NCLT Delhi: Adjudicating Authority Can't Consider Settlement Proposal Even With Higher Value After Approval Of Resolution Plan By CoC
The National Company Law Tribunal ('NCLT') Court V, New Delhi bench comprising Shri Mahendra Khandelwal (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member) held that the Adjudicating Authority cannot consider a Settlement Proposal, even of a higher value than the Resolution Plan, after the approval of the Resolution Plan by the Committee of Creditors...
The National Company Law Tribunal ('NCLT') Court V, New Delhi bench comprising Shri Mahendra Khandelwal (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member) held that the Adjudicating Authority cannot consider a Settlement Proposal, even of a higher value than the Resolution Plan, after the approval of the Resolution Plan by the Committee of Creditors ('CoC').
Background Facts:
Mr. Sanjeev Mahajan (Applicant), promoter of Nimitaya Hotel & Resorts Pvt. Ltd. (Corporate Debtor), submitted a One-Time Settlement (“OTS”) Policy to Indian Bank (Respondent Bank).
However, the Resolution Professional (“RP”) bypassed the required process under the Insolvency and Bankruptcy Code, 2016 (“IBC”) and the IBBI (Corporate Insolvency Resolution Process) Regulations, 2016, and forwarded the Settlement Proposal to the bank, which rejected it without negotiation. During the 8th CoC Meeting on 02.09.2022, with Indian Bank as the Sole CoC Secured Financial Creditor, the proposal was also rejected without explanation.
On 08.01.2023, the Resolution Plan of Nehru Place Hotels and Real Estate Pvt. Ltd. (Successful Resolution Applicant) was approved with 100% voting in the 14th CoC Meeting. On 28.08.2023, the Applicant submitted a revised Settlement Proposal for Rs. 120 crores, which was higher than the approved Resolution Plan. However, this revised proposal was rejected by the Respondent bank without valid reasons.
The Applicant filed an application challenging the CoC's rejection of the Settlement Proposal and sought to direct the Respondent Bank to deliberate and decide on the Settlement Proposal. It also sought the passing of an ad-interim ex-parte stay on any further proceedings in the application preferred by the RP for approval of the Resolution Plan pending before NCLT Delhi.
Contentions of the Applicant:
The Applicant contended that no genuine opportunity was given by the CoC to discuss and negotiate the submitted Settlement Proposal. Further, he claimed that the CoC failed to maximize stakeholder value by repeatedly ignoring the said proposal and approving a Resolution Plan that overlooks approximately Rs. 500 crores owed to other Operational Creditors.
NCLT Verdict:
The NCLT Delhi dismissed the application and held that the Adjudicating Authority cannot consider a Settlement Proposal, even of a higher value than the Resolution Plan, after the approval of the Resolution Plan by the CoC.
The Tribunal observed that the Applicant had submitted multiple Settlement Proposals on different occasions, but none were accepted by the CoC which consists Respondent Bank as the sole Financial Creditor.
Upon reviewing the minutes of the CoC meetings, NCLT Delhi noted that the CoC had considered the Applicant's Settlement Proposals with the Resolution Plans submitted by other applicants. Following the Hon'ble NCLAT's orders dated 04.07.2022 and 21.11.2022, the CoC, in its commercial wisdom, rejected the proposals after due deliberation.
The Tribunal also pointed out that after the CoC approved the Resolution Plan, the Applicant submitted another Settlement Proposal on 21.03.2023, allegedly higher than the approved Resolution Plan. However, the said proposal was also rejected by the Respondent Bank. Though the CoC comprises only the Indian Bank, the decision by the Respondent Bank's Competent Authority is effectively the commercial wisdom of the CoC.
NCLT observed that it is a settled law that the CoC can make decisions regarding the financial aspects of any Settlement Proposal using its commercial wisdom. It observed that it is for the CoC to take all factors into account and make appropriate commercial decisions. Further, the minutes of the CoC meeting reflect that the Applicant's proposal was duly deliberated and considered.
NCLT Delhi observed that it is not within its purview to examine and assess the merits and financial details of the Applicant's Settlement Proposal. Its role is limited only to determining whether the CoC considered the Applicant's Settlement Proposal per the Hon'ble NCLAT's orders dated 04.07.2022 and 21.11.2022.
Therefore, presently, the Tribunal did not accept the Applicant's claim that the Settlement Proposal exceeds the value of the approved Resolution Plan and observed that the acceptance or rejection of such a proposal is within the commercial wisdom of the CoC.
In conclusion, the Tribunal ruled that the issues raised by the Applicant cannot be accepted and therefore, no directions can be issued to the CoC for reconsideration of his Settlement Proposal.
DCase Title: Sanjeev Mahajan vs. Indian Bank (Erstwhile Allahabad Bank) & Anr.
Case No.: I.A. No. 2594/2023 in Company Petition No. (IB) – 1913/ND/2019
Counsel for the Applicant: Mr. Nakul Mohta, Mr. Zain Khan, Mr. Kumar Anurag Singh, Mr. Akshay Sharma, Mr. Anish Ahlawat, Ms. Riya Dhingra, Advs
Counsel for the RP: Mr. Manuj Nagrath, Adv.
Counsel for the Indian Bank: Adv Rajesh Kumar Gautam, Adv Anant Gautam, Adv Anani Achumi, Adv Dinesh Sharma, Adv Shivani Sagar, Adv Likini Jakhalv
Counsel for the Successful Resolution Applicant: Adv Ajay Kumar, Adv Pankaj Sethi, Adv S Vatsa, Adv Vaibhav Tiwari, Adv Vijayant Goel
Date of Judgment: 03rd July, 2024