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TMI Blog2022 (1) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Company Appeal (AT) (Insolvency) No.1481 of 2022 - - - Dated:- 5-1-2022 - [Justice Asho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.5694 of 2022, the Appellant has come up in this Appeal. 3. We have heard Shri Arun Kathpalia, learned Senior Counsel for the Appellant with Shri Abhijeet Sinha; Shri Krishnendu Datta, learned Senior counsel has appeared for Successful Resolution Applicant. We have also heard learned Counsel for the RP as well as learned Counsel appearing for Financial Creditors, i.e., Respondent Nos.3 and 5. 4. Shri Arun Kathpalia, learned Senior Counsel for the Appellant submits that Appellant has submitted Settlement Proposal dated 11.08.2022 addressed to Financial Creditor, titled as Revised Settlement Proposal under Section 12A for Corporate Debtor. Shri Kathpalia submits that the said Settlement Proposal has the approval of Edelweiss Asset Reconstruction Company Limited Respondent No.3 and Canara Bank Respondent No.4, who constitute more than 84% of vote shares. Bank of India has sought time to obtain approval due to there being no Executive Director. The Revised Settlement Proposal was submitted in pursuance of discussion held in Joint Lender Meeting dated 18.07.2022. The Adjudicating Authority committed error in rejecting IA No.5694 of 2022 filed by the Appellant for keeping in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 12A can be entertained after the Plan has been approved by the CoC. It is submitted that more than two years ago the Resolution Plan was approved on 17.01.2020 and the Settlement Proposal sought to be filed after two and a half years by the Promoter, cannot be entertained. The Code provides for strict timelines, which cannot be permitted to be violated as is sought to be done by the Appellant in the present case. No Form FA has yet been submitted to the RP to enable him to place before the Adjudicating Authority for approval. 7. The learned Counsel appearing for Respondent Nos.3 and 5 submit that CoC is entitled to accept a better proposal, which has been submitted by the Appellant and the Settlement Proposal submitted by the Appellant is in preapproval of the CoC, hence, the CoC was entitled to vote on the 12A proposal. 8. The learned Counsel for the parties have relied on various judgments of Hon ble Supreme Court and this Tribunal, which shall be referred to while considering the submission in detail. 9. From the submissions, which have been made by the learned Counsel for the parties and the material on record, following question arise for consideration: (I) Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application. Regulation 30A is as follows: 30 A. Withdrawal of application - (1) An application for withdrawal under section 12A may be made to the Adjudicating Authority (a) before the constitution of the committee, by the applicant through the interim resolution professional; (b) after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be: Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation. (2) The application under sub-regulation (1) shall be made in Form FA of the 68[Schedule-I ]accompanied by a bank guarantee- (a) towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of sub-regulation (1); or (b) towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re process under the Code, including approval of the Plan by the CoC and filing of the Application before the Adjudicating Authority for approval of the Resolution Plan. Had it intended that 12A Application can be entertained even after Resolution Plan is approved by the CoC, the proviso would not have confined to issue invitation for Expression of Interest, rather, it could have been conveniently mentioned that after approval of Resolution Plan Applicant should justify withdrawal. It was never intended that after approval of Resolution Plan by CoC, Application under Section 12A can be entertained. Hence, the Regulation is framed in that manner. 17. Regulation 30(2) provides that Application shall be made in Form FA and accompanied by a bank guarantee towards estimated expenses incurred on or by the IRP for the purpose of Regulation 33, till the date of filing of the Application under clause (1) of sub-regulation (1). Regulation 33 deals with the costs of the IRP, whereas Regulation 34 deals with RP costs. Regulations 33 and 34 are as follows: 33. Costs of the interim resolution professional.--(1) The applicant shall fix the expenses to be incurred on or by the interim reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion before the Adjudicating Authority to set aside the admission order, which was rejected on 29.07.2019, where the Adjudicating Authority observed that admission order cannot be set aside, except where an application under Section 12A is filed. Challenging the order dated 29.07.2019, an Appeal was filed in this Tribunal. At the time of hearing of the Appeal, it was pointed out by the Union Bank of India that Resolution Plan has already been approved by the CoC. Noticing the aforesaid, this Tribunal in paragraph 8 and 9 made following observations: 8. In the circumstances, while we are not inclined to issue any specific direction, give liberty to the Appellant to move an application u/s 12A for settling the claims of all the Creditors including the guarantors. 