TMI Blog2022 (9) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion 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 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant/Appellant to resume the construction. 4. On behalf of the Applicant/Appellant, it is projected before this `Tribunal , that the `Applicant/Appellant , firstly, had communicated the `Settlement Proposal to the `Resolution Professional via email on 23.06.2022 and requested the `Resolution Professional to consider the `Revised Proposal for conducting e-voting for the approval by the `Committee of Creditors . But the grievance of the `Applicant/Appellant is that, the `Resolution Professional has not taken action in communicating the same to the `Committee of Creditors . 5. The clear cut stand of the Applicant/Appellant is that everything will depend on the outcome of the decision taken by the `Committee of Creditors on the `Settlement Proposal by the `Committee of Creditors . In fact, the Respondents will not be prejudiced, in any manner, if the I.A. No. 558 of 2022 in Comp. App (AT) (CH) (INS) 647 of 2020 (TA/102/2021) is allowed by this `Tribunal , because of the fact that the `Applicant/Appellant acts in a `Bona fide interest and in the `interest of justice . 6. The Learned Counsel for the Applicant/Appellant contends that the I B Code, 2016, is enac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent/Resolution Professional , after the `Promoters gave confirmation for paying the `Corporate Insolvency Resolution Process cost , denied to accept and stated that the same may be collected by anyone `Committee of Creditor s Member , and the same may be transferred to the Resolution Professional. 11. The Learned Counsel for the Applicant/Appellant submits that the `Promoters had furnished their `Term Sheet given by the `Investor to the `Resolution Professional and the ₹ 1st Respondent /`Association and that apart, the `Promoters had informed about the constant conversation of the `Investor with the `Banks and any argument doubting, will show that the `Resolution Professional is resisting the `Settlement between the `Corporate Debtor and `Home Buyers . 12. The Learned Counsel for the Applicant/Appellant urges before this `Tribunal that there is no `Resolution Applicant as on to-day, and all the endeavours made by the ₹ 2nd Respondent/Resolution Professional were either rejected by the `Committee of Creditors (Viz., alleged involvement of Sriram Construction as per the 18th CoC Minutes) or were rejected by the `Adjudicating Authority , Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween Vallal RCK v. M/s. Siva Industries and Holdings Limited and Ors., dated 03.06.2022, wherein at paragraph 21, it is observed as under: 21. This Court has consistently held that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the IBC. It has been held that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. A reference in this respect could be made to the judgments of this Court in the cases of K. Sashidhar v. Indian Overseas Bank and Others (2019 12 SCC 150), Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Others (2020 8 SCC 531), Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others (2020 11 SCC 467), Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another (2021 10 SCC 401), and Jaypee Kensington Boulevard Apa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligations that are strictly regulated and coordinated by the statute and its regulations. To argue that a residuary jurisdiction must be exercised to alter the delicate economic coordination that is envisaged by the statute would do violence on its purpose and would be an impermissible exercise of the Adjudicating Authority s power of judicial review. The UNCITRAL, in its Legislative Guide on Insolvency Law, has succinctly prefaced its recommendations in the following terms: C. 15. Since an insolvency regime cannot fully protect the interests of all parties, some of the key policy choices to be made when designing an insolvency law relate to defining the broad goals of the law (rescuing businesses in financial difficulty, protecting employment, protecting the interests of creditors, encouraging the development of an entrepreneurial class) and achieving the desired balance between the specific objectives identified above. Insolvency laws achieve that balance by reapportioning the risks of insolvency in a way that suits a State s economic, social and political goals. As such, an insolvency law can have widespread effects in the broader economy. Hence, once the require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution Plan was brought down to 66%, Section 12A of the IBC which was brought in the statute book by the same amendment, requires the voting share of 90% of CoC for approval of withdrawal of CIRP. It could thus clearly be seen that a more stringent provision has been made insofar as withdrawal of CIRP is concerned. 17. It is further to be noted that after Section 12A of the IBC was brought in the statute book, Regulation 30A of the 2016 Regulations came to be inserted vide notification dated 3rd July 2018. The same came to be substituted vide notification dated 25th July 2019. Regulation 30A of the 2016 Regulations reads thus: 30 A. Withdrawal of application.(1) An application for withdrawal under Section 12 A 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 36 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be. The application has to be made in Form FA. It further provides that when an application is made after the issue of invitation for expression of interest under Regulation 36A, the applicant is required to state the reasons justifying withdrawal of the same. The RP is required to place such an application for consideration before the Committee. Only after such an application is approved by the Committee with 90% voting share, the RP shall submit the same along with the approval of the Committee to the adjudicating authority. It could thus be seen that a detailed procedure is prescribed under Regulation 30A of the 2016 Regulations as well. 18. A perusal of the said Regulation would reveal that where an application for withdrawal under Section 12A of the IBC is made after the constitution of the Committee, the same has to be made through the interim resolution professional or the resolution professional, as the case may be. The application has to be made in Form FA. It further provides that when an application is made after the issue of invitation for expression of interest under Regulation 36A, the applicant is required to state the reasons justifying withdrawal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent by referring to Clause 7 of the `Draft Agreement (Page 23 of I.A. No. 558 of 2022), points out that the said Clause purports to subject the `Investor to certain `obligations , among other things to invest Rs.50 Crore as `Working Capital for the `Project , such an `Investor is not made a `Signatory /`Party to the `Draft Settlement Agreement . 