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TMI Blog2024 (8) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 03.07.2024 passed by National Company Law Tribunal, Court V, New Delhi, rejecting IA No.2594 of 2023 filed by the Appellant. 2. Brief facts and sequence of events giving rise to this Appeal need to be noted: (i) The Corporate Debtor has taken various financial facilities from the Indian Bank (erstwhile Allahabad Bank). Section 7 Application was filed by the Indian Bank being CP(IB) No.1913/2019, which Application was admitted by order dated 24.12.2021 passed by the Adjudicating Authority. (ii) The Appellant filed Company Appeal (AT) (Insolvency) No.03 of 2022, challenging order dated 24.12.2021 before this Tribunal. Company Appeal (AT) (Insolvency) No.03 of 2022 was disposed of by this Tribunal by judgment dated 04.07.2022, permitting the Appellant to file fresh application under Section 12-A to the Interim Resolution Professional ("IRP")/ Resolution Professional ("RP") for placing it before the Committee of Creditors ("CoC") containing offer of more than Rs.81 crores. (iii) After order dated 04-07-2022, the Appellant submitted settlement proposal, which was not approved by the CoC. An IA No.3410 of 2022 was filed by the Appellant in Company Appeal (AT) (Insolvency) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 03.02.2023, disposed of, IA No.259 of 2023 observing that it is open for the Applicant/ Appellant to make such application, as permissible in law, before the Adjudicating Authority for consideration of his grievance, if any. It was, however, observed that no case has been made out to pass any further order in IA No.259 of 2023. Against the above order dated 03.02.2023 passed by this Tribunal, the Appellant filed Civil Appeal No.1705 of 2023 before the Hon'ble Supreme Court, which Appeal was also disposed of on 20.03.2023, noticing the liberty granted by Appellate Tribunal to approach the National Company Law Tribunal. (vii) The proposal which was submitted by the Appellant after approval of the Resolution Plan of the SRA, was declined by the Indian Bank vide email dated 05.05.2023 to the Appellant. The Appellant filed IA No.2594 of 2023 before the Adjudicating Authority, wherein following prayers were made: "a) Allow the instant Application and direct the Respondent/ Competent Authority to negotiate, deliberate and take a decision on the settlement proposal U/s 12-A dated 21.03.2023 given by the Applicant and/or; b) Pass an ad-interim ex-parte stay on any further procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CoC. With regard to rejection of the settlement proposal submitted by the Appellant, it is submitted that when the decision of CoC to reject the settlement offer given under 12-A is arbitrary, it is well settled that the said decision can be successfully challenged before the Adjudicating Authority. It is submitted that an arbitrary decision of the CoC cannot be saved in the name of commercial wisdom of the CoC. It is submitted that sole Member of the CoC has not given any heed to the settlement proposal given by the Appellant, who is desirous of revival of the Corporate Debtor. It is submitted that IA No.2594 of 2023 was filed by the Appellant due to liberty granted by this Tribunal vide its order dated 03.02.2023 in IA No.259 of 2023. 5. Shri Rajesh Kumar Gautam, learned Counsel for the Indian Bank, refuting the submission of learned Counsel for the Appellant submits that Appellant's settlement proposal submitted under Section 12-A, which was submitted by letter dated 25.11.2022 was considered by the CoC, as per order passed by this Tribunal on 04.07.2022 and 21.11.2022 in 13th CoC meeting held on 26.11.2022 and 14th CoC meeting held on 07.12.2022. The Resolution Plan submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applications. The Appellant has also filed Appeals to the Hon'ble Supreme Court at two occasions. It is submitted that the CoC has deliberated and considered the settlement proposal submitted by the Appellant and did not accept the same, there is no arbitrariness in the decision of the Bank. The amount due on the CD's is Rs.238 crores and by accepting the settlement proposal, the CoC could not have relinquished the obligation of the Promoters and Guarantors. There is no merit in the Appeal and the Appeal deserves to be dismissed. The learned Counsel for the Indian Bank has also filed an additional affidavit, which was permitted by this Tribunal. 