Case Synopsis by Adv. Jaydeep Mehta
Judgement of NCLAT
Ex-Promoter’s settlement proposal cannot be entertained after resolution plan approval by CoC
Case Citation: (2023) ibclaw.in 23 NCLAT
Synopsys of the case is as follows;
1. NCLAT dismisses an appeal filed by the Ex-Promoter (‘Appellant’) of Pawan Doot Estate Pvt. Ltd. (‘Corporate Debtor’) against NCLT order that rejected his plea to keep in abeyance the proceedings for approval of Resolution Plan.
2. NCLAT remarked that the “Adjudicating Authority being not satisfied that there is adequate reason to accept the prayer of the Appellant, no error has been committed by the Adjudicating Authority in rejecting the Application.”
3. NCLAT noted that –
(i) After initiation of CIRP, only one Resolution Plan was received, which was presented by the RP in the CoC meeting and the same was approved by 100% voting
(ii) RP submitted the application before NCLT for approval of the Resolution Plan, subsequent to which Appellant submitted settlement proposal u/s 12A before the Financial Creditors
(iii) W.r.t. Appellant’s submission that the mere fact that Resolution Plan has been approved by the CoC, is no impediment in CoC accepting the Settlement Proposal u/s 12A and that 100% CoC Members having given pre-approval, NCLT ought to have kept in abeyance the aforesaid proceedings, as also reliance placed upon the SC ruling in Siva Industries, NCLAT states that “From the above judgment…we are unable to find any ratio that even if a Resolution Plan is approved by the CoC and the Application is pending consideration for approval, the Promoters are entitled to file Settlement Proposal.”.
(iv) Elucidating that the case before SC was a case where no Plan could be approved and application was filed to initiate the liquidation process, during which period an application was filed by Promoters offering settlement, NCLAT clarifies that “The above judgment…can be said to clearly lay down that in event no Resolution Plan is approved and an application for liquidation is pending, 12A can be resorted to.”
(v) Lastly, NCLAT draws strength from the SC ruling in Ebix Singapore to hold that in the event, Appellant’s submission is accepted that even after the approval of the Plan, the CoC be given power to entertain a Settlement Proposal by the Ex-Promoter, the timelines for the different process and its finality will be breached, and concludes that after approval by the CoC of a Resolution Plan, CoC itself is bound by its decision and cannot be allowed to go back from its decision and pass any other resolution.
NCLAT judgment dated 05.01.2023