OTS Being Under Consideration Does Not Invalidate An Order For Liquidation: NCLAT Delhi
The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Justice M. Satyanarayana Murthy (Judicial Member) and Mr. Barun Mitra (Technical Member), while adjudicating an appeal filed in Ram Bhaj Jain v Tarun Batra & Anr., has held that mere fact that the Corporate Debtor's One Time Settlement was under consideration,...
The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Justice M. Satyanarayana Murthy (Judicial Member) and Mr. Barun Mitra (Technical Member), while adjudicating an appeal filed in Ram Bhaj Jain v Tarun Batra & Anr., has held that mere fact that the Corporate Debtor's One Time Settlement was under consideration, does not invalidate an order passed by the Adjudicating Authority for liquidation of the Corporate Debtor.
Background Facts
Vardhman Rice Mills Pvt. Ltd. ("Corporate Debtor") was admitted into Corporate Insolvency Resolution Process ("CIRP") by the Adjudicating Authority over a petition filed under Section 7 of Insolvency and Bankruptcy Act, 2016 ("IBC") by Lender Bank. Since no resolution plan was approved, Mr. Tarun Batra being the Resolution Professional of the Corporate Debtor, had filed an application under Section 33 of the IBC before the Adjudicating Authority, seeking directions for liquidation of the Corporate Debtor. The Adjudicating Authority vide an order dated 20.06.2022 had ordered liquidation of the Corporate Debtor. Mr. Ram Bhaj Jain ("Appellant"), the Suspended Director of the Corporate Debtor, filed an appeal before NCLAT challenging the order of liquidation.
Contentions Of Appellant
Appellant submitted that the Corporate Debtor is a Micro, Small and Medium Enterprise (MSME) and hence the Appellant had submitted a Resolution Plan for the Corporate Debtor. Committee of Creditors comprised of a single lender Bank and the Resolution Plan was rejected by the sole member without giving any reasons. Further, a One Time Settlement (OTS) proposal of the Corporate Debtor was under consideration before the Lender Bank.
Decision Of The NCLAT
The Bench observed that the CoC's minutes of meeting show that the Appellant's Resolution Plan was disapproved with 100% dissent of the Financial Creditor (Lender Bank). Therefore, the argument of Appellant that there was no due consideration of the plan cannot be accepted.
"The CoC in its commercial wisdom having refused to approve the plan submitted by the Appellant that decision is not open for any judicial review. In facts of the present case, the fact that OTS of the Appellant is under consideration also does not render the order of liquidation invalid in any manner."
The Bench held that the OTS proposal being under consideration does not render the order of liquidation invalid in any manner and accordingly, the appeal was dismissed.
Case Title: Ram Bhaj Jain v Tarun Batra & Anr.
Case No.: Company Appeal (AT) (Insolvency) No. 1011 of 2022
Counsel For Appellant: Mr. S. P. Singh Chawla, Advocate.