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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 ..... 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. The petitioner has not given any explanation, credible or otherwise, as to why the petitioner failed to approach the Court in 2018 or immediately after the rejection of the OTS in October, 2023. The petitioner s delay would have the effect of upending the Resolution Process. The delay thus clouds the petitioner s bona fides in filing the writ petition - the multiple OTS proposals given by the petitioner during pendency of the writ petition may be seen as an attempt to derail the CIRP and defeat realization of the funds through the CIRP. In any event, the Court cannot compel the respondent No. 1 to accept any OTS proposal made by the petitioner on behalf of its step-down subsidiary/Borrowing Entity. Can the RBI Regulations create new rights which are not contemplated under the IBC - which is a self-contained Code? - HELD THAT:- The petitioner s contention that the RBI Circular would apply to the facts of the case notwithstanding the ongoing CIRP would also attract the Supreme Court s decision in Bharti Airtel Limited [ 2024 (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court under Article 226 of the Constitution of India. The IBC also provides for challenging any order passed by the NCLT before the National Company Law Appellate Tribunal (NCLAT) under section 61 of the IBC - The petitioner has not given any explanation for not approaching the NCLT, and filing the present writ petition instead. The turn of events is all the more significant since the petitioner previously invoked the remedies provided under the IBC in relation to the petitioner being included in the CoC. The IBC has overriding effect in view of the non-obstante clause in section 238 of the IBC - The Court is therefore of the view that the petitioner has an alternative remedy within the framework of the IBC and has fallen short of giving reasons for refusing to avail of the effective statutory remedy. Can R.1, as the sole Financial Creditor, entertain an OTS once the Corporate Debtor enters CIRP? - HELD THAT:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner on behalf of its step-down subsidiary/Borrowing Entity. ii) The mandate of the RBI Framework must give way to the CIRP of the Borrower Entity once the process has been initiated. iii) 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) The petitioner has an alternative remedy within the framework of the IBC and has fallen short of giving reasons for refusing to avail of the effective statutory remedy. v) 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 Act I when the stage is set for the denouement. vi) The effect of the withdrawal would undo what cannot be undone before the NCLT. The withdrawal would also unsettle a binding settlement between the CoC and the Successful Resolution Applicant (R.3). vii) The power to withdraw the applications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 2018 to 2022. A Committee of Creditors (CoC) was constituted to take decisions concerning the Corporate Debtor. R.1/PTC India Financial Services Limited sought to be made part of the CoC as the Financial Creditor. The Supreme Court by its order dated 12.05.2022 directed the inclusion of R.1 in the CoC. On 17.10.2023, the petitioner made an OTS proposal of Rs.90 Crores to R.1 but it was rejected by R.1 on 30.10.2023 (impugned letter). 6. On 21.11.2023, the Resolution Professional invited Prospective Resolution Applicants to submit a Resolution Plan for resolution of the Corporate Debtor/NNPIL. On 19.02.2024, three Prospective Resolution Applicants, including R.3, submitted their Resolution Plans. On 16.07.2024, the Resolution Plan submitted by R.3 was put to vote by the Resolution Professional in the CoC. R.1 voted in favour of the Resolution Plan submitted by R.3 on 30.07.2024. On 31.07.2024, a Co-ordinate Bench passed an interim order directing the respondents not to take any final decision in respect of the step-down subsidiary company of the petitioner but clarified that all other proceedings shall continue. 7. On 01.08.2024, e-Voting in the CoC was completed and the plan subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIRP. Counsel submits that the petitioner made its offer for OTS during the pendency of the CIRP and that there had never been any agreement between the parties for accepting the OTS of Rs.90 Crores. Counsel submits that the outstanding amount due from the Corporate Debtor is approximately Rs.671 Crores as on 30.11.2024. Counsel also argues against the maintainability of the writ petition and that the RBI Framework has no application to the facts of the present case. Counsel lays stress on the legal impermissibility of considering an OTS proposal after approval of the Resolution Plan by the CoC. Counsel submits that the only attempt of the petitioner is to derail the CIRP and defeat implementation of the Resolution Plan. 11. Learned Senior Counsel appearing for R.3/Successful Resolution Applicant submits that the petitioner is not entitled to any relief in view of the delay in filing of the writ petition i.e., 6 years after commencement of the CIRP and 1 year after the rejection of the OTS proposal. Counsel submits that the petitioner has an adequate alternative remedy under section 60 (5) of the IBC and that the RBI Framework is not applicable to the borrower entity under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to submit their Resolution Plans. ii. On 19.02.2024, the Prospective Resolution Applicants submitted their Plans. iii. On 16.07.2024, the Resolution Plans were put to vote by the CoC. iv. On 30.07.2024, R.1 who holds 85% of the CoC voting share, voted in favour of the Resolution Plan submitted by R.3. 