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2019 (1) TMI 1741

..... the outstanding debt at any stage of the proceedings by redeeming the debt - HELD THAT:- The provisions of the IB Code are made having an overriding effect under section 238 of the Code on any other law in force and, in the present IB Code, the mode of settlement of debt has been made permissible only by way of an application to be moved under section 12A of the Code and not otherwise. As per the above stated provision, it is made open to the applicants to move such application only through the RP and the CoC before this court provided 90 per cent. members of the CoC have approved such settlement offer. Before introducing such section 12A, it was not open to the Adjudicating Authority to settle the debts or accept settlement offer after admission of the petition under the IB Code. The post admission settlement was not permissible because it is a settled legal position that once the petition is admitted, it becomes remedy in rem not in personem under the scheme of the Code and it was not made open even for the applicant/financial creditor to seek withdrawal of the CIRP on the pretext of subsequent settlement arrived at in the matter. To consider and examine the scope of settlement w .....

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..... ce the settlement plan for voting before all members of the CoC and for a further direction to the CoC of ESIL to facilitate the process of settlement and withdrawal of insolvency applications and CIRP against ESIL if the settlement plan of the applicants is approved by its requisite majority. The applicants have further prayed that, pending hearing and final disposal of the present application, respondent No. 1-resolution professional be directed to circulate the settlement plan dated October 25, 2018 among all members of the CoC. The applicants have also sought a relief to the effect that in case the settlement plan as proposed by the applicants is accepted, then the CIRP proceedings initiated against the corporate debtor, i. e., ESIL, shall stand withdrawn and concluded under the provisions of the Insolvency and Bankruptcy Code, 2016 (the "IB Code" for short). 2. The present applicants claim to be majority shareholder of the corporate debtor company, having possessed of around 70 per cent. of the share-holding. Applicant No. 1 is a holding company of the present corporate debtor. They have raised certain questions of law and facts for consideration of this Adjudicating .....

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..... approval of such resolution plan, which, as per the applicants, is illegal, inacceptable and even premature because it has been considered without being objectively and fairly considering the applicants' superior offer for settlement plan. Hence, the applicants have prayed that appropriate directions may be issued by this Adjudicating Authority to the RP and the CoC. 4. The present application is vehemently opposed not only by the RP and the CoC by filing detailed reply/written submission, but also by moving intervention application by the successful bidder-cum-resolution applicant, ArcelorMittal, to be impleaded as party in the present application, i. e., I. A. No. 430 of 2018 and further raising the question of maintainability of such subsequent application before this Adjudicating Authority after the hon'ble Supreme Court's decision dated October 4, 2018 in the case of Arcelor-Mittal India P. Ltd. v. Satish Kumar Gupta [2018] 211 Comp Cas 369 (SC) ; [2018] SCC Online SC 1733, as the hon'ble Supreme Court has already dealt with and decided the major issue involved in respect of the main petitions, i. e., C. P. (IB) Nos. 39 and 40 of 2017 and it was pleased to obse .....

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..... appropriate for the RP and the CoC to consider such a subsequent application because it may dilute the direction and mandate given by the honourable Supreme Court to the RP and the CoC. Moreover, their Lordships have already made it clear that, in case no plan is found worthy of acceptance, the corporate debtor-company shall go into liquidation. Hence, if such subsequent settlement plan, as submitted by the present applicants after the verdict of the honourable Supreme Court, is not given consideration, we cannot find fault in their decision keeping in view of the mandate of the honourable Supreme Court as it is not open for the RP and the CoC to take and consider additional agenda or subsequent development for settlement in the matter. Because, in our humble, view, the honourable Supreme Court granted one more opportunity to resolution applicants to pay off their debts and make bid at the request of learned counsel for the CoC. The honourable Supreme Court was pleased to make it clear that if no valid resolution plan is found, then the corporate debtor shall go into liquidation. Hence, in our view, if the RP and CoC are willing to consider such settlement plan, then they are legal .....

