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TMI Blog2025 (1) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... rection on R.1 to reconsider the OTS submitted by the petitioner in terms of the RBI Framework. 2. R.1, which rejected the petitioner's OTS proposal by way of the impugned letter dated 30.10.2023, is a Financial Services Company. The respondent No. 2 (R.2) is the Reserve Bank of India and the respondent No. 3 (R.3) is the Successful Resolution Applicant (SRA) which was impleaded by an order passed by a Co-ordinate Bench on 12.09.2024. 3. The Court is informed that NNPIL filed an application for Corporate Insolvency Resolution Process (CIRP) pursuant to a Special Resolution passed by the majority of share holders under section 10 of The Insolvency and Bankruptcy Code, 2016 (IBC) i.e., Initiation of Corporate CIRP by corporate applicant. The CIRP is currently pending in the National Company Law Tribunal (NCLT) and NNPIL is being represented by a Resolution Professional (RP). NNPIL has not been made a party to the writ petition. 4. The relevant events leading to filing of the writ petition are as follows: 5. On 17.11.2017, NNPIL (Corporate Debtor) filed a petition for CIRP before the NCLT, Hyderabad Bench. The petition was admitted by the NCLT on 18.01.2018 and moratorium was decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e RBI Framework. Counsel submits that the pendency of the CIRP would not be a factor for R.1 to consider the petitioner's OTS proposal and that R.1 considered the OTS proposal after admission of the CIRP. Counsel relies on section 12A of the IBC to urge that an application for withdrawal under the said provision should be submitted before issuance of the invitation for expression of interest and that no restriction exists under the law to accept withdrawal of an application filed under sections 7, 9 or 10 of the IBC after issuance of invitation of expression of interest. Counsel relies on the relevant provisions of the IBC including section 30A of the IBC in this context. It is further submitted that each of the CoC members must deliberate on the OTS proposal independently to ensure that the decision complies with the RBI Framework dated 08.06.2023 which consists of mandatory Guidelines for considering the OTS Proposals. Counsel seeks setting aside of the impugned letter and a direction on R.1 to reconsider the OTS proposal dated 17.10.2023 submitted by the petitioner in terms of the RBI Framework. 10. Learned Senior Counsel appearing for R.1/Financial Creditor places the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? VII. Is the writ petition maintainable in the absence of a necessary party/the borrowing entity? I Is the petitioner entitled to relief after commencement of the CIRP ? 13. The Borrower Entity (which in a step-down subsidiary of the petitioner) was admitted into insolvency on 18.01.2018. Section 12 of the IBC contemplates completion of the Insolvency Resolution Process within 180 days which can be extended by another 90 days. The petitioner's OTS proposal was rejected by R.1 on 30.10.2023 (impugned in the present writ petition). The petitioner has however waited almost 6 years after admission of the Borrower Entity into insolvency and almost a year from the impugned rejection and filed the present writ petition on 30.07.2024. 14. It is clear from the above that the petitioner failed, for reasons unaccounted for, to immediately approach this Court after the impugned rejection. The petitioner has not given any credible reason for the intervening delay in filing the writ petition which includes a delay of almost a year from the impugned rejection. 15. In any event, the rejection of the petitioner's OTS proposal by R.1 on 30.10.2023 was followed by four crucial events, which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto." 21. It is settled law that the IBC is a self-contained Code. In the scheme of such an enactment, a party would have to trace its legal right to the mechanisms, time frames and the relief provided for in the Code itself. The petitioner now seeks to trace its legal right to the OTS with only one of the creditors i.e., R.1. The IBC does not provide for such a scenario, namely, that the borrowing entity can negotiate with only one of the creditors in the CoC to the exclusion of the other creditors. It is of seminal importance that the CIRP was set in motion from 18.01.2018. 22. The IBC has been described as an exhaustive Code on the subject matter of insolvency in relation to Corporate entities: Inno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... negotiated arrangement with the borrower to fully settle the claims of the Regulated Entity ('RE') against the Borrower in Cash. Clause 2 of the Framework requires that the Board-Approved Policy "shall comprehensively lay down the process to be followed for all compromise settlements and technical write-offs, with specific guidance on the necessary conditions precedent such as minimum ageing, deterioration in collateral value". Clauses 1 and 2 of the RBI Framework reveals that a Board-Approved Policy will only be required for taking a compromise settlement forward i.e., any arrangement initiated between the RE and the Borrower for settling the claims of the former. Clause 2 of the RBI Framework clarifies that a Board-Approved Policy is essentially for putting in place "the Process" to be followed in compromise settlements. 28. Therefore, not having a Board-Approved Policy at the time of rejection of the petitioner's OTS would not undermine the rejection since the rejection itself precluded any compromise settlement between the petitioner and the respondent No. 1 after 30.10.2023. The requirement of following the process under a Board-Approved Policy was a part of the RBI Prudentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is exclusively within the commercial wisdom of the concerned lender: Bijnor Urban Cooperative Bank Limited, Bijnoor Vs. Meenal Agarwal (2023) 2 SCC 805. 31. The RE's request to the petitioner to extend the EMD of the OTS offer for 3 months cannot be equated to an acceptance of the petitioner's OTS. In any event, the respondent No. 1 was dealing with a Borrower which was already in CIRP as on 10.10.2020 (the date of the mail by which the request was made) and would hence be under an obligation to act in terms of the law, i.e., the provisions of the IBC. IV Is the Writ Petition maintainable in the face of the Alternative Remedy under section 60 (5) of the IBC ? 