16. The above four significant events would lead to a reasonable presumption that the petitioner, as the promoter of the Borrowing Entity/Corporate Debtor, waited in the wings for the entire process to be completed and only then approached the Court by way of the present writ petition, ostensibly for frustrating the time-bound Resolution Process as contemplated under the IBC. 17. The Supreme Court took note of the importance of a time-bound Resolution Process in Arcelor Mittal India Private Limited vs. Satish Kumar Gupta (2019) 2 SCC 1; Gujarat Urja Vikas Nigam Limited vs. Amit Gupta (2021) 7 SCC 209; and Bharti Airtel Limited vs. Vijaykumar V. Iyer Civil Appeal Nos. 3088-3089 of 2020 . These decisions placed emphasis on the primary object of the IBC which is to resolve the CIRP in a time-bound manner for the purpose of facilitating investments and higher economic development. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eatment of stakeholders in the CIRP by constituting a comprehensive framework within which the actors participate in the insolvency process: Pratap Technologies Private Limited vs. Monitoring Committee of Reliance Infratel Limited (2021) 10 SCC 623 and E.S. Krishnamurthy vs. M/s. Bharath Hi-Tech Builders Pvt. Ltd 2022 3 SCC 161. 23. The petitioner s contention that the RBI Circular would apply to the facts of the case notwithstanding the ongoing CIRP would also attract the Supreme Court s decision in Bharti Airtel Limited (supra) which considered whether the principle of set-off under Order VIII Rule 6 of The Code of Civil Procedure, 1908, can apply to claims against an entity undergoing insolvency. The Supreme Court held that the principle of set-off/insolvency cannot be made applicable as it is not permitted under the IBC. The notable aspect is that a right which has not specifically been provided for in the IBC cannot be applied to a Company undergoing insolvency. 24. The Court is hence of the view that the mandate of the RBI Framework must give way to the CIRP of the Borrower Entity once the process has been initiated. It is further relevant that paragraph 14 of the RBI Circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of the 07.06.2019 Framework was similar to that of the 2023 Framework, namely, that a Board-Approved Policy would kick-in only after the lender puts a timeline for resolution of the stressed asset in place. 29. However, the more fundamental question is whether the petitioner can question the respondent No. 1 for not having a Board-Approved Policy in place as on 30.10.2023, which is the date of the impugned rejection of the petitioner s OTS proposal. The undisputed dates indicate that the Corporate Debtor (step-down subsidiary of the petitioner) filed an application for initiation of the CIRP on 17.11.2017 before the NCLT, at Hyderabad. The application was admitted on 18.01.2018 and the CIRP commenced on and from that date. The Prudential Framework of 07.06.2019 and the Compromise Framework of 08.06.2023 came after one year and five years respectively, from the date of admission of the Corporate Debtor into CIRP. Therefore, there was no mandate on the respondent No. 1 to establish that it had a Board-Approved Policy in respect of the Corporate Debtor as on 30.10.2023 specially since the CIRP was already five years into the process post - admission. 30. Even more fundamental is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate debtor or corporate person under this Code. 33. Under section 60 (5) of the IBC, the NCLT has the jurisdiction to resolve any disputes concerning the insolvency of a Corporate Debtor. As discussed above, the IBC is a comprehensive and self-contained Code dealing with insolvency and bankruptcy by creating a dedicated forum for resolving disputes arising out of or concerning insolvency of a Corporate Debtor. 34. Therefore, the appropriate remedy of the petitioner, insofar as R.1 or R.3 are concerned, is to apply before the NCLT for appropriate relief. The petitioner cannot upend the insolvency process by invoking the writ jurisdiction of the High Court under Article 226 of the Constitution of India. The IBC also provides for challenging any order passed by the NCLT before the National Company Law Appellate Tribunal (NCLAT) under section 61 of the IBC. 35. The petitioner has not given any explanation for not approaching the NCLT, and filing the present writ petition instead. The turn of events is all the more significant since the petitioner previously invoked the remedies provided under the IBC in relation to the petitioner being included in the CoC. 36. The IBC has overriding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t jurisdiction of the Court. The petitioner s undoing of a legal prohibition under the IBC is thus contrary to law and legally impermissible. 