No Scope For Negotiation Once The CoC Has Approved The Resolution Plan: NCLAT In DHFL Case

Factual Background

The Resolution Plan submitted by the 'Piramal Group' was approved by a majority of 93.65% votes in favour of the Resolution Plan, which was pending adjudication before the Adjudicating Authority under Section 31 of the Code, when the Adjudicating Authority passed the impugned order directing the CoC to consider the 'Second Settlement Offer' of Mr. Kapil Wadhawan.

The Appellant, Union Bank of India filed an appeal on behalf of the CoC of DHFL against the order passed by the Adjudicating Authority- NCLT Mumbai, which passed an order directing the Administrator of DHFL to place the Second Settlement Proposal sent by Mr. Kapil Wadhawan (Respondent) before the CoC for its consideration, decision and voting. By an earlier order, the Adjudicating Authority had directed the Administrator to place the first Settlement Proposal before the Coc, however that proposal did not receive any reply. Both these orders of the Adjudicating Authority were challenged in this appeal.

During pendency of this appeal, the Adjudicating Authority passed an order approving the Resolution Plan which.

Issue and Decision

The issue raised before the Tribunal was-

Whether after Approval of the resolution plan by the COC and pending Approval, the Adjudicating Authority can direct the COC to convene a meeting and place the settlement proposal as offered for consideration, decision and voting on that within a certain period?

In the present case, the Adjudicating Authority, in the impugned order, directed the Committee of Creditors to consider the 'IInd Settlement Offer' of Kapil Wadhawan, when the resolution plan was pending adjudication u/s 31 of IBC.

Relying on the cases of Ebix Singapore Private Limited versus Committee of Creditors of Educomp Solutions Ltd and Pratap Technocrats(P) Ltd v Monitoring Committee of Reliance Infratel Ltd, the Tribunal concluded that:

a) Once the Resolution Plan is approved by a 100 per cent voting share of the CoC. The jurisdiction of the Adjudicating Authority was confined by the provisions of Section 31(1) to determining whether the requirements of Section 30(2) have been fulfilled in the plan as approved by the CoC.

b) Once the requirements of the IBC have been fulfilled, the Adjudicating Authority and the Appellate Authority are duty-bound to abide by the discipline of the statutory provisions. Neither the Adjudicating Authority nor the Appellate Authority has an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework.

c) The jurisdiction of the Adjudicating Authority is confined by the provisions of Section 31(1) to determining whether the requirements of Section 30(2) have been fulfilled in the plan as approved by the CoC.

d) There was no scope for negotiations between the parties once the CoC had approved the Resolution Plan. Thus, contractual principles and common law remedies, which do not find a tether in the wording or the intent of the IBC, cannot be imported in the intervening period between the acceptance of the CoC and the Approval by the Adjudicating Authority.

The Tribunal held-

"Considering the ratio of the Judgement of the Hon'ble Supreme Court in the case of Ebix Singapore (supra), "there was no scope for negotiations between the parties once the CoC has approved the Resolution Plan. Thus, contractual principles and common law remedies, which do not find a rope in the wording or the intent of the IBC, cannot be imported in the intervening period between the acceptance of the CoC Approved Resolution Plan and the Approval by the Adjudicating Authority."

Thus, the NCLAT set aside the order passed by the Adjudicating Authority on the ground that it was beyond jurisdiction and hence was unsustainable in law.

Citation: Company Appeal (AT) (Insolvency) No.370 of 2021, Company Appeal (AT) (Insolvency) No.376-377 of 2021, Company Appeal (AT) (Insolvency) No.393 of 2021

Counsel for the Appellant: Mr Tushar Mehta, SGI with Mr Raunak Dhillon,

Mr Animesh Bisht, Ms Saloni Kapadia, Ms Madhavi Khanna, Mr Shubhankar Jain, Ms Isha Malik and Ms Fatema Kachwalla Advocates.

Counsel for the Respondent: Mr Ashish Bhan, Mr Ketan Gaur, Ms Chitra Rentala, Mr Aayush Mitruka, Mr Kaustub Narendran, Ms Samriddhi Shukla, Ms Lisa Mishra and Mr Vishal Hablani, Advocates for Intervenor (Piramal Capital & Housing Finance Ltd., SRA).

Ms Liz Mathew, Ms Sonali Jain, Mr Rohan Rajadhyaksha, Mr Naveen Rath, Advocates for Administrator.

Mr Ashish S Kamat and Mr M.F. Philip, Advocates for R-3/RBI.