TMI Blog2021 (8) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIRP in relation to the Corporate Debtor? - HELD THAT:- It should also be noted that the powers of this Adjudicating Authority cannot be circumscribed on the ground that commercial wisdom of the CoC would prevail over any other provisions of the IBC, 2016. Further, it should also be borne in mind that this Adjudicating Authority is not a mere stamping authority so as to endorse the decision of the CoC and is required to examine whether such decision is falling within the contours of IBC, 2016. The Financial Creditor has full freedom to decide on the quantum of amount which they are willing to accept in respect of the overall dues pending against the Corporate Debtor and this Adjudicating Authority consciously restrains from making any observation in this regard and leaves the same to the commercial wisdom of the CoC. However, this Adjudicating Authority is duty bound to examine the consequences of a purported Settlement proposal which is proposed by the promoter of the Corporate Debtor and the position of the Corporate Debtor once the application for withdrawal of the CIRP is allowed and also the default if any committed by the promoter of the Corporate Debtor in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er VIII of the Settlement proposal; hence based on ambiguity of terms of settlement, we cannot order for withdrawal of the CIRP - prayer seeking for liquidation of the Corporate Debtor in case of any default in the proposed Settlement Plan transcends beyond the scope of IBC, 2016. The Applicantion under Section 12A of IBC, 2016 stands dismissed. - MA/43/CHE/2021 in IBA/453/2019, IA/647/IB/2020 in IBA/453/2019 and IA/586/CHE/2021 in IBA/453/2019 - - - Dated:- 12-8-2021 - R. Sucharitha, Member (J) and Anil Kumar B., Member (T) For PP : Sanjeev Kumar Anshul Seh gal, Advocates For Corporate Debtor . Arvindh Pandian, Senior Advocate Avinash Krishnan Ravi, Advocate For IDBI Bank : Satish Parasaran, Senior Advocate Subhang P. Nair, Advocate For SBI : M. L. Ganesh, Advocate ORDER R. Sucharitha, Member (J) 1. IA/647/IB/2020 is an Application which is moved by the promoter of the Corporate Debtor viz. Mr. Vallal RCK under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as IBC, 2016 ) read with Rule 11 of National Company Law Tribunal Rules, 2016 seeking urgent hearing of MA/43(CHE)/2021 and to consider the settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution Professional in relation to the Corporate Debtor and accordingly, this Tribunal vide its order dated 18.09.2019 passed in MA/955/2019 appointed the Applicant herein as the Resolution Professional in relation to the Corporate Debtor. (iii) Pursuant to the public announcement, it is seen that the creditors in relation to the Corporate Debtor had submitted their claims to the Applicant and accordingly, the Applicant in terms of Section 21 of IBC, 2016 read with Regulation 17 of the CIRP Regulations, 2016, constituted the CoC and that the claims of the Financial Creditors alone were admitted by the IRP to the tune of ₹ 4,863.87 Crore. The list of Financial Creditors who are forming part of the CoC and their respective voting shares are extracted hereunder; S.NO. NAME OF CREDITOR VOTING SHARE (%) 1 International Asset Reconstruction Company Pvt. Ltd. 23.60 2 IDBI Bank Ltd. 18.01 3 Masdar Energy Limited 15.97 4 Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Application moved by the Applicant this Tribunal vide its order dated 06.02.2020 had allowed for extension of CIRP for a period of 60 days. The Applicant also moved IA/298/2020 before this Tribunal seeking further extension of 30 days and this Tribunal vide its order dated 13.03.2020 allowed the said Application. (ix) Thereafter, it is seen that due to the Covid-19 pandemic and the attendant lockdowns imposed by the Central/State Government, there was some difficulty on the part of the Applicant to carry on with the CIRP in relation to the Corporate Debtor and that the Applicant relied upon the Judgment of the Hon'ble NCLAT dated 30.03.2020 in the matter of Suo-Motu Company Appeal (AT) No. 01 of 2020 to state that the period of lockdown would be excluded for the purpose of counting the period for Resolution Process under Section 12 of IBC, 2016. (x) In so far as the Resolution Plan submitted by RPIFL, it is seen that they have not deposited the Earnest Money Deposit (EMD) of ₹ 5 Crore as required under the provisions of the Request for Resolution Plan and instead requested for the EMD to be reduced to ₹ 50 Lakh and the performance security to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Financial Creditors viz. IARCL on 05.03.2021 wherein they have stated that they have decided to change its vote which was castled as against to now approve , which fact was brought to the knowledge of the CoC immediately by the RP and then the Applicant/RP has moved an Application seeking necessary directions from this Tribunal in relation to the same, and this Tribunal vide its order dated 29.03.2021 passed in MA/12(CHE)/2021 has directed the RP to place the request of IARCL letter dated 05.03.2021 before the entire CoC for its consideration and that the CoC shall accord their approval or rejection specifically in the meeting. (xv) The 17th CoC meeting was convened on 01.04.2021 and that the same agenda for withdrawal of the CIRP in relation to the Corporate Debtor purportedly to be as per Section 12A of IBC, 2016 was once again put for vote by the CoC and the voting lines were opened from 02.04.2021 to 06.04.2021. It is seen that the results were disclosed on 06.04.2021 in and by which the CoC with 94.23% have approved the Resolution passed for withdrawal of CIRP in relation to the Corporate Debtor, which passes the muster of 90% as laid down under Section 12A of IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted its claim before the IRP for a sum of ₹ 876.06 Crore which was admitted by the IRP and that the IDBI Bank has 18.01% voting share in respect of the total admitted claim of the Corporate Debtor which comes to the tune of ₹ 4863.86 Crore. Further, it was submitted that out of the total admitted claim of ₹ 4863.86 Crore, the Principal component alone comes to the tune of ₹ 2883.31 Crore, out of which the Principal Loan given to the Corporate Debtor is ₹ 1281.06 Crore and the loan towards Corporate Guarantee is ₹ 1602.25 Crore. 