Radhakrishnan Dharmarajan vs Radhakrishnan Dharmarajan

- (a) Permit the withdrawal of the application originally filed by Tourism Financial Corporation of India Ltd in IBA/1459/2019 in accordance with the proposal submitted by the promoter of the Corporate Debtor and approved by the Committee of Creditors with 100% majority of voting. - (b) Direct that the CIR Process against Appu Hotels Limited, the Corporate Debtor may be terminated; - (c) Direct that the rights and management of the Corporate Debtor shall stand restored to its Board of Directors with immediate effect and - (d) grant such other relief(s) which are deemed fit and necessary in the nature and circumstances of the case and thus render justice.

(a)

That this Hon'ble Tribunal may be pleased to permit the Applicant herein to intervene in the above IA/1410/2022 to support the 12A proposal of the Promoters and pass such further other orders as this Hon'ble Tribunal may deem fit in the facts and circumstances of the case and thus render justice.

(b)

That this Hon'ble Tribunal may be pleased to pass such other and further reliefs as the nature and circumstances of the case may require and thus render justice;

(a)

Reject the Section 12A settlement proposal of the Promoter, as approved by the Committee of Creditor in its 19th meeting dated 12.10.2022 and declare the same is non – est in law;

(b)

Direct the Resolution Professional to proceed in terms of the directions of the Hon'ble NCLAT contained in its judgment dated 17.09.2022 and upheld by the Hon'ble Supreme Court vide Judgment dated 03.05.2023 and proceed with the consideration of Resolution Applications received from the seven Resolution Applicants (including the Applicant herein); and

(c)

Any other order that this Hon'ble Tribunal might deem fit in the facts and circumstances of the case.

(a)

Allow the Intervention Petition of the Present Applicant, a prospective Resolution Applicant; or

(b)

Dismiss the 12A settlement proposal of the Promoter, approved by the CoC in its meeting dated 12.10.2022; or

(c)

Reject the Application filed by the Resolution Professional dated 03.11.2022, IA/1410/CHE/2022 for approval of the Settlement proposal under 12A of the IBC; or

(d)

Direct the CoC to consider the Resolution Plan of the Applicant afresh; and

(e)

Any other order that this Hon'ble Tribunal might deem fit in the facts and circumstances of the case.

(a)

Permit the Applicant herein to complete the CIRP process by 12.11.2022 (from 13.10.2022 to 12.11.2022) and

(b)

Granting such other relief which are deemed fit and necessary in the nature and circumstances of the case and thus render justice.

6. FACTUAL MATRIX OF THE CASE

Company Appeals (AT) (CH) (Ins.) Nos. 164, 176, 218 & 219 of 2021 are allowed.

The Common order passed in Miscellaneous Applications, IA/150/CHE/2021, MA/13/CHE/2021, MA/18/CHE/2021, MA/48/CHE/2021, IA/181/CHE/2021, IA/183/CHE/2021, IA/192/CHE/2021, IA/217/CHE/2021, IA/172/CHE/2021, IA/291/CHE/2021, IA/572/CHE/2021, IA/571/CHE/2021 passed in Company Appeal in IBA/ 1459 of 2021, dated 15 July 2021, approving the Resolution Plan is set aside. Resolution Professional is directed to proceed with the CIRP from the publication stage of Form ‘G’ for inviting Expression of Interest afresh as per CIRP Regulations. RP is directed to put up the Appellant/Promoters Settlement proposal for consideration before the CoC.

The Resolution Professional is directed to call the CoC within 15 days from the date of order and settlement proposal should be put to the vote and if approved with 90% vote share of the Committee of Creditors, then proceeding for withdrawal of the CIRP under Section 12 A read with Regulation 30A of CIRP Regulation.

Further, it is declared that the claim of related part Financial/Operational Creditor cannot be discriminated from unrelated Financial/Operational Creditors.

In the circumstances stated above, the time taken in the Appeal may be excluded for computation of the CIRP period. No order as to cost.

(emphasis supplied)

We have heard Dr. Abhishek Manu Singhvi, learned senior counsel in rejoinder on behalf of the appellant. We have also heard further submissions by learned senior counsel Mr. Jaideep Gupta and Mr. Rakesh Dwivedi; and learned counsel Ms. Haripriya Padmanabhan and Mr. Goutham Shivshankar.

Arguments concluded. Judgment reserved.

Learned counsel for the respective parties may file the notes/additional notes on their submission latest by 22.03.2022. It has been informed during the course of submissions that meeting of the Committee of Creditors (‘COC’) pursuant to the Tribunal impugned order of the National Company Law Appellate (‘NCLAT’) had taken place on 03.03.2022 and further meeting is slated for 21.03.2022.

In the totality of the circumstances, it is considered appropriate and hence provided that the meetings/proceedings of the COC may continue but the entire process shall remain subject to the final orders to be passed in these appeals.

(emphasis supplied)

The matter is taken up today on the application for direction moved by the appellant. We have taken note of the averments therein.

Having regard to the order passed on 16.03.2022, making all the proceedings subject to the final judgment in these appeals, no further order or direction is considered expedient or necessary at this stage.

The judgment remains reserved.

“Resolved that the settlement proposal submitted by Mr. Palani G Periasamy (Promoter) under Section 12A of the IBC, 2016 which was placed before the COC for discussion and approval in the nineteenth COC meeting held on 12.10.2022 is hereby approved”

We have heard the learned counsel for the respective parties on I.A. No.168602/2022.

Learned counsel for the parties may file further notes on their submissions in relation to I.A. No.168602/2022 on or before 21st November, 2022.

The judgment remains reserved.

However, having regard to the totality of the circumstances, when it has been pointed out that the approval as now accorded by CoC in its meeting dated 31.10.2022 has been placed for approval before the Adjudicating Authority, we would request the Adjudicating Authority to await the decision of this Court in these matters

Conclusion

70.

- In view of the above, these appeals are disposed of in the following terms:

1.

The impugned judgment and order dated 17.02.2022 is not interfered with only insofar the Appellate Tribunal has not approved the resolution plan in question for the reasons which have been affirmed by us in points C2, C3 and D1 hereinbefore. Other findings, observations and directions of the Appellate Tribunal are set aside.

2.

The question of dealing with fresh settlement proposal of the promoter, as approved by the CoC in its nineteenth meeting dated 12.10.2022 after receiving fresh resolution plans, is left open for consideration of the Adjudicating Authority, who shall be expected to deal with this aspect of the matter while keeping in view the law applicable and the facts of the present case as also the observations foregoing.

7. IA(IBC)/1410(CHE)/2022 – SECTION 12A APPLICATION FILED BY RP

Amount in INR (Crores)

S. No.	TYPE OF CREDITOR	ADMITTED CLAIM / BALANCE AS PER BOOKS	REMARKS
1(a)	Secured Financial Creditors	340.43	Admitted Claim
1(b)	Additional Interest to Secured Financial Creditors	25.29	Additional Payment from the promoter
2	Unsecured Financial Creditors	49.13	Admitted Claim
3	Unsecured Financial Creditors – Related	45.00	Admitted Claim
4	Operational Creditors	17.39	Admitted claim was only Rs.4.30 Crores
5	Other Creditors & Liabilities	16.35	As per Books
6	Preference Shareholders	9.00
7	Equity Shareholders	89.71
	Total	592.30
8	CIRP Expenditure	Unpaid actual, if any as approved by CoC

A. TREATMENT PROPOSED FOR SECURED FINANCIAL CREDITORS

S. No.	CLASS OF CREDITOR – SECURED FINANCIAL CREDITOR	AMOUNT PROPOSED TO BE PAID (Rs. IN CRORES)	TERM OF PAYMENT
1	State Bank of India	102.88	Immediate i.e. On Withdrawal Date
2	Bank of India (Tokyo)	52.24
3	IDBI Limited	11.81
4	Indian Bank	69.33
5	Phoenix ARC Private Limited (Assigned by TFCI)	21.88
6	Edelweiss ARC	4.13
7	IBDI Debentures Trusteeship Limited	76.53
8	Allium Finance Private Limited	1.63
	TOTAL	340.43

- Further as an improvement to the above admitted claim amount, we are also willing to pay a simple interest @ 6% p.a. on the admitted claim amount due to the Secured Lenders to the extent of Rs.25.29 Crores for the period from 6 May 2020 to 31st July 2021. - Upon settlement and payment of dues of the secured financial creditors in term of above, the secured creditors shall release the existing charges, encumbrance, Lien or the like if any, on the properties and assets of the Company and that of its guarantors and shall forth with and concurrently handover the original legal documents evidencing and creating the said charge along with the title deeds of the properties and assets of the company and that of its guarantors if any, held by them and also issue no due certificate to that effect immediately to the corporate debtor and the guarantors within 7 days from the date of receipt of the payment by the respective lenders.

B. TREATMENT PROPOSED FOR UNSECURED FINANCIAL CREDITORS

S. NO.	CLASS OF CREDITOR – UNSECURED FINANCIAL CREDITOR	AMOUNT PROPOSED TO BE PAID (Rs. IN CRORES)	TERM OF PAYMENT
A	UNRELATED PARTY FINANCIAL CREDITORS
1	Prabhat Resource Limited1	16.66	Immediate on withdrawal date
2	URC Builders	1.50
3	Aryav Exports Private Limited	4.87
4	Modern Constructions	3.34
5	M. Chandrasekaran	0.61
6	Sun Bright Industries	16.56
7	RSM Industries Private Limited	5.59
	Sub – Total (A)	49.13
B	RELATED PARTY FINANCIAL CREDITORS
1	Related Party Financial Creditors	45.00	To be paid in normal course of Business preferably within 365 days from the date of NCLT approval.
	Total (A+B)	94.13

- Any bonafide debt for which claim has not been filed / or has not been recognized in books of accounts, shall be settled as per treatment given to that class of creditor.

C. TREATMENT PROPOSED FOR ALL OTHER CREDITORS VIZ. OPERATIONAL CREDITORS, WORKMEN & EMPLOYEES, RELATED PARTY CREDITORS, STATUTORY DUES, OTHER LIABILITIES, ETC.

S. No.	AMOUNT TO BE PAID	TERM OF PAYMENT
1	100% of ascertained book liability (Operational Creditors, Workmen & Employees, Statutory Dues and Other liabilities	1) Claims to the extent of Rs.4.30 Crores admitted by the RP will be paid immediately after approval of NCLT on the 12A proposal 2) The remaining unclaimed debts of Rs.13.09 Crores to be paid as and when claims are made by the respective creditors in the normal course of business preferably within 365 days from the date of approval of this proposal by NCLT.

- Any bonafide debt for which claim has not been filed / not recognized in books of accounts in this category shall be settled as per treatment given as per the above schedule. - Any liability which is under dispute / litigation pending before any court / quasi – judicial authority and admitted by RP shall be paid subject to the outcome of those proceedings or any out-of-court settlement made after the withdrawal date.

D. TREATMENT PROPOSED FOR PREFERENCE AND EQUITY SHAREHOLDERS

8. INTERVENTION APPLICATION INV. P(IBC)/10(CHE)/2023 – COC OF APPU HOTELS LIMITED

9. INTERVENTION APPLICATION INV. P(IBC)/7(CHE)/2023 – M.K. RAJAGOPALAN

56.

A comprehensive look at the factual aspects and the orders previously passed in the matter make it clear that right from the inception of CIRP in question, the promoter and erstwhile director had made several attempts to invoke the operation of Section 12-A of the Code. At the very initial stage, while admitted the petition made by TFCI, the NCLT observed in its order dated 05.05.2020 that the attempts on the part of corporate debtor by way OTS settlement proposal had only been to gain time. Yet again, when the process has gone several steps ahead and when the day resolution plans were being put to vote, just a day before voting, the promoter put forth yet another settlement proposal without any concrete plan and without disclosing the source of funds to complete the settlement. The CoC, after due deliberation, refused to consider the same and thereafter voted on the resolution plan in question.

