Bharat Hydro Power Corporation Private ... vs Sachin Gopal Jathar & Ors

1. Bharat Hydro Power Corporation Private Limited, Having registered office at: Jail Road, Fancy Bazar, Guwahati - 781001 ..Appellant

Versus

1. Sachin Gopal Jathar, Resolution Professional, Partner AAA Insolvency Professional LLP, ...Respondent No. 1 Having Office at Mousumi Co-operative Housing Society Limited, 15B, Ballygunge Circular Road, Kolkata - 700019, West Bengal, Email: sachinjathar@aaainsolvency.com

2. Central Bank of India, Having its central office at: Chandermukhi, Nariman Point, Mumbai - 400021 And its branch office at 10 Camac Street, Kolkata - 700017 And also Asset Recovery Branch, Central Bank Building, 3rd Floor, 33 Netaji, Subhash Road, Kolkata - 700001 Email: arbkolk20@centralbankindia.co.in ...Respondent No. 2

3. Kundan Care Products Limited, Resolution Applicant, E-22, Industrial Area, Bhadrabad, District Haridwar, Uttrakhand - 2494003 E-mail: cs@kundangroup.com ...Respondent No. 3 -2-

For Appellant: Mr. ArunKathpalia, Sr. Advocate with Mr. Nitin Kant Setia, Mr. KshitijWadhwa, Mr. SardavinderGoyal, Advocates For Respondent: Mr. Krishnendu Dutta, Sr. Advocate with Vinit T. Advocate for R-1. Advocate Bhavya Jain, for R-2 Mr. Shailendera Singh, Advocate for R-3 Kshitij Kumar, Siddhanth Makkar, Advocates

with Company Appeal (AT) (Insolvency) No. 591 of 2022

IN THE MATTER OF:

1. Bharat Hydro Power Corporation Private Limited, Having registered office at: Jail Road, Fancy Bazar, Guwahati - 781001 ..Appellant

Versus

1. Sachin Gopal Jathar, Resolution Professional, Partner AAA Insolvency Professional LLP, ...Respondent No. 1 Having Office at Mousumi Co-operative Housing Society Limited, 15B, Ballygunge Circular Road, Kolkata - 700019, West Bengal, Email: sachinjathar@aaainsolvency.com

2. Central Bank of India, Having its central office at: Chandermukhi, Nariman Point, Mumbai - 400021 And its branch office at 10 Camac Street, Kolkata - 700017 And also Asset Recovery Branch, Central Bank Building, 3rd Floor, 33 Netaji, Subhash Road, Kolkata - 700001 Email: arbkolk20@centralbankindia.co.in ...Respondent No. 2

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -3-

3. Kundan Care Products Limited, Resolution Applicant, E-22, Industrial Area, Bhadrabad, District Haridwar, Uttrakhand - 2494003 E-mail: cs@kundangroup.com ...Respondent No. 3

For Appellant: Mr. Sumer Singh Brar, Mr. AayushAgarwala, Advocates. For Respondent: Mr. Krishnendu Dutta, Sr. Advocate with Vinit T. Advocate for R-1. Advocate Bhavya Jain, for R-2 Mr. Shailendera Singh, Advocate for R-3 Kshitij Kumar, Siddhanth Makkar, Advocates

JUDGEMENT

Ashok Bhushan, J:

1. These two Appeals have been filed against the same Order dated 19th

April, 2022 passed by National Company Law Tribunal, Chandigarh Bench

(hereinafter referred to as "The Adjudicating Authority") in CP (IB) No.

122/Chd/HP/2019. Company Appeal (AT) Ins. No. 544 of 2022 has been

filed against the Order dated 19th April, 2022 rejecting the I.A. No. 70 of

2021 filed by the Appellant. Company Appeal (AT) Ins. No. 591 of 2022 has

been filed against the Order dated 19.04.2022 allowing the Application I.A.

No. 134 of 2021 filed by the Resolution Professional for approval of the

Resolution Plan submitted by Respondent No. 3-Kundan Care Products Ltd.

2. Brief facts of the case necessary for deciding these Appeals are:

 The Adjudicating Authority vide Order dated 23.12.2019 initiated

'Corporate Insolvency Resolution Process' (CIRP) of the Corporate

Debtor-M/s. Luni Power Company Pvt. Ltd.

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -4-

 Interim Resolution Professional (IRP) made publication on 26.12.2019

in pursuance of which claim of Rs. 19.79 Crores were admitted.

 After the approval by the Committee of Creditors (CoC) Form-G was

published on 15.09.2020 inviting 'Expression of Interest' (EoI).