41. The Resolution Plan once approved by the CoC and submitted before the NCLT is binding on the CoC, the Successful Resolution Applicant (SRA) and the concerned stakeholders : Ebix Singapore Private Limited (supra), Hem Singh Bharana (supra), Kalinga Allied Industries India (P) Ltd. Vs. Committee of Creditors (Bindals Sponnge Industries Limited), through Punjab National Bank 2022 SCC OnLIne NCLAT 1618. 42. The IBC, 2016 provides for a scheme for resolution of insolvency in sequential steps after initiation of CIRP by a Corporate Applicant under Section 10. Sections 13 and 14 provides for declaration of moratorium and public announcements. The form of public announcement is provided under Section 15. Interim Resolution Professional (IRP) is appointed thereafter for management of the affairs of the Corporate Debtor under Sections 16 and 17. Section 20 provides for management of operation of Corporate Debtor as a going concern and Section 21 contemplates constitution of a CoC by the IRP after collation of all claims received against the Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 4.5 Crores during pendency of the CIRP. The petitioner made OTS proposals on 26.08.2023, 15.02.2023, 21.07.2023, 29.08.2023, 30.09.2023 and on 17.10.2023. The petitioner s 3 additional offers on 26.07.2024, 31.07.2023 and 24.09.2024. 47. The petitioner in effect wants the super structure to collapse when the substratum itself has crumbled. VI Can an application for withdrawal from CIRP be entertained after the CoC approves the Resolution Plan? 48. Section 12A of the IBC provides for withdrawal of applications admitted under sections 7, 9 or 10 being initiation of CIRP by a Financial Creditor, an operational creditor and by the corporate applicant, respectively. 49. Section 12A of the IBC is set out below: Withdrawal of application admitted under section 7, 9 or 10. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent voting share of the committee of creditors, in such manner as may be specified. 50. The provision makes it clear that withdrawing an application post-admission is not a two-way process i.e., an application by the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any strings attached is simplistic, to say the least. The effect of the withdrawal would undo what cannot be undone before the NCLT. The withdrawal would also unsettle a binding settlement between the CoC and the Successful Resolution Applicant (R.3). VII Is the writ petition maintainable in the absence of a necessary party/the borrowing entity? 54. The Borrowing Entity i.e., NNPIL is a necessary party since the said entity was put under the Insolvency Process pursuant to obtaining the requisite approval of 3/4th of its shareholders. 55. Section 10 of the IBC provides as under: Section 10. Initiation of corporate insolvency resolution process by corporate applicant. (1) Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority. (2) (3) The corporate applicant shall, along with the application, furnish (a) ... (b) (c) the special resolution passed by shareholders of the corporate debtor or the resolution passed by at least three-fourth of the total number of partners of the corporate debtor, as the case may be, approving filing of the application. 56. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial nature. R.1 is also not a creature of a statute and admittedly without State protection or monopoly and is not discharging sovereign functions or public duty. Therefore, it is arguable whether R.1 is a State under Article 12 of the Constitution of India or an Authority within the meaning of Article 226 of the Constitution. 60. Moreover, the activities of R.1 being regulated by the RBI will not make a difference since R.1 is engaged in the business of financing/lending on purely commercial terms. A Single Bench of the Delhi High Court in M/s. Rajpur Hydro Power Ltd. vs. M/s. PTC India Financial Services Ltd 2017 SCC OnLine Del 8277, held that R.1 (the party respondent therein) was not State under Article 12 of the Constitution. The decision was affirmed by the Division Bench in M/s Rajpur Hydro Power Ltd. vs. M/s. PTC India Financial Services Ltd. LPA No.401 of 2017 and C.M.No. 19750 of 2017. 61. The cases cited by the petitioner may be distinguished in the following manner. 62. Brilliant Alloys Private Limited Vs. S.Rajagopal (2022) 2 SCC 544, a judgment of 2018, was considered in Ebix Singapore Private Limited (supra) pronounced by the Supreme Court in 2022 where it was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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