57.

The Adjudicating Authority (NCLT) dealt with the matter in sufficient detail (vide paragraph 15.2 and relevant extraction therein) while noting that even the original applicant of CIRP, i.e., TFIC was kept in dark about such a proposal. It was also noticed that even the term-sheet to support the proposal from Deutsche Bank came with a disclaimer. In the totality of facts and circumstances, the proposals as made by the promoter and erstwhile director were all of eyewash and of dilatory tactics. However, the Appellate Tribunal (NCLAT) proceeded to observe that in the ninth CoC meeting, no discussion about settlement proposal had occurred and that CoC never considered the settlement proposal submitted by the promoter and erstwhile director; and that after getting the settlement proposal, it was incumbent upon the resolution professional to call the CoC meeting for consideration of such proposal. The observations of the Appellate Tribunal cannot be said to be in conformity with the record of proceedings.

57.1.

As noticed, the proposal in question was forwarded for consideration only at the eleventh hour, i.e., a day before CoC was to vote on the resolution plan in its ninth meeting. The CoC, in the said meeting, indeed, took into consideration the proposition of settlement and application for withdrawal request letter, which was circulated two hours before the meeting. The creditors with significant voting shares such as SBI and Bank of India were clear in their stand that they would stick to the agenda and would not deviate therefrom. The resolution professional had to request the representatives of the corporate debtor to allow the agenda items to go through as per the wishes of the majority of CoC and no further discussions were to be made on the letter sent to CoC. When the substantial majority of CoC was not in favour of such discussion which was proposed to be thrust on them only a few hours before the meeting, their approach cannot be faulted at. In any case, an application for withdrawal in terms of Section 12-A of the Code could have been made only if CoC approved the proposal with 90% voting share. When the creditors with substantial voting share were against any such proposal, any consideration was clearly ruled out and there could not have been any valid application for withdrawal.

58.

Thus, the Appellate Tribunal has erred in holding that the settlement offer of the promoter in terms of Section 12-A was not placed for consideration of CoC. Approval of resolution plan in question could not have been reversed on this count. However, as noticed herein before approval of the resolution plan in question could not have been endorsed by the Appellate Tribunal because of other substantial reasons.

10. INTERVENTION APPLICATION INV. P(IBC)/12(CHE)/2023 – SANKALP RECREATION PRIVATE LIMITED

11. REPLY ARGUMENTS TO INV.P/7/CHE/2023 AND INV. P/12/CHE/2023

44.5.

In the given set of facts and circumstances of this case, in our view, the Appellate Tribunal has rightly held the resolution plan being in contravention of the provisions of law for the time being in force. Observations and findings of the Appellate Tribunal in paragraphs 106 to 112 of the impugned order dated 17.02.2022 (reproduced hereinabove in paragraph 19.4.2.) deserve to be and are approved.

19.4.2.

The relevant observations and findings of the Appellate Tribunal in regard to this aspect read as under: -

“101.

Resolution Applicants ineligibility u/s 29A(e) of the Code...

*** *** ***

105.

... However, the rejected Trust was none other than the 2nd Respondent’s Trust, namely ‘Balaji Vidyapeeth’, which was never disclosed to the COC and has been deliberately suppressed. The IRP/ Resolution Professional should have informed the CoC that the 2nd Respondent had presented the Resolution Plan by competing with the said Trust. He has used the very same “Trust’ to support his credentials and creditworthiness in the Resolution Plan. The relevant portions of the Resolution Plan are extracted hereunder for ready reference:

***

106.

Therefore, it is incorrect to say that the 2nd Respondent has not gained any advantage from the Charitable Trust. The case on hand squarely falls within the ambit of Section 88 of the Indian Trusts Act, and as such, the Resolution Plan is illegal. Since the said ‘Sri Balaji Vidyapeeth’ has already been declared as ineligible, the 2nd Respondent cannot act as its alter ego in implementing the Resolution Plan and attain any financial advantage or gain is barred by Section 88 of the Indian Trusts Act. The said provision is extracted hereunder for ready reference.

***

109.

The argument of the 2nd Respondent that the Trust had submitted their EOIs independently and both of them were aware that the other was submitting their EOIs is purely mischievous. Admittedly, the 2nd Respondent is the Managing Director of the said Trust, and the fact remains that two EOIs were submitted by the 2nd Respondent, one for himself and the other on behalf of the Trust.

110.

However, the said facts have been suppressed from the CoC, and the CoC did not have an occasion to consider that the 2nd Respondent had submitted two EOIs. Therefore, it is also false to claim that the 2nd Respondent had complied with the provisions of the RFRP and the IBC. The 2nd Respondent suppressed material facts and gave false declarations about his ineligibility and the conflict of interest.

111.

The argument of IInd Respondent that a conflict of interest would arise in case the Trust were allowed to submit a Resolution Plan is incorrect and misleading. ***. Therefore, it is incorrect to say that the 2nd Respondent has not gained any advantage from the Charitable Trust.

112.

The case on hand squarely falls within the ambit of Section 88 of the Indian Trusts Act, and as such, the Resolution Plan is illegal. Since the said 'Sri Balaji Vidyapeeth' has already been declared as ineligible, the 2nd Respondent cannot act as its alter ego in implementing the Resolution Plan and attain any financial advantage or gain is barred by Section 88 of the Indian Trusts Act.

'109. ...On the contrary, a CoC's withdrawal of the CIRP under Section 12A is coupled with a requirement of payment of CIRP costs, but no damages are statutorily payable to the Resolution Applicant, irrespective of the stage of the withdrawal. ...

125.

... Further, in the event that the CoC enters into a settlement with the Corporate Debtor and withdraws from the CIRP under Section 12A, the Regulation 30A provides for only payment of insolvency costs and not compensation or damages to Resolution Applicant for investing time and money in the process.

'76. Given the timeline referred to above, and given the fact that a resolution applicant has no vested right that his resolution plan be considered, it is clear that no challenge can be preferred to the Adjudicating Authority at this stage. A writ petition Under Article 226 filed before a High Court would also be turned down on the ground that no right, much less a fundamental right, is affected at this stage."

“12.

From Section 12A and the decision of the Hon’ble Supreme Court in ‘Swiss Ribbons Pvt. Ltd.’ (Supra), it is clear that the Promoters/Shareholders are entitled to settle the matter in terms of Section 12A and in such case, it is always open to an applicant to withdraw the application under Section 9 of the ‘I&B Code’ on the basis of which the ‘Corporate Insolvency Resolution Process’ was initiated.

13.

In view of the aforesaid provisions of law, we hold that Section 29A is not applicable for entertaining/considering an application under Section 12A as the Applicants are not entitled to file application under Section 29A as ‘resolution applicant’.

14.

In the present case, the ‘Corporate Insolvency Resolution Process’ was initiated pursuant to an application under Section 7 filed by the ‘Andhra Bank’ (Appellant herein). The application under Section 12A having been approved by the ‘Committee of Creditors’ more than 90% of the voting share, it was not open to the Adjudicating Authority to reject the same and that too on a ground of ineligibility under Section 29A, which is not applicable.”

“23.

Ld. Adjudicating Authority has rejected the Application on the ground that the Application Section 12A of the IBC is not filed by the Applicant (Operational Creditor) on whose instance CIRP was initiated against the Corporate Debtor. No doubt, as per Section 12A of the IBC, the Application must be filed by the Applicant and Regulation 30A of the Regulations provides the procedure and format of the Application i.e. FA. Now the question arises that when the admitted claim of the Operational Creditor and other creditors are satisfied by the Corporate Debtor and CoC approved the resolution for withdrawal of the Application by 100% voting share and the Corporate Debtor has provided a bank guarantee as per sub-Regulation 2 of Regulation 30-A even though the Operational Creditor (Applicant) misusing his position, refused to sign the form FA and does not file Application under Section 12A of the IBC.

24.

In aforesaid peculiar facts and circumstances of the case no cause of action survives in favour of the Operational Creditor to proceed with CIRP. Thus, exercising the inherent powers under Rule 11 of National Company Law Appellate Tribunal, Rules, 2016 to prevent abuse of process, we hereby set aside the impugned order as well as the order of initiating CIRP against the Corporate Debtor. Resultantly, the Corporate Debtor Company is released from the rigours of the CIRP and is allowed to function through its Board of Directors from immediate effect. The IRP shall hand over the records to the Board of Directors.”

“5.

Advancing argument, the Learned Counsel for the Appellant submits that without receipt of any consent viz. Form –FA from the Appellant, who initiated ‘CIRP’ the 1st Respondent/Interim Resolution Professional should not have passed a 'Resolution' for withdrawal of the 'CIRP'. ...

25.

One cannot remain in oblivion of the fact that the 'mandate of the Code' is for 'Resolution' and 'Revival' of Companies. Furthermore, the Appellant is an affected person, because they want more money than what is owed to them by the 'Corporate Debtor'. ...

27.

It must be borne in mind that the jurisdiction of an Adjudicating Authority/Tribunal u/s 12 of the Code is very much limited. In reality, where 'CoC', had approved with more than 90% of voting share, it is not open to an Adjudicating Authority/Tribunal in law to reject the 'Application'.

28.

In Rajakumar V Nagarajan & Ors.(vide judgement in Civil Appeal 1792/2021) the Hon'ble Supreme Court had observed that a 'Company Director', is entitled to seek withdrawal of an application initiating 'CIRP', if, is able to establish that he would be settling the dues of Creditors. ...

30.

In the judgement dated 03.06.2022 of the Hon'ble Supreme Court in Vallal RCK V M/s. Siva Industries and Holdings, the Hon'ble Supreme Court has observed that 'Tribunals' should not interfere with the Commercial wisdom of the Committee of Creditors, agreeing to the settlement Plan submitted by the Corporate Debtor, once it got the approval of 'Committee of Creditors', with more than 90% voting in its favour.

31.

Be that as it may, ...the averments made in the Petition by the 'Resolution Professional' as withdrawal was approved by the CoC meeting that took place on 06.06.2022 (third meeting), the IA 676(CHE)/2022 filed by the Resolution Professional in the main IBA/374/2020 on the file of the Adjudicating Authority/NCLT, Division Bench II, (filed under section 12A of the Code) was rightly allowed by the Adjudicating Authority/NCLT, Division Bench II, Chennai.”

“6.

At this stage, learned counsel for the Appellant submits that the Appellant is ready to settle the claim with all the Creditors including ‘M/s. Edelweiss Asset Reconstruction Company Ltd.’

7.

However, Mr. R.P. Agarwal appearing on behalf of ‘Union Bank of India’ submits that the ‘Resolution Plan’ has already been approved by the ‘Committee of Creditors’ after taking into consideration the claim of the ‘M/s. Edelweiss Asset Reconstruction Company Ltd.’ ...

9.

If an application u/s. 12A 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 12A 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.”

12. ANALYSIS

66.

We are not expanding further on the matter because when we find that the settlement proposal of the promoter, after approval of CoC, for invoking the provisions of Section 12-A of the Code, is pending before the Adjudicating Authority, in our view, it shall be in the fitness of things that all the relevant aspects of the matter are left open for consideration of the Adjudicating Authority, including those relating to the justification for invoking Section 12-A after issuance of fresh invitation for EOI and after receiving resolution plans. In other words, we would leave all the relevant aspects open for consideration of the Adjudicating Authority in accordance with law while keeping in view the observations of this Court.

13. ISSUES FRAMED BY THIS TRIBUNAL

14. ISSUE NOS. (I) AND (II)

Point G – Impact and effect of subsequent events

59.