6. Further, it is seen from the Liquidation Application filed by the Applicant in IA/837/2020 that the Applicant has not enclosed Form - H and under the said circumstances, we are unable to ascertain the Liquidation value in relation to the Corporate Debtor. It is stated in the said Application that in order to maintain the confidentiality that Applicant has not disclosed the Liquidation value. However we find it very strange on the part of the Applicant to state so, since the provisions of IBC, 2016 read with IBBI Regulations mandate that the Applicant has to file Form - H disclosing all the details therein bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Settlement Amount as against their total admitted amount of ₹ 4,863.88 Crore. The detailed lender wise settlement proposal is extracted hereunder; (Amount in INR Crore) S. No. FINANCIAL CREDITOR ADMITTED AMOUNT TRANCHE I TRANCHE II SETTLEMENT AMOUNT 1 CentraI Bank of India 402.95 4.77 40.23 45.00 2 Life Insurance Corporation of India 354.36 22.50 137.50 160.00 3 State Bank of India 280.50 2.50 22.50 25.00 4 Union Bank of India 645.17 3.00 27.00 30.00 5 International Asset Reconstruction Company Pvt. Ltd. 1,147.69 2.33 13.22 15.55 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Plan postulating that the Commercial wisdom of the CoC cannot be a subject matter of appeal before the Adjudicating Authority, cannot mutatis mutandis apply to an Application filed under Section 12A of IBC, 2016. This Adjudicating Authority is required to be vigilant in considering the settlement plan in relation to Section 12A of IBC, 2016 and is only required to permit unprejudiced settlement plan to succeed. There is always a system of constant checks and balances where there must not be a capricious or arbitrary power given in the hands of CoC to accept or reject settlements. 14. The collective commercial wisdom of the CoC cannot be called in question by this Adjudicating Authority only when the said decision has been taken by the CoC in conformity within the framework of IBC, 2016. However, in the present case, instead, without even receiving single penny from the promoter of the Corporate Debtor, the CoC has voted under Section 12A of IBC, 2016 for the withdrawal of the CIRP in relation to the Corporate Debtor, which is not a settlement simpliciter rather than a Business Restructuring Plan , as submitted by the Learned Senior Counsel for the Corporate Debtor. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is spread over a period of 180 days. 18. In the present Application, the Applicant has prayed for the Liquidation of the Corporate Debtor in case of the failure of the terms of the Settlement proposal as given by the promoter of the Corporate Debtor. However, we find that such a prayer cannot be acceded to once an order of dismissal of IBA/453/2019 is passed under Section 12A of IBC, 2016, the Petitioning Creditor himself withdraws the Application in the format prescribed under Form FA. Thus, once the Petitioning Creditor has agreed to withdraw the Petition, there cannot be any strings attached to the same. In the event of a subsequent default, an application seeking revival of the same cannot be filed, since it must be borne in mind that the Application filed under Section 7, 9 and 10 of IBC, 2016 is for Insolvency Resolution of the Corporate Debtor and not for the recovery of the money from the Corporate Debtor. 19. Further, once an order of withdrawal of CIRP is passed under Section 12A of IBC, 2016, the Corporate Debtor would come out of the rigours of IBC, 2106 and would be free from CIRP and would be acting independently, and that the default being committed in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide any remedy, in which case, the CoC before passing any Resolution should be absolutely sure that they receive the entire OTS amount as proposed by the settler before passing a Resolution under Section 12A of IBC, 2016. 22. A settlement simpliciter under Section 12A of IBC, 2016 is different from a Resolution Plan given under Section 30 and 31 of IBC, 2016. However, in the present case, the promoter of the Corporate Debtor who is ineligible to submit a Resolution Plan because of Section 29A of IBC, 2016 is trying to provide a Settlement proposal, which is similar to a Resolution Plan under Section 12A of IBC, 2016. In other words, the promoter of the Corporate Debtor is trying to restructure the loans granted by the Financial Creditor under the pretext of a Settlement proposal to be given under Section 12A of IBC, 2016. Further, there exists an uncertainty in relation to the default, if any, being committed by the promoters of the Corporate Debtor and that this Tribunal has already come to a view that the Corporate Debtor cannot be pushed into liquidation in case of a default committed under Section 12A of IBC, 2016. In the first case, this Tribunal is of the view that the CoC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant Bank is having exclusive mortgage rights over the immovable property of the Corporate Debtor and the Applicant will be at liberty to enforce the SARFAESI Proceedings against the mortgaged property. Further, it is averred that the Applicant Bank viz. State Bank of India does not appear to have any objection for the withdrawal of the CIRP, provided that the rights of the Applicant Bank over the mortgaged property should not get diluted. Considering the submissions made by the Learned Counsel for State Bank of India, we are of the view that since we are not inclined to allow the relief as sought for in MA/43(CHE)/2021, seeking withdrawal of the CIRP process. The necessary consequence will be an order of Liquidation, which is also passed vide separate order, the Applicant Bank may exercise the security interest over the subject property and may intimate the same to the Liquidator in so far as whether they are relinquishing their security or standing outside the Liquidation process. With the above said directions IA/586(CHE)/2021 stands disposed off. 27. In view of the above discussions, we conclude as follows; a. The purported Settlement Plan proposed by the promote ..... X X X X Extracts X X X X X X X X Extracts X X X X
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