32. Section 60 (5) of the IBC provides as follows: "60. Adjudicating Authority for corporate persons: ......... (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of- (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceeding before the NCLT is transformed from a single or two-party proceeding into one in rem i.e., a collective proceeding with public ramifications. This means that if any entity wants to withdraw the CIRP, it would have to obtain the approval of the entire CoC in accordance with law. The option of negotiating with only one creditor (R.1 in this case) is not contemplated under the law: GLAS Trust Company LLC Vs. BYJU Raveendran Civil Appeal No.9986 of 2024. 39. In essence, any decision concerning the creditors must be in the form of a collective decision once an entity (in this case the Corporate Debtor) has subjected itself to the CIRP mechanism. In BYJU Raveendran (supra), the Supreme Court, relying on Swiss Ribbons (P) Ltd. Vs. Union of India (2019) 4 SCC 17, recognized that the CoC, which oversees the Resolution Process, must be consulted before allowing the claim to be settled. The Supreme Court further held that the NCLT and the NCLAT are the designated fora for a challenge to the CoC's decision. 40. Therefore, the position of law is this. The High Court conferring jurisdiction on a single creditor (R.1) to consider the settlement proposal of the petitioner cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esses without any counter movement to reverse the movement. 44. Significantly, between 18.01.2018 (the date of admission of the Borrower's application for CIRP) and 30.07.2024 (the date of filing of the present writ petition), there were at least four irreversible events which took place in the course of the CIRP. These are (1) the commencement of the CIRP of the petitioner's step-down subsidiary on 18.08.2018, (2) the invitation to prospective Resolution Applicants to submit Resolution Plans in respect of the Corporate Debtor on 21.11.2023, (3) the Resolution Plan of the respondent No. 1 being put to vote on 16.07.2024, and (4) approval of the respondent No. 3's Resolution Plan on 30.07.2024. 45. None of these events, as per the law declared by the Supreme Court, can now be reversed or be obliterated for a clean-slate start for considering the petitioner's proposal afresh. As stated above, a CIRP replaces bipartite negotiations with multi-party resolutions. The other parties, which would include the respondent No. 2 and the other members of the CoC, cannot be made to vanish from the advanced stage of the CIRP by clearing the stage for a re-raising of the curtains for replay of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India vs. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch Civil Appeal Nos.5023-5024 of 2024 dated 07.11.2024. In the said decision, the Supreme Court placed emphasis on the commercial wisdom of the CoC which assumes a position of superiority to all the stake holders. In fact, the hands-off approach was also extended to the NCLT which cannot trespass into the commercial wisdom exercised by the CoC. 52. In Hem Singh Bharana vs. Pawan Doot Estate Pvt. Ltd. 2023 SCC Online NCLAT 34, the National Company Law Appellate Tribunal (NCLAT) relied on Ebix Singapore Private Limited (supra) and reiterated that the CoC itself is bound by its approval of Resolution Plan and cannot be allowed to resile from its decision. The CoC's decision imparts the required finality on the different steps of the IBC for timely conclusion of the Resolution Process. Hem Singh Bharana was confirmed by the Supreme Court on 30.01.2023. In the present case, the CoC approved the Resolution Plan of R.3 on 01.08.2024 with the requisite majority. Therefore, the Resolution Plan approved by the CoC has become binding on the stakeholders including R.1 and R.3. The petitioner cannot be allowed to achieve i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party to the writ petition. On the other hand, Indian Overseas Bank is not a necessary or a proper party to the writ petition: 57. The petitioner seeks impleadment of the Indian Overseas Bank in I.A.No.7 of 2024. However, as per the petitioner's own showing, the principal prayer is against R.1 for rejection of the OTS proposal dated 17.10.2023. Indian Overseas Bank has no role to play with regard to the OTS proposal submitted by the petitioner to R.1 or the rejection thereof. I.A.No.7 of 2024 seeking impleadment of the Indian Overseas Bank should hence be dismissed. In any event, the admitted cause of action in the writ petition is against R.1. 58. Besides, R.1 constitutes 85.35% of the CoC and any application for withdrawal of the CIRP under section 12A of the IBC can only be done with the approval of 90% of the voting share of the CoC. The petitioner's prayer to implead the Indian Overseas Bank is therefore a relief which, by all means, falls within the regime of the IBC and is entirely within the powers of the NCLT. The petitioner cannot be permitted to crowd the Writ space with actors who should be in the arena of the NCLT. The question mark on the maintainability of the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92 is not applicable to the particular facts of this case since the Corporate Debtor was admitted in CIRP as of January, 2018. 64. The above discussion persuades the Court to conclude that the petitioner is not entitled to the relief prayed for under Article 226 of the Constitution of India. The petitioner should have taken recourse to the provisions of the IBC and approached the NCLT for appropriate relief. The writ petition is also not maintainable in view of the efficacious statutory remedy under section 60 (5) of the IBC which is a comprehensive Code envisaging all possible scenarios and modes of redress within the four corners of the IBC. The first respondent, as the sole Financial Creditor, is also divested of powers to entertain an OTS once the CIRP of the Corporate Debtor is set in motion. The power to withdraw the applications under section 12A of the IBC post-admission must also be subject to the approval of the CoC in the manner prescribed in the said provision. 65. The Court agrees with the contention of the respondent Nos.1 and 3 with regard to the writ petition being rendered irrevocably vulnerable by not impleading the Borrowing Entity who is presently in CIRP. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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