The discussion aforesaid would have been decisive of the matter but there had been several subsequent events in this matter, particularly of fresh invitation for EOI and then, approval of the settlement offer of the promoter by the CoC in its nineteenth meeting held on 12.10.2022 by 100% majority of the voting share. Thus, the question is about the impact and effect of such subsequent events. For dealing with this question, we need to recapitulate the relevant background aspects of the case and the chronology of subsequent events.

60.

As noticed, in the impugned judgment and order dated 17.02.2022, the Appellate Tribunal had directed the CoC to reconsider the offer of the promoter within fifteen days from the date of its order (i.e., within fifteen days from 17.02.2022). Prior to this, twice over the propositions of such settlement offer by the promoter had been dealt with disfavourably. The relevant parts of proceedings in the ninth CoC meeting concerning such proposal have already been noticed hereinbefore. It is noticed that after approval of the resolution plan, the promoter again submitted a settlement proposal on 08.03.2021 which was followed by a letter dated 14.07.2021 from one Saveetha Institute of Medical and Technical Sciences as proof of funding, but the said letter was subsequently withdrawn by the said Institute. The resolution plan was approved by the Adjudicating Authority on 15.07.2021, which was challenged by the promoter and the Appellate Tribunal granted stay over operation of the order dated 15.07.2021. The Appellate Tribunal, ultimately, allowed the appeal and apart from disapproving the resolution plan in question, directed the resolution professional to call for the meeting of CoC within 15 days from the date of judgment and to proceed with CIRP from the stage of publication of Form G and put the proposal of promoter before CoC for consideration. In compliance of these directions of NCLAT, eleventh CoC meeting was held on 03.03.2022 where the settlement proposal of the promoter was put to vote in the CoC; the voting continued until 25.03.2022; and ultimately, the said settlement proposal was voted against by 51.81% of the voting share.

61.

After such rejection of the settlement proposal of the promoter, as we have detailed hereinabove in paragraphs 26.1 to 26.4, proceedings continued in CoC for invitation of fresh EOI and for that purpose, CoC even resolved to seek further time extension to the Adjudicating Authority.

61.1.

On 29.09.2022, in the eighteenth CoC meeting, it was informed that seven resolution plans had been received and their evaluation was under process but, the CoC members were informed that another settlement proposal was received from the promoter on 19.09.2022. At that stage, again, when the mandatory 330 days' period was about to end, the CoC members unanimously voted to seek extension of CIRP timelines. Then, on 12.10.2022, the discussion on the settlement proposal of the promoter took place, it was put to vote and was approved by the CoC with 100% of the total voting powers.

62.

The aforesaid proceedings continued with the matter remaining pending in this Court. The question is, what ought to be the way forward? At the first blush, it may appear that when the settlement proposal has now been approved by the CoC with 100% voting powers in their commercial wisdom, the process thereunder may be allowed to continue as such. However, a blanket approval by this Court at this stage is fraught with other complications.

63.

Section 12-A was introduced in the Code later and in accordance with the Insolvency Law Report, March, 2018. This provision was introduced to provide for a mechanism for withdrawal upon settlement which was missing in IBC as originally promulgated. Regulation 30-A was also introduced to the CIRP Regulations. It was further amended with effect from 25.07.2019, providing for withdrawal of CIRP even after issuance of expression of interest but, with the condition that the applicant shall state the reasons justifying withdrawal after issuance of EOI.

64.

As noticed from various events, even at the threshold stage, the NCLT noticed the settlement proposal on behalf of the corporate debtor but then, found the same to be an eyewash which was put forward only to gain time. The petition was admitted, triggering CIRP. Significantly, the settlement proposal then came up from the promoter only a day before the received resolution plans were to be put to vote, i.e., on 21.01.2021. The CoC, even when not formerly voting on it, clearly rejected the same for the Agenda having already set for dealing with the resolution plan received from the resolution applicant. As noticed, after approval of the resolution plan, the promoter again submitted a settlement proposal but the Institute, said to be supporting the same, subsequently withdrew. After allowing of the appeal by NCLAT and in terms of those directions, the new settlement proposal was precisely put to vote and was rejected. Thereafter, fresh EOIs were invited and resolution plans were received. Significantly, the promoter moved another settlement proposal for invoking Section 12-A of the Code on 19.09.2022, only after receiving of the resolution plans from seven prospective resolution applicants. A pattern in the aforesaid dealings by the promoter is quite striking. When the resolutions plans had been received at the earlier stage, only at the eleventh hour, the settlement proposal came up. This time too, the settlement proposal came up from the promoter only after resolution plans had been received. Prior to it, his proposal had already been rejected. It gets perforce commented that the representative of the corporate debtor being a part of CoC, such proposer is obviously in a position to know about the propositions in the resolution plans when received in response to invitation.

11.

Subsequently the e-voting was conducted by the RP on the 12A proposal submitted by the promoter from 21st March 2022 to 25th March 2022 and requested the CoC members to take the decision thereon. The e-voting results were declared on 26 March 2022 wherein our proposal has been rejected without assigning any reasons for such rejection despite we offered entire dues of the Financial Creditors will be settled without any haircut. As per the e-voting results, 30.40 % of the voting share voted in favour of the proposal, 51.80% of voting share voted against the proposal and 17.80% of the total voting share abstained from the voting.

12.

In this back drop, we have made representation vide letter dated 4th Aug.2022 to all the CoC members/ RP wherein we informed that the rejection of said 12A proposal is nothing but arbitrary and against the settled law and the Hon'ble NCLAT's order and thereby requested to consider the 12A proposal in fair manner after affording us a proper and complete opportunity to present and discuss our proposal. The said representation once again made by us in the 16th CoC meeting held on 10th Aug. 2022 wherein we agreed to submit the revised 12A proposal in line with the various discussions held with the Consortium Lenders.

13.

The promoters, in the circumstances, has proposed once again under Section 12A of the Code for settlement of its debt including the claim of the Lenders.

22.

The law laid down by the Hon’ble Supreme Court as indicated in the above paragraphs is clear that the approval by the CoC of a Resolution Plan is not in the realm of contract, but is insulated by the Scheme under the Code and this bind both the Successful Resolution Applicant as well as CoC. The Hon’ble Supreme Court in the Ebix itself has laid down timelines provided in the Code have to be adhered to. In event, the submission of the Appellant is accepted that even after the approval of the Plan by the CoC, the CoC be given power to entertain a Settlement Proposal by the Ex-Promoter, the timelines for the different process and its finality shall be breached. Approval by the CoC of a Resolution Plan has to be in accordance with its commercial wisdom and when CoC approves a Plan and the Resolution Applicant is prohibited to modify or withdraw from the Plan, same embargo has to be accepted on CoC also from changing its stand. The judgment of the Hon’ble Supreme Court in Ebix Singapore lays down that after approval by the CoC of a Resolution Plan, CoC itself is bound by its decision and cannot be allowed to go back from its decision and pass any other resolution. This has to be accepted to give finality on different steps of the IBC and for timely conclusion of the resolution process.

(emphasis supplied)

15. ISSUE NO. (III)

30 A. Withdrawal of application.

(1)

An application for withdrawal under section 12A 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 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation.

(emphasis supplied)

3.

We, the Applicant herein withdraw the application bearing IBA/1459/2019 filed before the Adjudicating Authority under Section 7 of the Insolvency and Bankruptcy Code, 2016 for below mentioned reasons.

a. Promoter of Corporate Debtor is paying the entire dues of all the Secured Financial Creditors and Unsecured Financial Creditors immediately upon receipt of the approval by the Adjudicating Authority along with simple interest @ 6% p.a. on the admitted claim amount due to the Secured Lenders to the extent of Rs.25.29 Crores for the period from 6th May 2020 to 31 July 2021;

b. That the aforementioned proposal is higher in value as compared to the Resolution Plans received from the Prospective Resolution Applicants.

c. That the said Section 12(A) proposal has been approved with 100% vote of CoC Members.

The Chairperson then requested the CoC members to provide him the reasoning to be given to the RAs. Mr. Arun Shah suggested that RAs should be informed that 12A proposal submitted by the promoters deserved a priority consideration and since the promoters have substantiated with the availability of funds, the CoC felt the need to discuss the matter with respect to 12A proposal first and then subsequently with RAs. He also suggested that RA may be communicated that CoC has got the Resolution plans evaluated by some external agency and the report has come and the CoC is in the process of evaluation pros and cons of each Resolution Plan, therefore CoC need time. To this the Chairperson replied that at this stage it is not appropriate to say that the CoC requires further time as the CIRP timelines are coming to a close.

(emphasis supplied)

3.

There is no merit in the submission that the Committee of Creditors ignored the resolution plans after issuance of expression of interest without any justification. Till the cut-off date 01.08.2022, seven resolution plans were received from Resolution Applicants. The resolution plans were sent for evaluation through an external agency namely BDO India LLP who was appointed by the Committee of Creditors. When the evaluation process was on progress, on 19.09.2022, the Promoter submitted a revised settlement plan under Section 12A of the Insolvency and Bankruptcy Code, 2016.

4.

The second Item of the agenda of the 18th meeting of the Committee of Creditors held on 29.09.2022 related to deliberation on the evaluation of the resolution plans by the Committee of Creditors. Since the evaluation report was not received, it was resolved that the evaluation process should be speeded up so that the same can be discussed in the next meeting of the Committee of Creditors. The third item of the agenda related to take note of the 12A proposal submitted by the Promoter. As a matter of fact, in the joint lenders meeting held on 22.9.2022 between the members of the Committee of Creditors, it was decided to discuss the 12A proposal submitted by the promoter. In the 18th meeting of the Committee of Creditors, the members of the Committee of Creditors debated on the possibilities of consideration of 12A proposal vis a vis the evaluation and consideration of the resolution plan and also discussed its pros and cons. It was submitted on behalf of the promoter that under the 12A proposal, they are offering to settle all the suppliers and even those suppliers whose claims are not filed and admitted including the stakeholders like the shareholders. A request was also made that the 12A proposal should not be treated on par with the resolution plans. It is also relevant to mention that the Committee of Creditors had suggested certain modifications in the settlement proposal

5.

The next meeting of the members of the Committee of Creditors was held on 12.10.2022. The members of the Committee of Creditors were conscious of the fact that the Committee of Creditors has to justify as to why 12A proposal was taken for consideration post issuance of expression of interest. After elaborate deliberations and discussions, it was decided to put the 12A proposal to vote. The promoter also agreed to give a modified Bank Guarantee. The members of the Committee of Creditors observed that the 12A proposal deserved a priority consideration especially when the promoter has submitted the availability of funds. It was also observed, that the Resolution Applicants should be informed that the Committee of Creditors in its commercial wisdom decided to put to vote the 12A proposal and that the future course of action would be decided based on its outcome. This decision was taken collectively and unanimously by the members of the Committee of Creditors. The settlement proposal submitted by the promoter under Section 12A of the Insolvency and Bankruptcy Code, 2016 was put for voting. Subsequently, on 31.10.2022, 12A proposal was approved with 100% of the total voting powers of the Committee of Creditors. BDO India LLP has submitted the evaluation report of Resolution plans on 29.09.2022 to all the members of the Committee of Creditors. Therefore, the evaluation report was available with all the members of the Committee of Creditors before they voted on the 12A proposal.

6.