30. In effect, the Learned Counsel for the 1st Respondent submits that the `Draft Settlement Agreement clearly demonstrates the absence of any `bonafide and `genuine proposal for `Settlement on the part of the Applicant/Appellant. Indeed, the ₹ 1st Respondent/Association had communicated its concerns / feedback on the `Draft Settlement Plan to the `Promoters , who indicated that they would discuss the same with their Advocate and revert back. But, no further response was received from the `Promoters and instead, I.A. No. 558 of 2022 (came to be filed by the Applicant/Appellant before this `Tribunal), without addressing any of the concerns raised by the `Home Buyers . 31. The Learned Counsel for the ₹ 1st Respondent/Association while summing up, points out that I.A. No. 558 of 2022 in TA/102/2021 (Comp. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... `Non-binding Term Sheet . 36. Continuing further, it is represented on behalf of the 2nd Respondent/Resolution Professional, till date, the date of filing of I.A. No. 558 of 2022 by the `Applicant/Appellant in TA/102/2021 (Comp. App (AT) (INS) No. 647 of 2020), there is no direct correspondence by `Fosun reaching out to the ₹ 2nd Respondent/Resolution Professional . 37. The Learned Counsel for the 2nd Respondent/Resolution Professional points out that the `Applicant/Appellant has failed to ensure the participation of `Fosun , to inspire and instill any confidence about the `Proposal although, numerous requests in various `Committee of Creditors Meeting were made, for participation of `Fosun for any commitment. 38. Yet another stand taken on behalf of the 2nd Respondent/Resolution Professional is that even the `Draft Settlement Agreement , annexed with the I.A. No. 558 of 2022 in TA/102/2021 (Comp. App (AT) (INS) No. 647 of 2020) has no affirmative consent of the `Fosun , either a `Confirming Party or otherwise in any form. Also that, there is no provision in the I B Code, 2016, for the ex-promoters to submit the `Settlement Plan directly to the `Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Skylark Mansions Private Limited ), Bengaluru-42, preferred a Review Application No. 02 of 2020 in CP(IB) No. 389/BB/2019, before the `Adjudicating Authority , and the same came to be rejected on 23.04.2020. 44. The plea of the 1st Respondent/Association is that the `Settlement Proposal of the `Applicant /`Appellant does not aim to create any `enforceable rights in favour of the `Home Buyers nor any `enforceable obligations against the `Promoters of the `Corporate Debtor , as seen from the contents of the purported `Draft Settlement Agreement /`Proposal . 45. The prime contention of the 1st Respondent/Association is that, in as much as `CIRP is going on, in respect of `SMPL , the ex-promoters of the `SMPL are not permitted to act on behalf of `SMPL as it is the `Resolution Professional who can represent `SMPL . Also that, no `enforceable or `binding obligations are undertaken by the `SMPL or its `Promoters under the `Draft Proposal / `Agreement . 46. It is the stand of the ₹ 1st Respondent/Association is that the `Settlement Agreement of the `Applicant/Appellant clearly exhibits the absence of any `Bonafide and `Genuine Proposal for `Settlemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to the ₹ 2nd Respondent/Resolution Professional , there is no information about the status of the due diligence based on which, the whole `Investment Proposal of `Fosun rested. 51. The other vital plea of the 2nd Respondent/Resolution Professional is that, there is no provision under the I B Code, 2016, for submitting `Settlement Proposal as prayed for the Applicant/Appellant in IA 558 of 2022, except for approaching the `Resolution Professional with the `Settlement Plan , as per Section 12A of the Code, along with `Form FA for `Withdrawal , to be placed by the `Resolution Professional , for `Voting before the `Committee of Creditors . 52. In substance, the contentions of the ₹ 2nd Respondent/Resolution Professional is that there is no `Credibility / `Sanctity attached to the `Settlement Plan , to be placed for `Voting by the `Resolution Professional , before the `Committee of Creditors . Hence, I.A. No. 558 of 2022, filed by the `Applicant/Appellant is liable to dismissed in the interest of justice. 53. It cannot be gainsaid that an `inherent power of a `Tribunal /`Court of Law , cannot be exercised in violation or in conflict with or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate debtor is allowed to settle its claim. A question arises as to what is to happen before a committee of creditors is constituted (as per the timelines that are specified, a committee of creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the committee of creditors is not yet constituted, a party can approach the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the concerned parties and considering all relevant factors on the facts of each case. 53. 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 cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncourage settlements, they cannot direct them by acting as courts of equity. 59. Be that as it may, on a careful consideration of the divergent contentions advanced on the respective sides, 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 in I.A. No. 558 of 2022 in T.A. No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) 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 I.A. No. 558 of 2022 in T.A. No. 102 of 2021 (Comp. App (AT) (INS) No. 647 of 2020) 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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