TMI Blog2024 (1) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... ng shares of the CoC in favour of the resolution for withdrawal of the CIRP of the Corporate Debtor and if the voting of the CoC is below 90% then the application of withdrawal cannot be allowed and hence it need to be dismissed. In the present case the Respondent No. 1 with 19.94% voting did not support 12A Application filed by the Corporate Debtor, hence the Adjudicating Authority rightly gave its verdict. Section 12A of the Code is very clear that any withdrawal of CIRP by the Appellant need to have minimum voting support of 90% of the CoC and in the present case never met this threshold. Thus, the Adjudicating Authority could not direct for settlement to the HDFC in contravention of the Code. On taking into consideration the various judgments where it has been held by the Hon ble Supreme Court of India that commercial wisdom is non judiciable and there is extremely limited scope for judicial intervention. There are no merit in the appeal - appeal dismissed. - [Justice Rakesh Kumar Jain] Member (Judicial) And [Mr. Naresh Salecha] Member (Technical) For the Appellant : Mr. Abhijeet Sinha, Mr. Atanu Mukherjee Mr. KKR Das, Advocates. For the Respondents : M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l was allocated to the coal trader like the Corporate Debtor. The Appellant explained that earlier the Corporate Debtor used to precure the coal through e-auction from Coal India Limited and due to non-availability of coal, the Corporate Debtor initiated for import of coal from Indonesia. 7. The Appellant submitted that during the relevant period, there has been continuous fall in international prices of coal and the Corporate Debtor suffered severe loses with each import and during this financially difficult period, the Corporate Debtor entered into a Charter Party Agreement dated 25.02.2016 with the Operational Creditor for shipment of coal ex- vessel MV. Beks Nazik . The Appellant admitted that the Operational Creditor invoices No. DFR-16-037-2 for USD 1,57,234.17 could not be paid by the Corporate Debtor due to de-monetization and implementation of GST regime. The Appellant also stated that in the meanwhile his account was also categorized as NPA in March, 2017 by the Lenders. 8. The Appellant stated that subsequent to failure on the part of the Corporate Debtor to make payment to the Operational Creditor, a Settlement Agreement was entered between the Corporate Debtor a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, he received Form-FA dated 18.05.2022 under Regulation 30A of CIRP Regulation, 2016 signed by the Operational Creditor with a request to terminate the CIRP. The Respondent No. 2 convened the meeting of CoC on 23.06.2022 for seeking approval of CoC for withdrawal of CIRP in terms of Section 12A r/w Regulation 30 A for CIRP Regulation 2016. However, the HDFC Bank being Member of CoC with 19.94% voting share voting, opposed the said resolution. The said resolution was required to be approved by the CoC with 90% of the voting share and therefore, resolution for withdrawal of CIRP could not be passed. 14. It is the case of the Respondent No. 2 that in view of non approval of withdrawal application by CoC, the Respondent No. 2 did not submit the application for withdrawal of CIRP proceeding as mandated by Regulation 30A of CIRP Regulation before the Adjudicating Authority. 15. We also note that the Appellant filed I.A. No 3238 of 2022 in Company Appeal (AT) (Insolvency) No. 594 of 2022 before the Adjudicating Authority seeking the directions to IRP not to proceed with the transaction audit in terms of Section, 43, 45, 50 66 of the Code. The said application was opposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that during pending of the Appeal bearing Company Appeal (AT) (Insolvency) No. 594 of 2022, this Appellate Tribunal vide its order dated 05.10.2022 directed the Adjudicating Authority to hear I.A. No. 4704 of 2022 and accordingly the proceeding took place before the Adjudicating Authority and several hearings were held. The parties presented their submissions before the Adjudicating Authority. 21. It is the case of the Appellant that he brought before the Adjudicating Authority the aspect of the compromised settlement which has been taken place with the Operational Creditor and the Financial Creditor and therefore one of the Financial Creditor i.e., the HDFC could not have been allowed to object to such settlement and therefore the decision of the HDFC bank offering to the application filed under Section 12A of the Code, cannot be treated as commercial wisdom in accordance with the law. 22. The Appellant tried to differentiate the case under Section 12 A of the Code vis- -vis Section 30(4) of the Code and stated that the sustainability and viability of the Resolution Plan is covered under Section 30(4) of the Code which involve the element of commercial wisdom of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Creditor, despite being part of consortium of lenders, HDFC never agreed to the proposal made by the Respondent No. 1. The Respondent No. 1 further submitted that no other Financial Creditor could have offered binding offer on behalf of the Respondent No. 1. Thus, the alleged settlement proposal mentioned by the Appellant is neither binding on the Respondent No. 1 nor on the Members of the CoC. 31. The Respondent No. 1 also refuted that the averment of the Appellant regarding alleged agreement and settlement with the Financial Creditor w.r.t. properties being incorrect as it was regarding charge of the property owned by the promoters and not owned by the Corporate Debtor. 