Any Amount Proposed In Settlement Plan U/S 12A Of IBC Cannot Be Refunded If Plan Is Approved: NCLAT
Mohd Malik Chauhan
12 Nov 2024 4:35 PM IST
The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) held that any amount proposed in the settlement plan under section 12A of the IBC cannot be refunded if the plan is later approved and the CIRP is closed. In this case, a settlement plan was proposed by the appellant in which 3 crores rupees was proposed to...
The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) held that any amount proposed in the settlement plan under section 12A of the IBC cannot be refunded if the plan is later approved and the CIRP is closed. In this case, a settlement plan was proposed by the appellant in which 3 crores rupees was proposed to be given to the financial creditors. This plan was later approved.
Brief Facts
This Appeal has been filed challenging the Order dated 26.07.2022 passed by the Learned Adjudicating Authority. By the Impugned Order, Adjudicating Authority has dismissed the I.A.1370/2021, aggrieved by which Order, this Appeal has been filed.
The TJSB Sahakari Bank Ltd. filed an Application under Section 7 against Corporate Debtor M/s. Unimetal Castings Limited, (UCL) in C.P. (IB) No.3622/I&B/MB/2018. Vide Order dated 25.01.2019, for debt and default of ₹6,38,78,417/-, Section 7 Application was admitted and Tejas Jatin Parikh, Respondent No. 1 herein was appointed as Interim Resolution Professional (IRP) who was subsequently confirmed as Resolution Professional (RP).
On 15.07.2019, CoC unanimously, voted for Liquidation of the Corporate Debtor. Respondent No. 4, the Promoter & Executive Director of the Corporate Debtor, UCL as well as Joshi Deodhar Engineering Company Limited (JDECL) (sister concern) sent a communication to the RP intimating his intention of submitting a Resolution Plan.
IAs were filed by Respondent No. 4, the Tribunal on 11.02.2020, directed the CoC to consider the Settlement Proposal submitted by Respondent No. 4 for the revival of the Corporate Debtor. On 16.03.2020, a Memorandum of Understanding (MoU) was executed between the Appellants and CoC.
As per the revised MoU, Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor as well as related entity was to be closed by 30.09.2020, with regard to closure of CIRP of related entity, Section 12A Application was to be filed and with regard to CIRP of the Corporate Debtor, Resolution Plan was required to be approved.
With regard to CIRP against the related entity, i.e., JDECL, Section 12A Application was filed and payment of ₹3 Crores was made. The Adjudicating Authority passed an Order allowing the 12A Application. By Order dated 02.11.2020, consequently, the CIRP of JDECL came to be closed.
Insofar as the CIRP of the Corporate Debtor, on 12.09.2020, Respondent No. 4 who is one of the Promoters of the Corporate Debtor submitted a Resolution Plan for Corporate Debtor. Resolution Plan was submitted without Performance Security Deposit. The CoC approved the Resolution Plan of the Corporate Debtor on 22.12.2020, subject to Resolution Applicant submitting ₹25 Lakhs as Performance Security Deposit.
Appellant sent a letter to the CoC withdrawing from the settlement proposed under the revised MoU and thereafter filed an Application before the Adjudicating Authority. I.A. No. 1370/2021, praying for refund of amount of ₹3,25,00,000/-. Adjudicating Authority heard the I.A. No. 1370/2021 and by Impugned Order dated 26.07.2022, rejected the Application.
Contentions
The appellant submitted that first & second MoU, both contemplated closure of the CIRP of JDECL by 12A Application and approval of Resolution Plan in the CIRP of Corporate Debtor by 30.09.2020 which fact having not accomplished, the Appellant was entitled to refund of the amount.
Per contra, the respondents submitted that Since Resolution Applicant did not deposit the Performance Security Deposit. The CoC of the Corporate Debtor on 20.11.2021 has approved the Liquidation of the Corporate Debtor and the Adjudicating Authority also passed Liquidation Order on 25.01.2020 against the Corporate Debtor.
That It was due to lapse of the Resolution Applicant who is none other than Promoters of the Corporate Debtor that Resolution Plan of the Corporate Debtor could not be approved.
That Appellant is third party to the CIRP and under the MoU, there was Clause XII, which was regarding the dispute resolution, Appellant could have taken recourse of the Clause XII of the MoU for its claim, if any, and the Application filed before the Adjudicating Authority for refund of the amount was not maintainable.
NCLAT's Analysis
The tribunal noted that from the facts brought on the record, it is clear that insofar as dues of JDECL is concerned, 12A Application was filed which was allowed by the Adjudicating Authority approving the 12A and the CIRP of JDECL thus came to be closed. Entire debt of the Financial Creditor with JDECL was ₹3 Crores, which CIRP stood closed and entire debt also discharged.
The tribunal further noted that MoU also indicates that ₹25 Lakhs was to be paid with regard to debt of Corporate Debtor on execution of MoU and rest of the payments were made within 4 years as per the schedule given in revised MoU as noted above. No further payment with regard to dues of Corporate Debtor could be paid since the Resolution Plan could not be approved by the Adjudicating Authority, although CoC has approved the Resolution Plan for the Corporate Debtor.
Based on the above, the tribunal while rejecting the appellant that the entire amount should be refunded observed that after obtaining the Order of closure of CIRP of JDECL, the prayer of Appellant to refund ₹3.25 Crores which also contains the payment of ₹3 Crores towards closure of CIRP of JDECL is both dishonest attempt and legally impermissible. When CIRP of JDECL is closed on payment of total debt of ₹3 Crores, there is no question of refund of the said amount of the Appellant.
The tribunal further noted that now the question is left regarding ₹25 Lakhs which was paid by the Appellant in reference to the Resolution Plan submitted in the Resolution Process of Corporate Debtor. As noted above only ₹25 Lakhs was paid which was on account of terms and conditions of the MoU dated 07.08.2020 that on signing of the MoU, the said amount shall be paid. The rest of the amount i.e., ₹9.50 Cores was to be paid within four years, which occasion did not arise since the Plan was never approved.
The tribunal noted clause IV of the undertaking in which it was provided that if the Resolution Plan of UCL is not approved and withdrawal of CIRP proceeding under 12A is not allowed before 30.09.2020, the amount shall be refunded.
Based on the above, the tribunal came to the conclusion that in the MoU there was no Clause of forfeiting the amount of Rs. 25 Lakhs paid towards the resolution of Corporate Debtor, UCL and further Resolution Applicant was not required to pay any EMD or Performance Guarantee. The amount of Rs. 25 Lakhs paid did not form the asset of Corporate Debtor to take control of it in the Liquidation Proceeding of Corporate Debtor.
The tribunal concluded that the prayer of the Appellant thus to refund amount of ₹3 Crores is dishonest, unjust and has rightly been rejected. However, the amount of ₹25 Lakhs which was paid on signing of the MoU and the approval of the Resolution Plan of Corporate Debtor could not take place needs to be refunded to the Appellant by the Financial Creditors.
Accordingly, the present appeal was allowed to this extent only.
Case Title: Globomet Engineering Private Limited Versus Shri Tejas J Parikh and Ors.
Case Reference: Company Appeal (AT) (Insolvency) No. 1080 of 2022
Judgment Date: 11/11/2024