Under the settlement proposal which was approved unanimously by all the members of the Committee of Creditors, an amount of Rs. 105 crores of the settlement proposal was deposited on 11.10.2022. It was also informed that an amended Bank Guarantee from Axis Bank for the balance amount of Rs. 315 crores would be submitted immediately after the members of the Committee of Creditors approves the draft Bank Guarantee. Under the settlement proposal submitted by the Promoter, the entire dues of the banks will be settled along with 6% interest accrued during the CIRP as discussed with the secured creditors. As far as the unsecured creditors including the operational creditors are concerned, they will recover the entire dues as per the books of account of the Corporate Debtor and the dues of the other creditors and other liabilities will also be settled. It was also ensured that the unsecured creditors including the operational creditors will be able to recover their dues in terms of 12A proposal. It was also mentioned that any contingent liability as and when crystallized would be settled in full to mitigate the situation and to protect the livelihood of suppliers. It was also proposed that the Corporate Debtor would continue as a going concern which will provide direct employment to around 800 employees. The revival of the company will increase the economic value and at the same will generate future employment. The livelihood of about 250 suppliers and service providers Indirectly associated with the Corporate Debtor through its transporters, security agencies, dealers, vendors, etc., will be safeguarded. There won't be any loss to the exchequer in terms of GST custom duty, Income tax, etc. Valuable foreign exchange earnings will increase and the travellers and the corporate guests will get facilities for stay. It is this proposal which was accepted by all the members of the Committee of Creditors unanimously.

7.

It is evident from the statement that the net value offered by the Intervenor namely Consortium of Sankalp IN (SI) & Globe Ecologistics Pvt. Ltd. is Rs. 270 crores which is the lowest with a payment term from 90 days to 2 years. Similarly, the net value offered by the intervenor Mr. M.K.Rajagopalan is only Rs. 438.86 crores. Since the net value offered by the Intervenors is less than the total amount offered by the Promoter I.e., Rs592.30 crores which is in full settlement of entire liabilities of the Corporate Debtor, there is no merit in any contention raised by the Intervenors herein and their applications for Intervention should be dismissed.

8.

It is also submitted that the Committee of Creditors took into account the settlement plan submitted by the Promoter and accepted the same since the said proposal settles all the claims of the secured and the unsecured creditors which includes the operational creditors. The proposal of the promoter is for payment of Rs.592.30 crores of which Rs. 420.00 crores was paid upfront by promoter with Rs105.00 crores by way of deposit in the no-lien account and balance amount of Rs. 315.00 crores was duly supported by bank guarantee which is to be encashed Immediately on receiving the approval given by this Hon'ble Tribunal

9.

In the above background, it is submitted that the proposal given by the promoter was approved unanimously by the members of the Committee of Creditors since the said proposal settles all the claims and the proposal was duly supported by deposit of Rs105 crores and the balance amount of Rs. 315.00 crores by way of a Bank Guarantee. Therefore, there is no violation of Section 30-A(1) of the CIRP regulations 2016. The resolution plans given by the resolution applicants stands no comparison with the proposal given by the Promoter. It is also submitted that the Committee of Creditors decided to consider the settlement proposal and voted unanimously and there is no bar for considering the settlement proposal which was deliberated upon and the suggestions made by the Committee of Creditors with regard to change of some of the proposal terms were accepted by the Promoter and a revised proposal was submitted. Therefore, there is no change in the position of the Committee of Creditors on the settlement proposal as alleged. It is further submitted there was no violation of any law In convening and holding of the 18th and 19th meeting of the Committee of Creditors and the same is in accordance with law. The Resolution Applicant has no right to take part in the meeting of the Committee of Creditors.

10.

It is submitted that in a catena of judgements it has been held that the commercial wisdom of the CoC is paramount and the legislature has consciously not provided any ground to challenge the commercial wisdom. I further submit that the ultimate object of the IBC is to put the Corporate Debtor back to rails. I submit that the Petitioners in the Intervention Petition Nos. 7 and 12 of 2023 who are only the Resolution Applicants are not stake holders and they have no locus standi to challenge the decision of the CoC which in its commercial wisdom has approved the 12 A proposal of the Promoter with 100% voting. I submit that the Intervening Petitioners are not stake holders or aggrieved persons to maintain the above Intervention Petitions

11.

For the reasons mentioned above, it is humbly prayed that this Hon’ble Tribunal may be pleased to dismiss the present Intervention Petition Nos. 7 and 12 of 2023 in I.A. No. 1410/CHE/2022 in IBA/1459/2019 and allow the IA 1410/22 filed under Sec-12A of IBC filed and thus render justice.

16. ISSUE NO. (IV)

30 A. Withdrawal of application.

(1)

An application for withdrawal under section 12A 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 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation.

(2)

The application under sub-regulation (1) shall be made in Form FA of the Schedule-I accompanied by a bank guarantee-

(a)

towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of subregulation (1); or

(b)

towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) of sub-regulation (1).

(3)

Where an application for withdrawal is under clause (a) of sub-regulation (1), the interim resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt.

(4)

Where an application for withdrawal is under clause (b) of sub-regulation (1), the committee shall consider the application, within seven days of its receipt.

(5)

Where the application referred to in sub-regulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with the approval of the committee, to the Adjudicating Authority on behalf of the applicant, within three days of such approval.

(6)

The Adjudicating Authority may, by order, approve the application submitted under subregulation (3) or (5).

(7)

Where the application is approved under sub-regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under sub-regulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code.

EVOLUTION OF SECTION 12A OF IBC, 2016

“The Adjudicating Authority may permit withdrawal of the application made under rules 4, 6 or 7, as the case may be, on a request made by the applicant before its admission.”

> “We are of the view that instead of all such orders coming to the Supreme Court as only the Supreme Court may utilise its powers under Article 142 of the Constitution of India, the relevant Rules be amended by the competent authority so as to include such inherent powers. This will obviate unnecessary appeals being filed before this Court in matters where such agreement has been reached.”

12A. 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 CoC, in such manner as may be specified

“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 ninety percent voting share, the resolution professional shall submit the application under sub-regulation (1) to the Adjudicating Authority on behalf of the applicant, within three days of such approval.

(5)

The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (4).”

"The only reason why the withdrawal was not allowed, though agreed to by the Corporate Debtor as well as the Financial Creditor -State Bank of India and the Operational Creditor-Respondent No.3, is because Regulation 30A states that withdrawal cannot be permitted after issue of invitation for expression of interest. According to us, this Regulation has to be read along with the main provision Section 12A which contains no such stipulation. Accordingly, this stipulation can only be construed as directory depending on the facts of each case. Accordingly, we allow the Settlement that has been entered into and annul the proceedings. The Special Leave Petition is disposed of accordingly."

Section 12-A is not violative of Article 14

79.

Section 12-A was inserted by the Insolvency and Bankruptcy (Second Amendment) Act, 2018 with retrospective effect from 6-6-2018. It reads as follows:

“12-A. Withdrawal of application admitted under Sections 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.”

80.

The ILC Report of March 2018, which led to the insertion of Section 12-A, stated as follows:

“29.1.

Under Rule 8 of the CIRP Rules, NCLT may permit withdrawal of the application on a request by the applicant before its admission. However, there is no provision in the Code or the CIRP Rules in relation to permissibility of withdrawal post admission of a CIRP application. It was observed by the Committee that there have been instances where on account of settlement between the applicant creditor and the corporate debtor, judicial permission for withdrawal of CIRP was granted [Lokhandwala Kataria Construction (P) Ltd. v. Nisus Finance and Investment Managers LLP [Lokhandwala Kataria Construction (P) Ltd. v. Nisus Finance and Investment Managers LLP, (2018) 15 SCC 589] ; Mothers Pride Dairy India (P) Ltd. v. Portrait Advertising and Marketing (P) Ltd. [Mothers Pride Dairy India (P) Ltd. v. Portrait Advertising and Marketing (P) Ltd., 2017 SCC OnLine SC 1789]; Uttara Foods and Feeds (P) Ltd. v. Mona Pharmachem [Uttara Foods and Feeds (P) Ltd. v. Mona Pharmachem, (2018) 15 SCC 587] ]. This practice was deliberated in light of the objective of the Code as encapsulated in the BLRC Report, that the design of the Code is based on ensuring that “all key stakeholders will participate to collectively assess viability. The law must ensure that all creditors who have the capability and the willingness to restructure their liabilities must be part of the negotiation process. The liabilities of all creditors who are not part of the negotiation process must also be met in any negotiated solution.” Thus, it was agreed that once CIRP is initiated, it is no longer a proceeding only between the applicant creditor and the corporate debtor but is envisaged to be a proceeding involving all creditors of the debtor. The intent of the Code is to discourage individual actions for enforcement and settlement to the exclusion of the general benefit of all creditors. 29.2. On a review of the multiple NCLT and Nclat judgments in this regard, the consistent pattern that emerged was that a settlement may be reached amongst all creditors and the debtor, for the purpose of a withdrawal to be granted, and not only the applicant creditor and the debtor. On this basis read with the intent of the Code, the Committee unanimously agreed that the relevant rules may be amended to provide for withdrawal post admission if the CoC approves of such action by a voting share of ninety per cent. It was specifically discussed that Rule 11 of the National Company Law Tribunal Rules, 2016 may not be adopted for this aspect of CIRP at this stage [as observed by the Hon’ble Supreme Court in Uttara Foods and Feeds (P) Ltd. v. Mona Pharmachem [Uttara Foods and Feeds (P) Ltd. v. Mona Pharmachem, (2018) 15 SCC 587] ] and even otherwise, as the issue can be specifically addressed by amending Rule 8 of the CIRP Rules.” (emphasis in original)

Before this section was inserted, this Court, under Article 142, was passing orders allowing withdrawal of applications after creditors’ applications had been admitted by NCLT or NCLAT.

81.

Regulation 30-A of the CIRP Regulations states as under:

“30-A. Withdrawal of application.—(1) An application for withdrawal under Section 12-A 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 36-A.

(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 ninety per cent voting share, the resolution professional shall submit the application under sub-regulation (1) to the adjudicating authority on behalf of the applicant, within three days of such approval.

(5)

The adjudicating authority may, by order, approve the application submitted under sub-regulation (4).”

This Court, by its order dated 14-12-2018 in Brilliant Alloys (P) Ltd. v. S. Rajagopal [Brilliant Alloys (P) Ltd. v. S. Rajagopal, 2018 SCC OnLine SC 3154], has stated that Regulation 30-A(1) is not mandatory but is directory for the simple reason that on the facts of a given case, an application for withdrawal may be allowed in exceptional cases even after issue of invitation for expression of interest under Regulation 36-A.

82.

It is clear that once the Code gets triggered by admission of a creditor’s petition under Sections 7 to 9, the proceeding that is before the adjudicating authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate 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 NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the parties concerned and considering all relevant factors on the facts of each case.

83.

The main thrust against the provision of Section 12-A 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 explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the Committee of Creditors do not have the last word on the subject. If the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, NCLT, and thereafter, NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12-A also passes constitutional muster.

(emphasis supplied)

30 A. Withdrawal of application.

(1)

An application for withdrawal under section 12A 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 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation.

(2)

The application under sub-regulation (1) shall be made in Form FA of the Schedule-I accompanied by a bank guarantee-

(a)

towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of subregulation (1); or

(b)

towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) of sub-regulation (1).

(3)

Where an application for withdrawal is under clause (a) of sub-regulation (1), the interim resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt.

(4)

Where an application for withdrawal is under clause (b) of sub-regulation (1), the committee shall consider the application, within seven days of its receipt.

(5)

Where the application referred to in sub-regulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with the approval of the committee, to the Adjudicating Authority on behalf of the applicant, within three days of such approval.

(6)

The Adjudicating Authority may, by order, approve the application submitted under subregulation (3) or (5).

(7)

Where the application is approved under sub-regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under sub-regulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code.

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 K. Sashidhar v. Indian Overseas Bank [K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150 : (2019) 4 SCC (Civ) 222] , Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta [Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443] , Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh [Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh, (2020) 11 SCC 467 : (2021) 1 SCC (Civ) 799] , Kalpraj Dharamshi v. Kotak Investment Advisors Ltd. [Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., (2021) 10 SCC 401 : (2022) 1 SCC (Civ) 233] and Jaypee Kensington Boulevard Apartments Welfare Assn. v. NBCC (India) Ltd. [Jaypee Kensington Boulevard Apartments Welfare Assn. v. NBCC (India) Ltd., (2022) 1 SCC 401 : (2022) 2 SCC (Civ) 165]

22.