32. The Respondent No. 1 cited judgment of the Hon ble Supreme Court of India in the matter of Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., [(2021) 10 SCC 4] and also cited judgment of this Appellate Tribunal in the matter of 'Shaji Purushothaman v. Union Bank of India, [(2019 SCC OnLine NCLAT 1151)], in support of his case. 33. In addition, the Respondent No. 1 cited judgment of Hon ble Supreme Court of India Vallal RCK v. Siva Industries and Holdings Ltd., [(2022 SCC OnLine SC 717 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised to do so. 41. The Respondent No. 2 also refuted the wrong statement by the Appellant that is the lead bank is always the final authority in case of difference of opinion amongst the members of consortium and submitted that there is no such statutory provisions the Respondent No. 2 cited the judgments Swiss Ribbons Pvt. Ltd. Vs. Union of India Ors. AIR (2019) 4 SCC 17 , the relevant portion of the aforementioned judgment is reproduced herein below: 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 creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instalments have been paid by the Corporate Debtor to the Operational Creditor. 47. We note that the issue regarding withdrawing application by the Appellant was discussed in 7th CoC Meeting held on 06.06.2023 and the relevant extract of the minutes reads as under :- All the CoC members enquired from Suspended Director, Mr Narendra Jindal with regard to reason for filing an appeal against the Hon ble NCLT dismissal order and requested him to withdraw the appeal application before the Hon ble NCLAT at the earliest. Since his appeal is hampering the CIRP process and further stay on publication of Farm G is unnecessary delaying the CIRP process, wherein time is the essence. Suspended Director, Mr Narendra Jindal assured the CoC members that he will withdraw his Appeal application before the NDOH i.e. 24th July, 2023. Further, Sh. Amit Goyal Ji, (DGM) State Bank of India requested the RP to bring to the notice of Hon ble NCLAT in the NDOH with regard to withdrawal of existing OTS agreement earlier entered with the SBI Bank and as on date there is No OTS agreement in existence with the SBI Bank either. RP assured him that same will be communicated to the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s non est in law. For, it was only to abide by the directions of Nclat. We are of the view that nothing would turn on it. The decision of CoC dated 13-2-2019/14-2-2019 is a decision, which has been taken in exercise of its commercial wisdom . As such, we hold, that the decision taken by CoC dated 13-2- 2019/14-2-2019, which is taken in accordance with its commercial wisdom and which is duly approved by NCLT, will prevail. Further, Nclat was not justified in interfering with the stated decision taken by CoC. (Emphasis Supplied) 52. We note the decision of the Hon ble Supreme Court of India on 12A of the Code rendered in Shaji Purushothaman (Supra) on commercial wisdom of the CoC. The relevant extract of the said judgment has been reproduced hereinafter: 9. If an application under Section 12-A is filed by the appellant, the Committee of Creditors may decide as to whether the proposal given by the appellant for settlement in terms of Section 12-A is better than the resolution plan as approved by it and may pass appropriate order. However, as such decision is required to be taken by the Committee of Creditors , we are not expressing any opinion on the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at against total claim of Rs. 29.05 Crores, the Appellant offered only Rs. 4.97 Crores which is less than 18 % of the outstanding dues payable. Therefore, the HDFC as Financial Creditor did not support the 12A application filed by the Appellant, considering commercial wisdom and we do not find any error here. 58. We have also noted from the averments made by the SBI, where the SBI categorically stated that it never gave the assurance on behalf of the other bankers and the OTS proposal of the SBI dated 06.06.2022 also stood expired in view of non-compliance of terms and condition committed by the Appellant vide its OTS proposal dated 22.02.2022. Thus, we hold that no banker is willing to support the application of the Appellant for withdrawal from CIRP. 59. We find that in view of provisions laid down under Section 12A of the Code, it is crystal clear that, once CoC is constituted, there is a mandatory requirement of 90% of the voting shares of the CoC in favour of the resolution for withdrawal of the CIRP of the Corporate Debtor and if the voting of the CoC is below 90% then the application of withdrawal cannot be allowed and hence it need to be dismissed. In the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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