7. The learned Counsel for the RP has filed an additional affidavit. Learned Counsel for the RP refuted the submissions of the Appellant and submitted that Appellant's revised settlement offer dated 25.11.2022 was placed before the CoC and deliberated on 13th and 14th CoC meetings and the settlement proposal of the Appellant was put to vote and was rejected with 100% vote share of the CoC on 08.01.2023. The Resolution Plan submitted by Respondent No.3 was approved with 100% vote share of the CoC. The period of 330 days, after expiry of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion within a period of two months from this date. For a period till CoC takes a decision on a proposal under Section 12A, CoC may not put any Resolution Plans, if any, to vote." 10. Subsequent to the order of this Tribunal dated 04.07.2022, the Appellant again filed an IA No.3410 of 2022 in Company Appeal (AT) (Insolvency) No.03 of 2022 stating that the Appellant has submitted its settlement proposal, where the Appellant asked the CoC to disclose the Resolution Plan. It was pleaded by the Appellant that Appellant is not permitted to participate and negotiate with the CoC. IA No.3410 of 2022 was disposed of by this Tribunal on 21.11.2022 observing that proposal of Applicant under Section 12-A for settlement has naturally to be weighed against the Resolution Plans received in the process. While disposing of the Application, following observations were made in paragraph 15 by this Tribunal, which are as follows: "15. The 06th, 07th and 08th CoC Meetings which have been brought on record in the Contempt Application clearly indicate the substantial part of discussions in the minutes of the CoC where with regard to the interpretation of the Order of this Tribunal dated 04.07.2022, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any other period as decided by CoC " .... The CoC member, Indian Bank deliberated that apparently from the revised offer of the resolution Applicant, it can be ascertained that the financial creditor will receive Rs. 118 Crore approx. .. as per the plan which is quite higher than the proposal submitted by Mr. Sanjeev Mahajan (100 Cr.) .... Indian Bank also added that the order of the NCLAT, New Delhi dated 21.11.2022 has given an opportunity to the promoter and both the resolution Applicants to revisit their offer and renegotiate with the CoC and thereafter the CoC to take a decision and looking upon the revised values received, it is said that the revised proposal of the resolution Applicant-Nehru Place Hotels has increased their offer value by approximately of Rs. 5. 00 Crore in total. Mr. Sanjeev Mahajan deliberated upon his proposal and showed his bonafide intent, and his proposal is, "as in where is basis" ..... The CoC member, Indian Bank replied that in the present meeting itself he has been given an opportunity to revise the offer or deliberate upon same .... in case the promoter is willing to revise the offer, CoC will be happy to consider the same. Indian Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osals to vote." 15th CoC meeting dated 28.12.2022 Item No. A3: To take note of the minutes of the 14th CoC meeting held on 07.12.2022 which were circulated on 09.12.2022 " .. That Mr. Sanjeev Mahajan has made representation before the MD/MD Secretariat in view of which the CoC has asked the RP to call for a special meeting to take his inputs and listen to his view in respect of any negotiations for any improved offer of his settlement as stipulated under order of the Hon'ble NCLAT dated 21.11.2022. At this juncture, the Chairman gave the opportunity to Mr. Mahajan to deliberate upon the Settlement Proposal as he has been requesting the bank to have a personal meet with competent authority and this CoC has been specially conveyed to give effect to the directions received by Mr. N C Nehra from his central office, ... The Coc further inquired whether Mr. Mahajan wishes to increase the upfront amount payable to the bank in lieu of the settlement or any further change in the payment timelines, To this Mr. Mahajan replied that whatever they have submitted, they stand by their offer .. " 16th CoC meeting dated 09.01.2023 Item No. A5: To discuss the further course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on as is where is ... Indian Bank put forth that in case the Bank accepts the Settlement Proposal it will be releasing the guarantees held with the bank to the promoter which shall not be there in case of the resolution plan, therefore, upon comparison of the Resolution Plan and the Settlement Proposal, the Settlement Proposal given by the promoter is not in compete with the resolution plan received. After detailed deliberation and discussion upon the feasibility and viability of the resolution plans as received from the resolution Applicants and the proposal of promoter u/s 12, CoC asked the RP to put all 3 proposals to vote." 13. From the above minutes, it is clear that Bank has also asked the Appellant whether he is ready to increase his offer, where the Appellant has intimated that he has submitted its best offer. The minutes of the 14th CoC also notices that the Bank noted in the minutes that if the Bank accept the settlement proposal, it will have to release the guarantees held with the Bank to the Promoters, which shall not be there in case of Resolution Plan submitted by Respondent No.3 is approved. The minutes clearly record "therefore, upon comparison of the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this grievance, if any. Learned Counsel for the Applicant/Appellant submits that he is making offer higher than the Successful Resolution Applicant, whose plan has been approved. It is open for the Applicant to place his plea, as admissible in law, before the Adjudicating Authority. We are of the view that no case has been made out to make further order in I.A. No. 259 of 2023. Any Application filed by the Applicant shall be considered in accordance with law by the Adjudicating Authority. Contempt Case (AT) No. 07 of 2023 Learned Counsel for the Applicant/Appellant submits that he does not want to prosecute the Contempt Application. Contempt Application is, therefore, closed." 