No doubt that the aforesaid observations have been made by this Court while considering the powers of the CoC while granting its approval to the resolution plan.

23.

As already stated hereinabove, the provisions under Section 12A IBC have been made more stringent as compared to Section 30(4) IBC. Whereas under Section 30(4) IBC, the voting share of CoC for approving the resolution plan is 66%, the requirement under Section 12-A IBC for withdrawal of CIRP is 90%.

24.

When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and dehors the provisions of the statute or the Rules.

25.

In the present case, the proceedings of the 13th, 14th and 15th meetings of CoC would clearly show that there were wide deliberations amongst the members of the CoC while considering the settlement plan as submitted by the appellant. Not only that, the proceedings would also reveal that after suggestions were made by some of the members of the CoC, suitable amendments were carried out in the settlement plan by the appellant. One of the members of the CoC having voting share of 23.60%, though initially opposed the settlement plan, subsequently decided to support the same. Accordingly, NCLT itself, vide order dated 29-3-2021 [IDBI Bank Ltd. v. Siva Industries & Holdings Ltd., 2021 SCC OnLine NCLT 498], directed the RP to reconvene the CoC meeting. As per the directions of NCLT, on 1-4-2021, the 17th meeting of the CoC was reconvened, wherein the settlement plan was approved by 94.23% votes.

26.

It is thus clear that the decision of the CoC was taken after the members of the CoC, had due deliberation to consider the pros and cons of the settlement plan and took a decision exercising their commercial wisdom. We are therefore of the considered view that neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of CoC.

27.

This Court has, time and again, emphasised the need for minimal judicial interference by NCLAT and NCLT in the framework of IBC. We may refer to the recent observation of this Court made in Arun Kumar Jagatramka v. Jindal Steel & Power Ltd. [Arun Kumar Jagatramka v. Jindal Steel & Power Ltd., (2021) 7 SCC 474] : (SCC p. 533, para 95)

“95.

... However, we do take this opportunity to offer a note of caution for NCLT and NCLAT, functioning as the adjudicatory authority and appellate authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. As we have noted earlier in the judgment, the IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India. As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from NCLT and Nclat should be kept at its bare minimum and should not disturb the foundational principles of the IBC.”

6.

As observed hereinabove, immediately on constitution of COC, this Court has stayed the impugned order. No further steps are taken by the IRP/COC pursuant to the admission of the CIRP proceedings except the IRP was appointed and the COC was constituted. Under Section 12A of the IBC which has been inserted by the Insolvency and Bankruptcy (Second Amendment) Act, 2018 with retrospective effect from 06.06.2018, 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 COC, in such manner as may be specified. The rationale behind the insertion of Section 12A is contained in the Insolvency Law Commission Report, which is as under:

“29.1

Under Rule 8 of the CIRP Rules, NCLT may permit withdrawal of the application on a request by the applicant before its admission. However, there is no provision in the Code or the CIRP Rules in relation to permissibility of withdrawal post admission of a CIRP application. It was observed by the Committee that there have been instances where on account of settlement between the applicant creditor and the corporate debtor, judicial permission for withdrawal of CIRP was granted. [...] Thus, it was agreed that once CIRP is initiated, it is no longer a proceeding only between the applicant creditor and the corporate debtor but is envisaged to be a proceeding involving all creditors of the debtor. The intent of the Code is to discourage individual actions for enforcement and settlement to the exclusion of the general benefit of all creditors.”

7.

It is true that the procedure for preferring an application under Section 12A of the IBC is contained in Regulation 30A of the CIRP Regulations, 2016. However, as per the decision of this Court in the case of Brilliant Alloys Pvt. Ltd. v. S. Rajagopal, 2018 SCC Online SC 3154, the said provision is held to be directory, depending on the facts of each case.

7.1

In the case of Swiss Ribbons Pvt. Ltd. (supra), it is held that at any stage before a COC is constituted, a party can approach NCLT/Adjudicating Authority directly and the Tribunal may in exercise of its powers under Rule 11 of the NCLT Rules, allow or disallow an application for withdrawal or settlement. Therefore, in an appropriate case and where the case is being made out and the NCLT is satisfied about the settlement, may permit/allow an application for withdrawal or settlement.

156.

Since the aim of the statute is to preserve the interests of the corporate debtor and the CoC, it was recognised that settlements between the corporate debtor and the CoC may be in the best interests of all stakeholders since insolvency is averted.

156.1.

Two decisions of two-Judge Benches of this Court in Lokhandwala Kataria Construction (P) Ltd. v. Nisus Finance & Investment Managers LLP [Lokhandwala Kataria Construction (P) Ltd. v. Nisus Finance & Investment Managers LLP, (2018) 15 SCC 589] and Uttara Foods & Feeds (P) Ltd. v. Mona Pharmachem [Uttara Foods & Feeds (P) Ltd. v. Mona Pharmachem, (2018) 15 SCC 587], (prior to the insertion of Section 12-A which enabled withdrawal of the CIRP on account of settlement between the parties), had refused to effectuate this remedy by exercising inherent powers of the adjudicating authority under Rule 11 of the NCLT Rules, 2016 or the power of parties to make applications to the adjudicating authority under Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

156.2.

In Uttara Foods [Uttara Foods & Feeds (P) Ltd. v. Mona Pharmachem, (2018) 15 SCC 587] this Court had granted a one-time relief under Article 142 of the Constitution since all the parties were present before it and had presented it with signed consent terms. This course of action, in refraining from the exercise of inherent powers to effect procedures and remedies that were not specifically envisaged by the statute, was explicitly affirmed by the Insolvency Law Committee Report dated March 2018 which proceeded to suggest amendments to IBC and recommended a ninety per cent voting threshold by the CoC for withdrawals of a CIRP and a specific amendment to Rule 8 of the then existing CIRP Rules to enable parties to file such applications. This report led to the insertion of Section 12-A which vested the CoC with the power to withdraw the CIRP or vote on such withdrawal, if sought by the corporate debtor. This provision was introduced with retrospective effect on 6-6-2018. Significantly, no such exit routes have been contemplated for the resolution applicant. It is relevant to note that the newly inserted and then unamended Regulation 30-A (w.e.f. 4-7-2018) of the CIRP Regulations stipulated that withdrawal under Section 12-A can be allowed through submitting an application to the IRP or RP (as the case may be) before the invitation for EoI is issued to the public. The CoC was to consider the application within seven days of its constitution and an approval for such application required approval of the ninety per cent of the voting share of the CoC.

156.3.

However, on 14-12-2018, a two-Judge Bench of this Court, held in Brilliant Alloys (P) Ltd. v. S. Rajagopal [Brilliant Alloys (P) Ltd. v. S. Rajagopal, (2022) 2 SCC 544] that Regulation 30-A is directory, and not mandatory in nature since Section 12-A IBC does not stipulate a deadline by which a withdrawal from the CIRP can be made. Thus, in exceptional cases withdrawals from the CIRP under Section 12-A IBC could be permitted even after the invitation of EoI has been issued. Regulation 30-A of the CIRP Regulations was then amended by the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2019, w.e.f. 25-7-2019 to reiterate the decision of this Court. The newly amended provision allows for withdrawals even after the invitation for expression of interest has been issued, provided that the applicant states the reasons justifying such withdrawal.

Agenda Item No. A.2 To discuss and put to vote the settlement proposal submitted by promoters under section 12A if approved by COC.

The Chairperson apprised that settlement proposal put forth by the promoters was discussed in the last COC meeting and the COC had sought certain modifications and clarifications in the said settlement proposal. The Chairperson then requested the COC members and promoters to continue their discussion.

Mr. Suresh from Phoenix ARC enquired about Rs. 105 crores deposit made by the promoters into the Indian Bank in the name of a third party. To this Mr. Srinivasalu, from Indian Bank confirmed that a deposit of Rs. 105 crores have been made and lien has been marked in the name of Resolution Professional of Appu Hotels Ltd. Mr. Suresh then asked whether the account is in the name of a third party. To this Mr. Srinivasalu confirmed that account is in the name of a third party (Iheart private limited), but lien has been marked in the favour of Resolution Professional of Appu Hotels Ltd.

Mr. Ajay from State Bank of India emphasized that it was decided, that the money will be deposited in a no lien account and the deposit should be with a lead bank or any other bank of the consortium. He further enquired whether any commitment letter has been received from Iheart Properties Private Limited. Mr. Srinivasalu confirmed that letter has come from Iheart private limited (Iheart).

Mr. Suresh requested the Chairperson to shed some light on the issue with reference to legal compliance. The Chairperson explained that as far as proposal under 12A and role of RP under the Code is concerned there is no requirement for funds verification as 12A is withdrawal application that required 90 percent approval of the COC, therefore, the entire onus is placed on COC. He further explained that 12A plan is different from resolution plan. In a resolution plan, the RP has to do compliance check under various provisions of the Code and regulations, however, under a 12A plan, it is purely left to the commercial wisdom of the CoC. He emphasized that role of COC is very important in 12A as a justification has to be given to the NCLT by the applicant as to why 12A settlement is taking place post issuance of expression of interest. The only requirement is that the promoters / directors have to provide a bank guarantee for CIRP cost, hence question raised by Mr. Suresh is a pure risk-based question that has to be assessed by him as an individual COC member and as an applicant.

Mr. Navin Sambtani from IDBI Trusteeship sought clarification on similar issue. He submitted that since the money has been deposited into the account of Iheart, is there anything else apart from lien being marked in the name of RP to make this fairly irrevocable in favour of the intended end uses or the COC will have to wait for specific instructions from Iheart to allow the funds to be used for the intended purpose.

Mr. Srinivasalu from Indian Bank apprised that they have asked the branch not to give the original receipt. Original receipt will be retained by the Bank in addition to the lien marked. He further apprised that they have received a very clear and detailed letter from Iheart instructing that the funds are to be used for the 12A proposal of the Promoters of Appu Hotels Limited.

Mr Ajay of SBI, emphasized that the instructions were very clear with respect to deposit of money into no lien account, however, despite the instructions the money has been deposited into the account of Iheart. Mr. Srinivasalu confirmed that it is as good as no lien account backed by commitment letter issued by Iheart. It was mutually agreed between the COC members that Indian Bank will issue a confirmation that the money is at the disposal of COC represented by the RP. To this Indian Bank requested the COC members to go through the letter issued by Iheart where these issues have been dealt with.

The letter issued by Iheart was shared by Indian Bank on the screen. Mr Ramachandran from Prabhat Resources, pointed out that the forfeiture clause is missing in the letter and the same must be communicated to Iheart, that in case of any breach, the amount deposited shall be liable to be forfeited. Mr Ajay, questioned that in whose favour the title deeds will be released after approval of settlement, Iheart or the borrower? As the point no 7 in the letter refers to wording as "us" which means to indicate it is Iheart and the same needs to be clarified by the Promoters.

Mr. Navin Sambtani, pointed out that most important question to consider right now is that is the COC comfortable with other clauses of the letter with respect to the fact that this is a no lien account and only specifically meant for a particular purpose. And after this the COC can come to the issue of release of documents.

Mr. Ajay from State Bank of India emphasized that as per SBI's instructions the amount was supposed to be deposited into a no lien account and India Bank had also conveyed that it will be transferred to a no lien account. He further emphasized that he will have to get it examined from the legal department of SBI as to whether this mechanism will work or not for SBI, and then only SBI can give its approval.

Mr. Periasamy, promoter of Corporate Debtor, while addressing the issue of release of security submitted that once the dues of the creditors are cleared, they can release the security documents in favour of the new lenders also.