9. If an application u/s 12A is filed by the Appellant, the Committee of Creditors may decide as to whether the proposal given by the Appellant for settlement in terms of Section 12A is better than the Resolution Plan as approved by it, and may pass appropriate order. However, as such decision is required to be taken by the Committee of Creditors , we are not expressing any opinion on the same. The appeal stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a typical contract. 113. The BLRC Report, which furnished the first draft of the IBC and elaborated on the aims behind the overhaul of the insolvency regime, refers to a CoC approved Resolution Plan as a binding contract in one instance and refers to it as a binding agreement in other instances. The report also refers to a CoC-approved Resolution Plan as a financial arrangement , revival plan or a solution . The interchangeability of the terms agreement , contract , financial arrangement , revival plan and solution indicates that there is no clear intention of the BLRC in characterizing the nature of the Resolution Plan as a contract. The binding effect of the Resolution Plan has the consequence of preventing the CoC or the Resolution Applicant to renege from its terms after the plan has been approved by the CoC through a voting mechanism. The fleeting mention of a binding contract on one occasion in the BLRC Report (which was a prelegislative text that underwent subsequent modifications by the Legislature) to indicate the binding nature of the Resolution Plan and the finality of negotiations once it is approved by the CoC, does not establish the legal n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of the IBC .. 22. The law laid down by the Hon ble Supreme Court as indicated in the above paragraphs is clear that the approval by the CoC of a Resolution Plan is not in the realm of contract, but is insulated by the Scheme under the Code and this bind both the Successful Resolution Applicant as well as CoC. The Hon ble Supreme Court in the Ebix itself has laid down timelines provided in the Code have to be adhered to. In event, the submission of the Appellant is accepted that even after the approval of the Plan by the CoC, the CoC be given power to entertain a Settlement Proposal by the Ex-Promoter, the timelines for the different process and its finality shall be breached. Approval by the CoC of a Resolution Plan has to be in accordance with its commercial wisdom and when CoC approves a Plan and the Resolution Applicant is prohibited to modify or withdraw from the Plan, same embargo has to be accepted on CoC also from changing its stand. The judgment of the Hon ble Supreme Court in Ebix Singapore lays down that after approval by the CoC of a Resolution Plan, CoC itself is bound by its decision and cannot be allowed to go back from its decision and pass any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90% voting share was arbitrary. It was the contention that though the withdrawal was just and proper, the CoC could exercise the power arbitrarily to reject such a settlement. While rejecting the said contention, this Court observed thus: 83. The main thrust against the provision of Section 12A is the fact that ninety per cent of the Committee of Creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the Committee of Creditors do not have the last word on the subject. If the Committee of Creditors arbitrarily rejects a just settlement and/or withd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding approval before the Adjudicating Authority. The case before the Hon ble Supreme Court was a case where no Plan could be approved and Application was filed to initiate the liquidation process, during which period an application was filed by Promoters offering settlement. Rejection of said Application was set aside by the Hon ble Supreme Court. The above judgment of the Hon ble Supreme Court can be said to clearly lay down that in event no Resolution Plan is approved and an application for liquidation is pending, 12A can be resorted to. From the above judgment of the Hon ble Supreme Court, we are unable to find any ratio that even if a Resolution Plan is approved by the CoC and the Application is pending consideration for approval, the Promoters are entitled to file Settlement Proposal. 25. To the same effect is the judgment of this Tribunal in Company Appeal (AT) (Insolvency) Nos.288 289 of 2018 in V. Navaneetha Krishnan vs. Central Bank of India, Coimbatore Anr. This Appellate Tribunal held that even during the liquidation period, if any person, not barred under Section 29A, satisfy the demand of Committee of Creditors, giving offer, which may be considered by the CoC b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, we must indicate that before the Appellate Authority substantial argument was advanced over failure on the part of the Adjudicating Authority to maintain parity between the financial creditors and operational creditors on the aspect of clearing dues. 29. In paragraph 29, ultimately the Hon ble Supreme Court has held that exit route prescribed under Section 12A is not applicable to a Resolution Applicant. The judgment in Maharashtra Seamless Limited was on different facts and circumstances and there is no ratio in the said judgment that after approval of Resolution Plan, Ex-Promoters are entitled to submit a Settlement Proposal. 30. There is one more aspect of the case, which need to be noticed. 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. 31. The learned Counsel for the Appellant lastly submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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