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..... f the Code and not otherwise. As per the above stated provision, it is made open to the applicants to move such application only through the RP and the CoC before this court provided 90 per cent. members of the CoC have approved such settlement offer. Before introducing such section 12A, it was not open to the Adjudicating Authority to settle the debts or accept settlement offer after admission of the petition under the IB Code. The post admission settlement was not permissible because it is a settled legal position that once the petition is admitted, it becomes remedy in rem not in personem under the scheme of the Code and it was not made open even for the applicant/financial creditor to seek withdrawal of the CIRP on the pretext of subsequent settlement arrived at in the matter. Therefore, as a special case, depending on the facts and circumstances of the case, the honourable Supreme Court was pleased to allow the settlement by closing the CIRP in order to do complete justice in exercise of its extraordinary powers conferred under article 142 of the Constitution of India thus it is not open to an Adjudicating Authority to exercise its inherent powers as prescribed under rule 11 o .....

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..... ot only of the IB Code but also carefully examined the subsequent provisions of section 12A read with section 30A in its paragraphs 49 and 51 of the said judgment and pleased to hold that these provisions are not violative of article 14 of the Constitution of India. Paragraphs 49 to 51 of the said judgment of the honourable Supreme Court read as under (page 272) : "Section 12A is not violative of article 14 Section 12A was inserted by the Insolvency and Bankruptcy (Second Amendment) Act, 2018 with retrospective effect from June 6, 2018. It reads as follows : '12A. Withdrawal of application admitted under section 7, 9 or 10.-The Adjudicating Authority may allow the withdrawal of appli cation 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. The ILC Report of March 2018, which led to the insertion of section 2A, stated as follows : '29.1 Under rule 8 of the CIRP Rules, the National Company Law Tribunal may permit withdrawal of the application on a request by the applicant before its admission. However, there is n .....

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..... peal No. 18520 of 2017 and even otherwise, as the issue can be specifically addressed by amending rule 8 of the CIRP Rules.' Before this section was inserted, this court, under article 142, was passing orders allowing withdrawal of applications after creditors applications had been admitted by the National Company Law Tribunal or the National Company Law Appellate Tribunal. (emphasis1 supplied) Regulation 30A of the CIRP Regulations states as under : '30A. Withdrawal of application.-(1) An application for withdrawal under section 12A shall be submitted to the interim resolution professional or the resolution professional, as the case may be, in Form FA of the schedule before issue of invitation for expression of interest under regulation 36A. (2) The application in sub-regulation (1) shall be accompanied by a bank guarantee towards estimated cost incurred for purposes of clauses (c) and (d) of regulation 31 till the date of application. (3) The committee shall consider the application made under sub-regulation (1) within seven days of its constitution or seven days of receipt of the application, whichever is later. (4) Where the application is approved by the committee with .....

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..... 8 (SC), wherein, the honourable Supreme Court has been pleased to uphold its constitutional validity. Considering circumstances, if there is no specific provision for making settlement of the case and closing of CIRP by other than the applicant of petition/financial/operational creditor, it is not open to other persons to make application under section 60(5) of the IB Code for making settlement. Hence, on this count also, the present application fails. 10. In addition to the above, the honourable National Company Law Appellate Tribunal in the order dated January 3, 2019 passed in the matter of Committee of Creditors of Essar Steel (India) Ltd. v. Satishkumar Gupta, Company Appeal (AT) (Insolvency) No. 3 of 2018, has been pleased to observe as under : "From the record we find that the matter was finally decided by the hon'ble Supreme Court in ArcelorMittal India P. Ltd. v. Satish Kumar Gupta [2018] 211 Comp Cas 369 (SC) ; [2018] SCC Online SC 1733, Civil Appeals Nos. 9402-9405 of 2018 by its judgment dated October 4, 2018. 2. It is informed that the 'committee of creditors' thereafter passed order in terms of sub-section (4) of section 30 of the Insolvency and Bankr .....

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