Mr. Suresh from Phoenix ARC asked whether Section 186 of Companies Act is applicable to this. To this the promoter, Mr. Periasamy, replied that private limited companies are exempted from the applicability of Section 186 of Companies Act and clarified that the sponsor is a private limited company.

Mr. Navin enquired from the promoter that whether the funds will be directly infused by Iheart to Appu Hotels as borrower or it will be given directly to the promoters who will then infuse the money into Appu Hotels after plan approval. To this the promoter clarified that it will be a deemed loan for Appu Hotels Ltd and the same will be regularised through compliance once the 12A proposal is approved by the CoC and NCLT.

Mr. Suresh from Phoenix, requested the Chairperson to check the applicability of Section 186 of Companies Act just to make sure that the transaction is not ultra vires. Mr. Navin opined that since this 12A issue is incumbent on COC, the whole authorization of loan coming directly from Iheart needs to be checked externally through some law firm.

Mr. Periasamy assured the COC members that they will comply with all the necessary authorizations required for disbursement of money from Iheart, and agreed to give a separate undertaking in this regard as a shareholder and promoter of Appu Hotels Limited. He further urged the CoC members to consider the proposal favourably, given that he and his team have worked hard to put up this proposal to retain the business of the CD and he has the backing of majority of the shareholders.

Mr. Suresh from Phoenix ARC opined that as COC members it is their duty also to check the pre-requirement and do the ring fencing to ensure that the COC is taking steps in the right direction and in accordance with law so as to avoid any legal infirmity in the future.

Mr. Navin advised that the process can be started with the submission of undertaking letter by Mr. Periasamy within 2-3 days and in the meantime the COC will put its own mind on the specific requirements for authorizations which the COC will ask Mr. Periasamy to comply with.

The Chairperson reminded the COC members that today's meeting was convened for taking certain decisions on 12A proposal and if not the CoC should consider the Resolution plans which are under evaluation by the CoC. He further emphasised as we ran out of time in the CIRP, it is important for the CoC to decide in this meeting, if they are going to put the 12 A proposal to vote and if not, the Resolution plans evaluation may be taken up by the CoC and we can't convene another CoC meeting to decide that, given that we are on a very tight timelines and any decisions taken after today is subject to the approval of the Adjudicating Authority and hence CoC members should keep that in consideration.

Mr. Arun Shah from Aryav Exports emphasized that the promoters have complied with the requirements as stipulated by COC in the last COC meeting. He further emphasized that discussions of today's meeting are additional and involves technical issues which needs to be safeguarded and for that the promoters are ready to furnish undertakings. He then requested the COC members to stipulate the requirements in writing and hand it over to the promoter so that the promoter complies with the requirements and the process will move faster. He also emphasized that money is now available for disbursement the moment the COC and NCLT approves the 12A settlement proposal.

Mr Srinivasalu of Indian Bank, agreed with the submissions of Mr. Arun Shah and requested the Chairperson to put the 12A settlement proposal to vote. Mr. Suresh opined that the 12A proposal can be put to vote and the final filing can be done subject to regulatory compliance.

Mr. Navin also opined that settlement proposal, be put to vote and the promoter to also furnish the necessary undertaking and further authorisations as stipulated by the CoC members and the same can be examined and decided by the CoC members, before they vote.

Mr. Rishi Gupta of IDBI Bank, pointed out that there is one additional letter for amendment in the bank guarantee and the last clause of the said letter is with respect to extension of bank guarantee i.e., upon approval of 12A proposal by COC the validity of bank guarantee will extend prior to one month before expiry and if the renewed bank guarantee is not submitted within the stipulated time it can be invoked by the RP on instructions of the COC with 51% of the mandate and for such invocation NCLT order is not required. Mr. Rishi then asked why instructions of COC is required for invocation of bank guarantee and the same shall be allowed to be invoked by RP upon failure by the promoters. He further pointed out that once the plan is approved there is no question of coming back to COC for a mandate of 51%.

To this Mr. Sennimalai, MD of the CD replied that once the proposal is approved money will be deposited and in case the money is not deposited the bank guarantee can be revoked. It is clearly stated in the document that if the money is not deposited and the validity of bank guarantee is not extended then the banks will be at liberty to revoke it.

Some of the COC members opined that it is a draft proposal and if there is any technical issue or any amendment or modification is required in the draft proposal, the same can be suggested to the promoters and accordingly they can get it amended.

Mr. Periasamy agreed with the view of COC members and requested them to give the proposed amendment / modifications in writing and they will amend the proposal and send it to the COC.

Mr. Ajay from SBI agreed with the opinion of Mr. Rishi and opined that there should not be any requirement to seek instructions from COC to invoke bank guarantee. RP should be authorized to invoke the BG without coming back to anybody.

Mr. Periasamy and others agreed to remove the said clause from the proposal.

Mr. Kaliannan, representing the CD, submitted that rest of the clauses of the BG will remain same and they will amend the BG with the suggested changes.

Mr. Ajay from SBI requested for a confirmation from Indian Bank on the issue. Indian Bank opined that let the promoters remove the clause as mentioned by the COC and submit it and the same will be circulated among COC members.

Mr. Arun Shah then asked all the COC members to confirm whether the COC is fine with removal of the clause from BG and submission of amended BG by the promoters.

The Chairperson asked the COC members when can he open the voting lines for voting on 12A settlement proposal. To this Mr. Ajay opined that voting lines can be opened after circulation of minutes by the RP. The Chairperson proposed that voting lines may be opened from 14.10.2022 till 21.10.2022, if fine with all the COC members.

Mr. Srinivasalu enquired from the promoters when can they expect the modified bank guarantee to come. To this Mr. Periasamy replied they need 1-2 days' time to submit the modified BG.

The Chairperson then requested the COC members to provide him the reasoning to be given to the RAs. Mr. Arun Shah suggested that RAs should be informed that 12A proposal submitted by the promoters deserved a priority consideration and since the promoters have substantiated with the availability of funds, the COC felt the need to discuss the matter with respect to 12A proposal first and then subsequently with RAs. He also suggested that RA may be communicated that COC has got the resolution plans evaluated by some external agency and the report has come and the COC is in the process of evaluating pros and cons of each resolution plan therefore COC need time. To this the Chairperson replied that at this stage it is not appropriate to say that the CoC requires further time as the CIRP timelines are coming to a close.

Mr. Ajay suggested that RAs should be informed that while COC was evaluating resolution plans a 12A proposal from the promoter is received and the COC decided to examine the same.

Mr. Navin affirmed the suggestion made by Mr. Ajay and added while COC was evaluating the resolution plans submitted by RAs, a 12A proposal from the Promoter is received, and the COC in its commercial wisdom decided to evaluate the 12A proposal. He further suggested that RAs should be informed that COC in its commercial wisdom has decided to put to vote the 12A proposal and any further course of action will be decided based on this outcome. The other CoC members concurred with the suggestion and requested the RP to take note, that this is the collective decision of the CoC.

Resolution for Voting by the CoC

“Resolved that the settlement proposal submitted by Mr. Palani G Periasamy (Promoter) under Section 12A of the IBC, 2016 which was placed before the COC for discussion and approval in the nineteenth COC meeting held on 12.10.2022 is hereby approved.”

(The above Resolution of the Promoter for settlement under Section 12A of the IBC,2016, which was put to vote on 14.10/2022 to 31/10/2022 is approved with 100% of the Total voting powers of the CoC.

Result of the Resolution, Post Voting ended on 31/10/2022 at 10 PM

The above resolution is being put to vote from 14/10/2022 12 PM till 21/10/2022 11.59 PM and based on the result of this voting, the post voting minutes will be updated and sent to the CoC.)

The Voting results and the approval sheet from the E-Voting is sent to the CoC separately.

CIRP Expenses Ratification

RP informed that he had mailed to the CoC, the summary of the CIRP expenses from 05.05.2020 to 30/09/2022 which is Rs 4,14,50, 885 and highlighted the key expenses for the period from 31/07/2022 to 30/09/2022 and the same is taken as ratified at this CoC meeting.

VOTE OF THANKS

As there was no other matter for discussion, the CoC concluded the meeting with a vote of thanks to everyone by the Chairperson.

“Mr. Navin affirmed the suggestion made by Mr. Ajay and added while COC was evaluating the resolution plans submitted by RAs, a 12A proposal from the Promoter is received, and the COC in its commercial wisdom decided to evaluate the 12A proposal. He further suggested that RAs should be informed that COC in its commercial wisdom has decided to put to vote the 12A proposal and any further course of action will be decided based on this outcome. The other CoC members concurred with the suggestion and requested the RP to take note, that this is the collective decision of the CoC.”

Resolution Plan, Appu Hotels- CIRP Update

rp appu [email protected] To: rajagopalan mk [email protected]/[email protected]

Tue, Oct 18, 2022 at 10:41 AM

Dear Sir,

We refer to the Resolution Plan submitted by you for Appu Hotels Ltd. While the CoC was evaluating the same and had also appointed an agency to assist the CoC in that process, a 12 A proposal from the Promoter was received by the CoC and the CoC in their commercial wisdom decided to consider the proposal and the same is being put to vote currently by the CoC based on their commercial wisdom and any future course of action will be decided based on this outcome. It is also reminded that whatever outcome is still subject to the SC decision which was reserved for order on 16/03/2022.

Regards,

Radhakrishnan Dharmarajan Resolution Professional Appu Hotels Limited. (IBBI/IPA-001/IP-P00508/2017-18/10909)

Regards,

Radhakrishnan Dharmarajan Resolution Professional Appu Hotels Limited. (IBBI/IPA-001/IP-P00508/2017-18/10909)

> “15. ………Be that as it may, while it is important to maintain the sanctity and credibility of CIRP proceedings, it is equally important to ensure that hypertechnicality is not allowed to occupy centre-stage and besiege the proceedings as it would end up frustrating and defeating the very object and purpose of IBC. It is against this evaluation parameter that we may now proceed to examine the acts of omission and commission on the part of Respondents No.1 and 3 in the present matter to conclude as to whether there has been any transgression of the bounds of rules and regulations leading to any serious miscarriage of justice suffered by the Appellants.

23.

...It is well recognised that rules of procedure being handmaid of justice, the object and intent of such procedures should be to advance the cause of justice and not become a tool to manipulate the process. The CIRP proceedings in the present case has already been a protracted affair. Remanding the matter back to CoC on the grounds of the procedural deviations raised by a dissenting minority in class of creditors would render the CIRP a never ending process. This would militate against the core objective of the IBC to ensure insolvency resolution in a time bound manner.

42.1.

It has rightly been contended on behalf of the resolution professional that Form G was published in all leading newspapers on 09.08.2020 and then, IBBI was also informed about technical issues in uploading the Form on the website. The Adjudicating Authority has also rightly observed that a statutory provision regulating a matter of practice or procedure would generally be read as directory and in the present case, no prejudice has been shown by anyone as regards technical non-compliance of all the requirements of publication. It has been too far-stretched on the part of the Appellate Tribunal to observe that when CIRP was conducted during the periods of lockdown in the face of Covid-19 pandemic, most of the people avoided reading newspapers under the apprehension of Covid infection. As noticed, initially as many as 13 EOIs were received. It has also rightly been contended on behalf of the resolution professional that all the requisite steps having been reasonably taken, the process that had reached an advanced stage could not have been annulled on such technicalities.

42.3.

The NCLAT held that the aforesaid was a commercial decision of CoC not requiring interference of the Court. It has been argued on behalf of the contesting respondents that, the aforesaid decision cannot be considered res judicata for they being not the parties to the said appeals decided by NCLAT on 05.05.2021. In our view, even if principles of res judicata are as such not applied, fact of the matter remains that at the given stage, the process as undertaken by the resolution professional had been consistently approved by CoC, Adjudicating Authority and the Appellate Tribunal. Even otherwise, as observed hereinabove, there had not been any such illegality or material irregularity for which the entire process would have been considered vitiated. The findings of the Appellate Tribunal in this regard too, cannot be approved and are required to be set aside.