15. It appears after order dated 03.02.2023, the Appellant has sent various other proposals, which have been noted above, including the offer submitted on 21.03.2023 for an amount of Rs.118.26 crores, which was declined by the Indian Bank by communication dated 05.05.2023. It was thereafter, an IA No.2594 has been filed by the Appellant, which came to be decided by the impugned order by the Adjudicating Authority. We have already noticed the prayer in the IA, which were to set aside the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority made following observations: "....CoC has already approved the Resolution Plan which is pending for consideration of this Adjudicating Authority. Suspended Management has filed certain applications proposing higher amount than proposed by the SRA for consideration of the CoC. Since, the matter is an old one, last opportunity is granted, so that any acceptable settlement can be arrived. If no settlement arises before the next date of hearing, the Resolution Plan will be heard on merits....." 17. When we look into the IA, which was filed by the Appellant being IA No.2594 of 2023, what is questioned by the Appellant is rejection of its proposal, which was submitted on 21.03.2023, enhancing its Plan value as Rs.118.26 crores. The submission, which has been pressed by Shri Abhijeet Sinha, is that the Adjudicating Authority in the impugned order has not considered the submissions, which was advanced by the Appellant on the ground that rejection of settlement proposal of the Appellant is in accordance with the commercial wisdom of the CoC and the same cannot be questioned before the Adjudicating Authority. The learned Counsel for the Appellant submits that it has been laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following from the settlement proposal dated 25.11.2022, which is filed as Annexure R-1 to the additional affidavit filed by the Bank. Following was stated in the settlement proposal of the Appellant dated 25.11.2022: "Needless to mention that upon approval and implementation of the present offer, the entire outstanding / debt of Bank as a whole shall stand discharged and no due shall remain recoverable, all legal proceedings shall be withdrawn immediately on remittance of 25% of our offer amount. Payment of remaining INR 75 Crore on or before 31st March, 2023 the entire liability of CD shall stand extinguished. CD and/ or Promoters/ Guarantors shall not be liable to make any further payment towards the outstanding amount to the FC. The FC shall issue a letter confirming the closure of the loan Account." 19. Thus, the settlement proposal submitted by the Appellant was with the condition that on approval of the same, liability of CD, Promoter and Guarantors shall stand extinguished, meaning thereby that the Bank has to release the personal guarantees of Promoter and Guarantors, which part of the proposal was duly considered in the 14th CoC meeting and relevant extract from 14th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17] , one of the challenges made was with regard to validity of Section 12-A IBC. It was argued that the figure of 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 : (SCC p. 87, para 83) "83. The main thrust against the provision of Section 12-A 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 11 of the Adjudicating Authority Rules, may allow or disallow the application for withdrawal or settlement after hearing the parties and considering the relevant factors on the facts of each case. A withdrawal in other words is by the applicant. The withdrawal leads to a status quo ante in respect of the liabilities of the corporate debtor. A withdrawal under Section 12-A is in the nature of settlement, which has to be distinguished both from a resolution plan which is approved under Section 31 and a scheme which is sanctioned under Section 230 of the 2013 Act. A resolution plan upon approval under Section 31(1) IBC is binding on the corporate debtor, its employees, members, creditors (including the Central and State Governments), local authorities, guarantors and other stakeholders. The approval of a resolution plan under Section 31 results in a "clean slate", as held in the judgment of this Court in Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] . Rohinton F. Nariman, J. speaking for the three- Judge Bench of this Court, observed : (Essar Steel case [Essar Steel (India) Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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