Ex-Management Of Corporate Debtor Cannot File Proposal U/S 12A During Consideration Of Resolution Plan When Earlier Proposal Was Rejected: NCLT New Delhi

Brief Facts

The erstwhile management of the Primrose Infratech Pvt. Ltd. (corporate debtor) filed an application under section 12A of the IBC read with regulation 30A of the CIRP regulations, 2016 in which a settlement was proposed before the committee of creditors (CoC) and withdrawal of a petition admitted under section 9 of the IBC was sought. Earlier, the CoC had approved the resolution plan.

The applicant claimed that their offer to the tune of Rs. 20 crores was way better than the offer given by the successful resolution applicant (SRA) of Rs. 15 crores with only 1 lakh as equity.

Contentions

The applicant argued that an application under section 12A of the IBC can be filed at any stage even after the approval of resolution plan. They referred to the judgment of the NCLAT in Shaji Purushothaman v. Union of India & Ors, Company Appeal (AT)(Ins) No. 921 of 2019 wherein it was held that it is for the CoC to decide whether settlement plan should be accepted or not. The plan has to be placed before the CoC even after the approval of resolution plan. It was contended by the applicant that their offer provided better terms for the revival of the corporate debtor with Rs. 10 crores in equity.

Per Contra, the respondent resolution professional submitted that the resolution plan had already been approved by the CoC therefore the settlement plan could not be placed before it at this stage. several judgments were referred like Hem Singh Bharana v. Pawan Doot Estate Pvt. Ltd.”, [CA (AT) (Ins) No. 1481 of 2022] and Nehru Place Hotels & Real Estates Pvt. Ltd. v. Sanjeev Mahajan & Ors.” [CA (AT) (Ins) No. 1715 and 1716 of 2023]wherein it was held that once the resolution plan is approved, settlement proposal under section 12A of the IBC cannot be considered. Both these judgments were later affirmed by the Supreme Court as well. It was further contended that multiple applications under section 12A of the IBC had previously been filed by the applicants and all of them were rejected by the CoC or the tribunal.

NCLT's Analysis

The NCLT agreed with the contention of the respondent and held that ex management of the corporate debtor filed various applications under section 12A of the IBC which were not approved therefore they cannot be allowed to file the same application now. The CoC had already rejected their applications on previous occasions in which settlement was proposed. The tribunal further noted that the applicants did not show genuine interest in the settlement proposal. It was a tactic on their part to delay the approval of resolution plan by filing such applications. It was held as under:

“In the present case, the Applicant has approached this Adjudicating Authority seeking our direction to the COC to consider resorting to process as per the above provision of law. 11. In this context, we note that this Adjudicating Authority has already dismissed two applications filed by the ex-Directors under Section 12A. Furthermore, the CoC has once considered one such proposal in its meeting held on 19.02.2020 and rejected the same. 12. As we are now at the stage of consideration of the resolution plan, it is not deemed apt to give yet another opportunity to the Applicant to file a proposal under Section 12A as applicants have not shown bonafide for settlement earlier and it is just a repeated process to derail the approval of the Resolution Plan”.

Conclusion

The NCLT concluded that at this stage when resolution plan had already been approved, a new application under section 12A of the IBC cannot be entertained therefore the application is liable to be rejected. Accordingly, the present application was dismissed.

Case Title: Pratham Expofab Pvt. Ltd. and Anr. v. Anil Matta (RP) and Anr.

Court: National Company Law Tribunal, New Delhi

Case Reference: I.A. – 188/2024 in C.P.(IB)-995 of 2018

Judgment Date: 28/08/2024