17. ISSUE NO. (v)

Agenda Item No. A.2 To take note and deliberate on the evaluation of resolution plans by COC.

The Chairperson apprised the COC members that all the seven resolution plans received till cut off date are being evaluated and the process is under progress. One of the COC members enquired whether BDO has participated in the COC meeting. The Chairperson requested Ms. Sunayana to respond to this query. Ms. Sunayana informed the COC that as per her last discussion with BDO personnel, they are waiting for a confirmation of appointment from Indian Bank and she requested the Indian Bank to update on the same. Mr. Srinivasalu from Indian Bank apprised that they have already issued a confirmation letter to BDO on 22.09.2022 confirming their appointment on 01.09.2022 accepting the terms and conditions of their appointment. Ms. Sunayana informed that there was some confusion with respect to their professional fees on which BDO wanted confirmation. To this Indian Bank replied that acceptance of terms and conditions includes acceptance of professional fees also and therefore no additional confirmation should be sought. Ms. Sunayana also explained that evaluation process is complete, however, they are unable to submit the report pending confirmation. She further emphasized that COC members need to evaluate resolution plans once the evaluation scoring and reports are received from BDO.

The Chairperson also emphasized that all of us should be mindful of the time being spent as nearly two months' time have taken for the evaluation exercise. He also informed the COC that RAs have been calling him regularly and questioning why they are not being called for discussion with COC. The Chairperson submitted that the CoC should speed up the evaluation process so that the same can be discussed in the CoC meetings.

It was decided to sort this issue of confirmation by Indian Bank after the COC meeting and procure the evaluation report from BDO without any further delay as they have already done the evaluation of resolution plans.

Agenda Item No. A.3 To take note of the fresh 12 A proposal submitted by the Promoter and if the CoC decides to approve, to put to vote the same.

The Chairperson apprised the COC members that on 19.09.2022 the promoter submitted a revised settlement plan under Section 12A of the Code and the COC intended to discuss the same in the present COC meeting. The Chairperson then requested the COC members to proceed with the discussion on settlement proposal with the promoter.

Mr. Srinivasalu from Indian Bank apprised that as per their discussion in the last JLM held between the CoC members to discuss the 12 A proposal, they have forwarded the minutes and they have sought certain clarification from the promoters on settlement proposal under Section 12AHe submitted that Indian Bank is almost satisfied with the 12A proposal provided the clarifications sought are answered, for eg, the bank need copy of agreement of CD with I heart Properties, He stated that otherwise they are fine with the 12A proposal

Mr. Ajay Kumar Singh from State Bank of India enquired about the status of COC in the event Section 7 application is withdrawn pursuant to approval of 12A proposal. The Chairperson clarified that once 12A proposal is approved the moratorium is lifted, however, there will be direction by the NCLT to implement the 12A proposal and the same will be recorded in the order of NCLT. Mr. Ajay further enquired whether Bank Guarantee ("BG") furnished by the promoter is a payment instrument or it's a back-up instrument. Mr. Palani G Periaswamy, promoter of CD clarified that BG submitted by him is a full payment instrument. Mr. Ajay then reiterated that he wants the Chairperson to get it clarified from a legal person through legal opinion as to whether BG can be taken as a consideration payment instrument or it can be taken as a backup instrument i.e., if something fails then BG can be invoked. Mr. Ajay then informed that 12A proposal was discussed internally and the stand of SBI continues i.e. they want 25% margin to be kept in no lien account as per bank's policy.

Bank of India also agreed with the stand taken by SBI and confirmed that they also want 25% margin to be kept in no lien account.

Mr. Periaswamy asked what is the difference between BG and money when it is clearly depicted in BG that full payment will be made on getting the Order from NCLT.

Mr. Ayyapan of SBI, emphasized that before accepting any proposal as OTS under such cases, they need 25% of the total amount to be kept in no lien account and hence they have taken a stand that a 25% of the consideration amount to be brought in by the promoters and deposited into the no lien account and the balance 75% can be through BG.

Mr. Periaswamy requested the COC members to reduce the 25% margin to 10-15% margin. To this Mr Ayyappan replied that he has received promoter's email with respect to this request and that the said email will be replied to Mr. Periaswamy then asked for 4 days time from today to deposit 25% in no lien account and undertook to modify the BG mechanism as suggested by the CoC members.

Arun Shah from Aryav Exports submitted that there are some sincere efforts by the promoters and now they have also agreed to bring in the 25% in no lien account and modify the BG mechanism, the COC members should not lose the opportunity and go ahead to accept the 12A proposal with suggested modifications.

Mr Ramachandran of Prabhat Resources submitted that he is fully happy and satisfied with 16.66% share which might accrue to Prabhat Resources under the 12A proposal but his only apprehension as practitioner of IBC laws, that he should not be put to question later that why did he give his consent to a scheme or settlement when there is already a wilful default declaration on the same promoter by virtue of association of some other company and the company is now under CIRP. He requested the Chairperson, that this issue must be examined to pass the test of 12 A.

The Chairperson clarified that there is no bar under IBC and Regulations thereunder to submit 12A proposal by a promoter irrespective of being declared as Wilful Defaulter. As far as his question on wilful default declaration is concerned it is for the individual lenders to decide and take a call, whether to approve the proposal or not.

Mr. Periaswamy informed that they have already submitted a detailed letter to Central Bank of India, clarifying that they are not wilful defaulters and also represented before for being wrongly labelled as wilful defaulters. They further informed that they are taking this to appropriate forum to get it removed and they have submitted every evidence to prove they are not wilful defaulters.

Representative from Aryav Exports emphasized that if 12A proposal has no relation with wilful default then they should take the proposal for approval.

Mr. Srinivasalu of Indian Bank agreed with the observation made by Aryav Exports and suggested that they should move forward with the proposal.

Mr. Periaswamy reiterated that he has considered the points of SBI and Bank of India and he is ready to deposit 25% within 4 days as he has to make full payment after the approval. He submitted that earlier promoters were having difficulty in securing the funds but now they have secured the funds with all proofs and have also agreed to deposit 25% in no lien account and other terms, there should not be any reluctance on part of the lenders to support the promoters with 12A proposal. He requested the COC to go forward with the proposal and try to approve it quickly so that the promoters can get back and do business as usual. He also urged that the objective of the IBC is to revive the business and it will meet that objective, if the CoC members can approve his 12 A proposal and in terms of commercial value also his proposal is better than what is being offered by the Resolution Applicants.

The Chairperson explained the provisions of Section 12A and Regulation 30A (which has to be read with 12A). He explained that 12A application has to be moved by the Applicant bank i.e., Phoenix ARC and as per Regulation 30A if any application under Section 12A is made after issuance of expression of interest then the same has to be backed up by reasons and justifications. He further explained that COC will have to justify two things: first, the application of 12A and second not considering the resolution plans.

Mr. Ajay Kumar from SBI enquired whether any legal opinion has been obtained on this issue. To this the Chairperson replied that this is for the COC to take a call. Mr. Ajay opined that all other resolution plans should also be put to vote. He further opined that RAs cannot be denied the right to be a part of this process. He then requested the Chairperson to get the issue examined as to whether both proposal and plans can be put to vote simultaneously or not. The Chairperson clarified that as an RP he has presented the Resolution Plans to the CoC and also placed the 12A proposal received from the CoC, since the CoC was keen to consider that as well and it is up to the CoC to decide based on commercial wisdom and CoC prerogative on the way forward. Mr Ajay requested the RP to take a legal opinion in this regard.

Ms. Sunayana submitted that COC has not discussed / negotiated the plan with the RAs even once and if the resolution plan is put to vote without negotiation, then the plans may not give out much and therefore 12A and other seven plans can't be put to vote together.

Mr. Avinash submitted that there is a provision under IBC to consider a 12A proposal before the resolution plans are voted upon and requested the Chairperson to check with the legal counsel. To this the Chairperson clarified that the provision relates to issuance of expression of interest wherein consideration of 12A proposal after issuance of expression of interest has to be justified with reasons. Mr. Avinash then asked after issuance of EOI till what stage of CIRP the 12A proposal can be entertained. To this the Chairperson replied that the Code does not have any provision on this time limit aspect.

Mr. Suresh from Phoenix ARC submitted that filing of 12A application is not only on behalf of the Applicant bank but on behalf of all the COC members therefore it should be in consultation with the COC only.

Mr. Ayyappan was also of the view that Regulation 30A does not provide any timeline and opined that after EOI publication there should be a valid reason for filing 12A application. He gave an example of Videocon CIRP wherein 12A proposal and resolution plan both were evaluated and put to vote and requested the Chairperson to seek input from the legal counsel. He requested that the issue should be examined thoroughly then only the COC can take a judicious call.

The Chairperson informed the COC members that voting percentage required for approval of a resolution plan is 66% and voting percentage required for approval of a 12A proposal is 90%. He submitted that so far he has not come across any precedence where 12A proposal and resolution plans were considered and voted upon together. He further submitted that legal people may be able to give some guidance on how this can be done together.

Mr. Navin Sambtani agreed with observation made by the Chairperson and submitted that they have dealt with different situations in CIRP but combining of a resolution plan and 12A proposal is unprecedented and they will be happy if they are made aware of such precedence.

Mr. Srinivasalu enquired whether there has been any situation where the COC is examining the resolution plans and a 12A proposal has come. To this the Chairperson replied that recently in a case 12A proposal had come at liquidation stage and the said proposal was rejected by NCLT and NCLT, however, the Supreme Court held that it is the prerogative of COC to decide. The Chairperson clarified that in terms of timeline there is a precedence but in terms of simultaneous voting there is none to his knowledge.

Representative from Aryav Exports emphasized that the COC members should favourably consider the 12A proposal based on representation made by Mr. Periaswamy.

Mr. Navin clarified that the COC is not averse to consideration of 12A proposal. The COC is discussing and trying to tackle a 12A proposal vs. resolution plan situation and what should be the best approach for the COC. None of the COC members is aware of a situation where both have been considered simultaneously by the COC.

Mr. Avinash submitted that as per the provisions of IBC a 12A proposal has to be voted upon within 7 days of its receipt and in the present case the 7 days have lapsed. Mr. Navin opined that timeline is not much of a concern as the same is directory and it will not render them ineligible. The real concern is direction.

Other COC members opined that it is not the final proposal and the timeline will start once the promoter submits the revised final proposal.

Mr. Srinivasalu asked the promoters on what date they will submit the final and correct 12A proposal and from that date the timeline will start. The promoters stated that they will try to submit the final and compliant 12A proposal on 07.10.2022 but not later than 10.10.2022 (Monday). Ms. Bhoomalakshmi from IDBI Bank submitted that she can approach the sanctioning authority only in the case when the 25% of fund and letter of proposal will come. She further submitted that she will not be able to vote on the proposal on 12.10.2022. The Chairperson clarified that on 12.10.2022 the proposal will be put to vote subject to COC approval and it is not necessary that the proposal needs to be voted upon on the 12th itself.

Ms. Sunayana enquired from the promoters whether the amended BG will be for the 75% amount if they deposit the 25% amount on 07.10.2022. Mr. Periaswamy clarified that with regard to BG and money he is committing for 10.10.2022 and with regard to the revised proposal he is committing 07.10.2022. He submitted that he will try to get both together, however, due to bank holidays he needs some time. For abundant caution he is committing 10.10.2022 as final date.

Mr Suresh from Phoenix, enquired from the promoters whether they will consider any improvisation in the interest payments to the Financial Creditors till the cut-off date. To this the promoters expressed their inability to make any further improvement in the figures of 12A proposal committed by him.

