Sunil Jha vs Avishek Gupta & Anr

Heard Shri Sunil Fernandes, learned counsel for the Appellant. This Appeal has been filed against order passed by the Adjudicating Authority dated 04.01.2024 in I.A. No. 1714/KB/2023 by which application, the Appellant has prayed for direction for placing the Settlement Proposal submitted by the Appellant before the CoC for consideration. The Adjudicating Authority by the impugned order has held that the Settlement Proposal submitted by the Appellant was considered in the 13th CoC meeting held on 19.05.2023 and the CoC unanimously decided to reject the proposal. The Adjudicating Authority after returning the said finding has dismissed the application.

Shri Sunil Fernandes, learned counsel for the Appellant challenging the order contends that there is no appropriate consideration of the proposal. When the Appellant was giving an amount which could have satisfied claims of all stakeholders, the CoC ought to have reasonably consider the proposal, which have been beneficial to all stakeholders. For any clarification it was open for the CoC to call Appellant and discuss the proposal.

We have considered the submissions of the Appellant and perused the record.

The Settlement Proposal under section 12A of the Code was placed before the CoC for consideration in 13th meeting of the CoC held on 19.05.2023. The minutes of the proceeding under which settlement proposal was considered is part of the record, which is as follows:

“SETTLEMENT PROPOSAL U/S 12A OF THE CODE

The RP team informed the CoC that on 30th September 2022, a settlement proposal under Section 12A of the Code was submitted by Mr. Sunil Jha, in the capacity of the Managing Director of Shristi Infrastructure Development Corporation Limited ("SIDCL"). Thereafter, on 17th April 2023. SIDCL submitted an addendum to the settlement proposal to representatives of JCF (which was received by RP on 8th May 2023). The settlement proposal submitted by SIDCL under Section 12A of the Code is summarised as below:

INR in Cr.

Class of Stakeholders

Amount Admitted

Amount Proposed

Remarks

Financial Creditor:

-Yes Bank Limited

370.36

300

INR  25.00  Cr.  Upfront  and INR   275.00   Cr.   within   8 years in the form of 9% p.a. simple     non     cumulative NCDs.

-Rare ARC

393.47

293.92

Share Warrant – INR 293.92 Cr.  within  14  years  in  the form of share warrant.

-Axis Bank

23.28

-

Employees

and workmen

0.12

0.07

INR  0.01  Cr.  upfront  and

INR 0.06 Cr. within 3 years.

Statutory

Dues

4.73

0.01

INR 0.01 Cr. within 3 years.

Operational Creditors

24.42

4.39

INR  0.44  Cr.  upfront  and INR 3.95 Cr. within 3 years

Other

Creditors

INR 1

-

816.38

598.39

*As per the settlement proposal dissenting financial creditors will be given Nil amount under settlement.

The CoC members were then asked to share their views opinion on the 12A settlement proposal of SIDCL.

The representatives of JCF stated that they have examined and assessed the entire 12A proposal (including the addendum) in depth and are of the view to reject the 12A proposal (including the addendum) on the following grounds:

• The payment proposed under the proposal is deferred in nature and is over a period of 8 years. As per the proposal, frequency of interest payment and principal payment is not given.

• The proposal is vague and does not indicate or elaborate on the means of finance or source of funds for the proposed amounts. This is extremely relevant (given the past experience) since any backtrack on the obligations will prejudice the interest of all the stakeholders.

• The proposal does not contain any Business Plan or the financial projections for accomplishing turnaround of the business of the Corporate Debtor and therefore the proposal is neither bankable nor feasible or viable.

• The credibility of SIDCL is questionable. In this regard, it is important to note that as per the Consolidated Financials of SIDCL for nine months ended Dec’ 2022, the net worth of SIDCL, is negative.

• There are multiple applications w/s 7 and u/s 9 of IBC pending against SIDCL, and matters are sub- judice.

Mr. Sunil Jha stated that they can deliberate on the settlement proposal and source of funds and that the financial partner shall be informed during the discussions. As regards the applications u/s 7 and w/s 9 of IBC pending against SIDCL, Mr. Sunil Jha stated that settlement talks with the banks and the operational creditors are ongoing, and settlements are expected to be reached shortly. He further stated that the proposal of SIDCL was submitted on 30th September 2022 but the same was not discussed by the CoC.

The RP team emphasised that the proposal submitted by SIDCI on 30th September 2022 was discussed in the 8th CoC meeting held on 4th October 2022 and the details were shared with CoC members for their consideration.

Further, the representatives of JCP stated that they had duly considered the proposal submitted by SIDCL earlier on 30th September 2022 as well as the addendum. They noted that the details with respect to the business unaddressed by SIDCL, in both the proposals and despite having sufficient time to provide a detailed plan, SIDCL has failed to do so. Further, there was no certainty of outcome of the purported settlement talks and the applications s.7/s.9 were pending as on dare against SIDCL. In view of this and for reasons already stated earlier, JCF reiterated that it was inclined to reject SIDCL's settlement proposal under Section 12A of the Code. Representatives of Axis Bank expressed their concurrence with the views of JCF.

After discussions, it was decided that the settlement proposal admitted by SIDCL, under Section 12A of the Code shall be put up for voting by the CoC.”

When we look into the minutes of the CoC, it is clear that the proposal submitted by the Appellant was duly considered and deliberated by the CoC. The reasons have also been noted in the minutes due to which the proposal did not find favour with the CoC. The decision to accept or reject the proposal under Section 12A is essentially a business decision and is in the domain of commercial wisdom of the CoC. We do not accept the submission of learned counsel for the Appellant that proposal of the Appellant was not adequately considered by the CoC or there is any error in consideration or CoC has arbitrarily acted in rejecting the proposal of the Appellant.

It is well settled that jurisdictional review of the decision of CoC for accepting or rejecting a proposal by the Adjudicating Authority is only on the ground that decision is arbitrary. The minutes of the CoC meeting does indicate that there is application of mind and CoC has rejected the proposal after due consideration and deliberation.

Mr. Gopal Jain, learned senior counsel appearing for Respondent No.2 submits that the Resolution Plan has also been approved on 04.01.2024.

We do not find any error in the order of the Adjudicating Authority rejecting  the  application  I.A.  No.  1714/KB/2023  filed  by  the  Appellant.

Appeal is dismissed.