process: The Appellant argued that the RP should communicate the Settlement Proposal to the CoC for approval. The RP's duties under Sections 18 and 25 of the IBC, 2016, and the constitution of the CoC under Section 24 were highlighted. The Appellant claimed that the RP's failure to consider the Settlement Plan and place it before the CoC was against the interest of justice. 3. Legal Framework under IBC, 2016, Regarding Settlement and Withdrawal of CIRP: The 1st Respondent contended that the invocation of inherent powers under Rule 31 of the NCLT Rules, 2016, by the Appellant was impermissible as the IBC, 2016, is a self-contained code. The 1st Respondent relied on the Supreme Court judgment in Pratap Technocrats (P) Ltd. v. Monitoring Committee of Reliance Infratel Limited, emphasizing that the jurisdiction of the Adjudicating Authority and the Appellate Authority is strictly governed by the provisions of the IBC and its regulations. The 1st Respondent argued that a settlement in CIRP can only be effected as per Section 12A of the IBC, read with Regulation 30-A of the IBBI Regulations, 2016. 4. Validity and Enforceability of the Draft Settlement Agreement: The 1st Respondent argued that the Draft Settlement Agreement did not create enforceable rights in favor of Home Buyers or enforceable obligations against the Promoters of the Corporate Debtor. The 1st Respondent highlighted that the Draft Agreement lacked timelines for investment mobilization and did not include the Investor as a signatory, questioning its bona fide nature. The 2nd Respondent/RP also raised concerns about the credibility and sanctity of the Settlement Plan, noting the absence of direct correspondence from the Investor and the necessity of Foreign Direct Investment (FDI) approval. 5. Inherent Powers of the Tribunal under Rule 31 of the NCLAT Rules, 2016: The Tribunal noted that inherent powers cannot be exercised in violation or conflict with express provisions of law. The Tribunal referred to the Supreme Court's decision in Nawabganj Sugar Mills Company Limited v. Union of India, emphasizing that judicial discretion must be informed by tradition, methodized by analogy, and disciplined by system. 6. Commercial Wisdom of the CoC and Judicial Intervention: The Tribunal referred to the Supreme Court's judgment in Vallal RCK v. M/s. Siva Industries and Holdings Limited, which underscored the paramount status of the CoC's commercial wisdom without judicial intervention. The Tribunal also cited the Supreme Court's decision in Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors., which explained the high threshold for withdrawal under Section 12A of the IBC, requiring 90% approval from the CoC. Conclusion: The Tribunal concluded that there was no provision under the IBC, 2016, authorizing it to direct the RP to communicate the Settlement Proposal to the CoC and place it for e-voting. The Tribunal noted that the I.A. No. 558 of 2022 was not filed by the 1st Respondent/Association at whose behest the CIRP was initiated and was not accompanied by the mandatory Form FA for withdrawal. The Draft Settlement Agreement had not received the consent or approval of the Home Buyers, especially those forming part of the 1st Respondent/Association, holding approximately 56% voting share in the CoC. The Tribunal dismissed I.A. No. 558 of 2022, filed by the Applicant/Appellant, as not bona fide and intended to delay the hearing of the main appeal.
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