Mr. Navin then referred to the clause of RFRP wherein it is stated that existing cash balances in the company belongs to the COC members at the time handover. He then asked the Chairperson to confirm the clause on cash balances as per RFRP. The Chairperson confirmed that on the date of handover to the Resolution Applicant, the cash shall go to the financial creditors. To this Mr. Periaswamy submitted that the clause under RFRP is for the Resolution Applicants and not for the promoters who are trying to revive their business.

Mr. Navin while responding to the submission of Mr. Periaswamy opined that since it is a 12A proposal and interest payment is not till the current period, the COC members have the right to consider all the possibilities. Further, he submitted that he has taken note of inability of the promoters to make any further improvisation in the proposal.

The CoC members further debated on the possibilities of consideration of 12 A proposal vis a vis the Evaluation and consideration of the Resolution Plans and discussed the pros and cons and most felt that a legal guidance a this stage can help the CoC with their decision making process and they are also conscious of the tight timelines left in the CIRP and will consider taking a very objective decision evaluating all the options and requested the RP to look at the possibilities of applying for Exclusion/Extension with the AA.

Chairperson reminded the CoC members that the mandatory 330 days period is completing on 12/10/2022 and he will have to schedule the next CoC on 12/10/2022, given that the CoC is deciding to give timelines till 10/10/2012 to the promoter.

CoC members asked the Chairperson if there can be additional Exclusion/Extension period that can be sought from the AA as the CoC is in the final stage of evaluation of the Resolution plans as well as the 12 A proposal submitted by the Promoter and the timelines of 12/10/2022 will not solve the purpose. RP, informed that two weeks' time lost due to his Covid infection and he can apply for Exclusion for the same on consultation with the legal counsel.

COC decision on resolution plans

Ms. Sunayana suggested that till the 10.10.2022 when the promoters submit the revised proposal, the COC needs to put in action other part also i.e., the resolution plans evaluated by BDO.

Mr. Ajay Kumar from SBI submitted that to decide on the resolution plans they need to have a legal opinion first on the issue.

Indian Bank agreed with stand of SBI and emphasized that legal opinion must be obtained before going forward with the resolution plans. To this the Chairperson submitted that he is obtaining the legal opinion upon the insistence of COC members on two issues i.e., on BG mechanism and on simultaneous voting of 12A proposal and resolution plans.

Mr. Srinivasalu requested the Chairperson to share a matrix of all the resolution plans so that it gives a bird's eye view to everybody. The Chairperson informed that summary cum matrix is already shared with the COC members containing summary of each and every plan, however, if anyone has not received it, he can reshare it.

After discussions and deliberation, the COC members observed that the evaluation of resolution plans is underway, however, a 12A proposal has been received from the promoters. Since the COC is at this particular juncture it would like to seek legal opinion on the way forward with respect to resolution plans. Also, the promoters of the CD have specifically requested the COC members to consider their 12A proposal in order to save their business and they shall be enabled to get back to their business. Further, keeping in view the stringent timelines of CIRP it has been mutually decided to convene the next COC meeting on 12.10.2022.

Mr. Sennimalai, suspended MD of the CD, submitted that 12A proposal is different from resolution plans. He further submitted that under 12A proposal they are offering to settle all the suppliers and even those suppliers whose claims are not filed and admitted, taking care of all the stakeholders including the shareholders. He therefore requested that 12A proposal should not be treated at par with resolution plan.

9.

If an application u/s. 12A 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 12A 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.

75.

Section 12A of the IBC was inserted with effect from 6 June 2018 by Amending Act 26 of 2018. Under Section 12A, the Adjudicating Authority may allow the withdrawal of an application which is admitted under Sections 7, 9 and 10, on an application made by the applicant with the approval of a 90 per cent voting share of the CoC in such manner as may be specified. Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, on the other hand, contemplates that the NCLT, functioning as the Adjudicating Authority, may permit a withdrawal of an application made under Rule 4 (by the financial creditor), Rule 6 (by the operational creditor) or Rule 7 (by the corporate applicant) on the request made by the applicant before its admission. Regulation 30-A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 contains provisions for the withdrawal of an application. Under Regulation 30-A43, as it originally stood, an application for withdrawal under Section 12-A was required to be submitted before the issuance of an invitation for the expression of interest under Regulation 36-A. In the decision of this Court in Swiss Ribbons (supra), which was rendered on 25 January 2019, it was contemplated that an application for withdrawal may be presented between the period commencing from the admission of the application and the date of the constitution of the CoC. This led to the substitution of the Regulation 30-A44 on 25 July 2019. As substituted, Regulation 30-A stipulates that an application for withdrawal under Section 12-A may be made to the adjudicating authority:

(a)

before the constitution of the CoC, by the applicant through the IRP; and

(b)

after the constitution of the CoC, by the applicant through the IRP or the RP as the case may be.

However, where the application under clause (b) is made after the issuance of the invitation for expression of interest, the applicant has to state the reasons justifying withdrawal after the issuance of the invitation. In the decision of this Court in Brilliant Alloys (supra), it has been held that a withdrawal may be contemplated even after the issuance of invitation of expression of interest.

Distinction between a withdrawal simpliciter and scheme of arrangement

77.

The submission is that on the withdrawal of the application under Sections 7, 9 and 10, as the case may be, the company goes back to the same promoter in spite of such a promoter being ineligible under Section 29-A for submitting a resolution plan. As such, it was urged that there is no reason or justification then to preclude a promoter from presenting a scheme of compromise or arrangement under Section 230.

78.

There is a fundamental fallacy in the submission. An application for withdrawal under Section 12-A is not intended to be a culmination of the resolution process. This, as the statutory scheme would indicate, is at the inception of the process. Rule 8 of the Adjudicating Authority Rules, as we have seen earlier, contemplates a withdrawal before admission. Section 12-A subjects a withdrawal of an application, which has been admitted under Sections 7, 9 and 10, to the requirement of an approval of ninety per cent voting shares of the CoC. The decision of this Court in Swiss Ribbons [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17] (para 82 extracted above) stipulates that where the CoC has not yet been constituted, NCLT, functioning as the adjudicating authority, may be moved directly for withdrawal which, in the exercise of its inherent powers under Rule 11 of the Adjudicating Authority Rules, may allow or disallow the application for withdrawal or settlement after hearing the parties and considering the relevant factors on the facts of each case. A withdrawal in other words is by the applicant. The withdrawal leads to a status quo ante in respect of the liabilities of the corporate debtor. A withdrawal under Section 12-A is in the nature of settlement, which has to be distinguished both from a resolution plan which is approved under Section 31 and a scheme which is sanctioned under Section 230 of the 2013 Act. A resolution plan upon approval under Section 31(1) IBC is binding on the corporate debtor, its employees, members, creditors (including the Central and State Governments), local authorities, guarantors and other stakeholders. The approval of a resolution plan under Section 31 results in a “clean slate”, as held in the judgment of this Court in Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443]. Rohinton F. Nariman, J. speaking for the three-Judge Bench of this Court, observed : (Essar Steel case [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443], SCC p. 615, para 105)

“105.

Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were. In SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17 SCC 394 : (2019) 2 SCC (Civ) 458], this Court relying upon Section 31 of the Code has held : (SCC p. 411, para 25)

‘25. Section 31 of the Act was also strongly relied upon by the respondents. This section only states that once a resolution plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, under Section 133 of the Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety’s consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the resolution plan, which has been approved, may well include provisions as to payments to be made by such guarantor. This is perhaps the reason that Annexure VI(e) to Form 6 contained in the Rules and Regulation 36(2) referred to above, require information as to personal guarantees that have been given in relation to the debts of the corporate debtor. Far from supporting the stand of the respondents, it is clear that in point of fact, Section 31 is one more factor in favour of a personal guarantor having to pay for debts due without any moratorium applying to save him.’”

80.

The benefit under Section 31, following upon the approval of the resolution plan, is that the successful resolution applicant starts running the business of the corporate debtor on “a fresh slate”. The scheme of compromise or arrangement under Section 230 of the 2013 Act cannot certainly be equated with a withdrawal simpliciter of an application, as is contemplated under Section 12-A IBC. A scheme of compromise or arrangement, upon receiving sanction under sub-section (6) of Section 230, binds the company, its creditors and members or a class of persons or creditors as the case may be as well as the liquidator (appointed under the 2013 Act or the IBC). Both, the resolution plan upon being approved under Section 31 IBC and a scheme of compromise or arrangement upon being sanctioned under sub-section (6) of Section 230, represent the culmination of the process. This must be distinguished from a mere withdrawal of an application under Section 12-A. There is a clear distinction between these processes, in terms of statutory context and its consequences and the latter cannot be equated with the former. (emphasis supplied)

18. ISSUE NO. (VI)

82.

Take the next stage under Section 30. A Resolution Professional has presented a resolution plan to the Committee of Creditors for its approval, but the Committee of Creditors does not approve such plan after considering its feasibility and viability, as the requisite vote of not less than 66% of the voting share of the financial creditors is not obtained. As has been mentioned hereinabove, the first proviso to Section 30(4) furnishes the answer, which is that all that can happen at this stage is to require the Resolution Professional to invite a fresh resolution plan within the time-limits specified where no other resolution plan is available with him. It is clear that at this stage again no application before the adjudicating authority could be entertained as there is no vested right or fundamental right in the resolution applicant to have its resolution plan approved, and as no adjudication has yet taken place. (emphasis supplied)

Inv. P(IBC)/7(CHE)/2022 - Mr. M.K. Rajagopalan,;

(a)

Reject the Section 12A settlement proposal of the Promoter, as approved by the Committee of Creditor in its 19th meeting dated 12.10.2022 and declare the same is non – est in law;

(b)

Direct the Resolution Professional to proceed in terms of the directions of the Hon'ble NCLAT contained in its judgment dated 17.09.2022 and upheld by the Hon'ble Supreme Court vide Judgment dated 03.05.2023 and proceed with the consideration of Resolution Applications received from the seven Resolution Applicants (including the Applicant herein); and

(c)

Any other order that this Hon'ble Tribunal might deem fit in the facts and circumstances of the case.

Inv. P(IBC)/12(CHE)/2022 - Sankalp Recreation Private Limited

(a)

Allow the Intervention Petition of the Present Applicant, a prospective Resolution Applicant; or

(b)

Dismiss the 12A settlement proposal of the Promoter, approved by the CoC in its meeting dated 12.10.2022; or

(c)

Reject the Application filed by the Resolution Professional dated 03.11.2022, IA/1410/CHE/2022 for approval of the Settlement proposal under 12A of the IBC; or

(d)

Direct the CoC to consider the Resolution Plan of the Applicant afresh; and

(e)

Any other order that this Hon'ble Tribunal might deem fit in the facts and circumstances of the case.

7.

We have considered the respective submissions. By its very nomenclature, CrPC is a compendium of law relating to criminal procedure. The provisions contained therein are required to be interpreted keeping in view the well-recognised rule of construction that procedural prescriptions are meant for doing substantial justice. If violation of the procedural provision does not result in denial of fair hearing or causes prejudice to the parties, the same has to be treated as directory notwithstanding the use of the word “shall”. (emphasis supplied)

66.

We are not expanding further on the matter because when we find that the settlement proposal of the promoter, after approval of CoC, for invoking the provisions of Section 12-A of the Code, is pending before the Adjudicating Authority, in our view, it shall be in the fitness of things that all the relevant aspects of the matter are left open for consideration of the Adjudicating Authority, including those relating to the justification for invoking Section 12-A after issuance of fresh invitation for EOI and after receiving resolution plans. In other words, we would leave all the relevant aspects open for consideration of the Adjudicating Authority in accordance with law while keeping in view the observations of this Court.

19. ISSUE NO. (VII)

20. CONCLUSION