 The Appellant-Shareholder holding 2.92 % of share of the Corporate

Debtor wrote a Letter dated 14.10.2020 to the General Manager,

Central Bank of India communicating that Shareholder is willing to

pay agreed amount of Rs. 10 Crores to Central Bank of India in full

and final settlement of all claims of the Banks against dues of the

Company. It was further mentioned that they look forward for

confirmation and acceptance of their offer by the Bank to enable them

to cause filing Application under Section 12A of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as "The Code"). The

Bank vide a Letter dated 16.10.2020 wrote to the Corporate Debtor

about the offer received from Bharat Hydro Power Corporation Pvt.

Ltd.. The letter informed the Corporate Debtor that CIRP is in progress

and if the Corporate Debtor intends to settle the matter under One

Time Settlement (OTS) appropriate application is to be filed by the

Corporate Debtor under Section 12A mentioning the details of offer,

source of fund, payment schedule, etc. and the Bank may consider the

OTS offer as per the policy provided if the agreed amount is proposed

to be paid latest by 31st March, 2021.

 On 16.10.2020, 04th CoC Meeting was held where it was noticed that

two Applicants have submitted their EoIs. CoC also resolved to seek

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -5-

extension of CIRP period of 90 days and also resolved to exclude

certain period from the CIRP.

 The Appellant on 09.11.2020 again wrote to the Central Bank of India

and mentioning that Rs. 1 Crore is already available with the Bank in

'No Lien Account' and amount of Rs. 09 Crore further would be

deposited within 31st March, 2021. Letter further requested the Bank

to accord approval to the Application under Section 12A as and when

submitted so that the Bank can communicate the Resolution

Professional for expediting the process of completing formalities of

Section 12A Application.

 On 27th November, 2020, CoC held its 5th Meeting where it was noted

that in pursuance of the public notice, RP had received two EoIs and

two PRAs and only Kundan Care Products Ltd. submitted its

Resolution Plan on 17.11.2020.

 The Appellant filed an I.A. No. 60 of 2021 on 08.12.2020 wherein one

of the prayers made by the Appellant was that till the full payment of

the OTS Settlement amount is paid or till 31st March, 2021, whichever

is earlier, the CIRP be kept in abeyance and Respondent No. 2 i.e.

Resolution Professional be directed not to continue with the CIRP.

 08th CoC Meeting was fixed for 03rd February, 2021. A letter dated 2nd

February, 2021 was sent by the Suspended Board of Directors where

the Suspended Board of Directors referred to Application filed by one

of the Promoters of the Corporate Debtor for One Time Settlement. 08th

CoC Meeting considered the letter dated 02.02.2021 sent by the

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -6-

Suspended Board of Directors and the Committee of Creditors decided

to continue with the CIRP. The minutes further noticed that matter

regarding the Settlement was yet to be formalized through the NCLT.

The Committee of Creditors proceeded to consider the Resolution Plan

received from M/s. Kundan Care Products Ltd. and after discussion

the Resolution Plan was approved with 100% voting by the CoC

Members.

 Aggrieved by the decision of the Committee of Creditors dated

03.02.2021 approving the Resolution Plan, I.A. No. 70 of 2021 was

filed by the Appellant before the Adjudicating Authority praying that

Resolution Plan in 08th Meeting be declared null and void and the CoC

may be directed to call another CoC meeting and consider the proposal

of the Appellant for OTS in Application No. 60 of 2021.

 In I.A. No. 70 of 2021, Reply was filed by the Bank as well as the RP to

which Rejoinder was also filed by the Appellant. Adjudicating

Authority vide Order dated 19th April, 2022 rejected the I.A. 70 of 2021

and by the same order, Resolution Plan submitted by the Respondent

No. 3 was approved and I.A. No. 134 of 2021 was allowed.

 These two Appeals have been filed challenging the Orders dated 19th

April, 2022.

3. We have heard Shree Arun Kathpalia, Learned Sr. Counsel appearing

for the Appellant, Shree Krishnendu Dutta, Learned Sr. Counsel appearing

for the Resolution Professional, Learned Counsel, Bhavya Jain for R-2-

Central Bank of India and Mr. Shailendera Singh, Advocate for Resolution

Applicant.

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -7-

4. Learned Sr. Counsel for the Appellant submits that the offer made by

the Appellant vide its Letter dated 14.10.2020 offering OTS amount of Rs. 10

Crores was replied by the Bank vide Letter dated 16.10.2020 where it was

stated that if the agreed amount be paid latest by 31st March, 2021 which

request of the Bank having been accepted and communicated by Letter

dated 09.11.2020 the settlement was required to be formalized by NCLT only

and there was no jurisdiction in the CoC to proceed to approve the

Resolution Plan on 03.02.2021. The Offer of the Settlement of Rs. 10 Crores

out of which Rs. 1 Crore was already deposited, was never considered by

CoC and without considering the offer of the Appellant for OTS, Adjudicating

Authority could not have proceeded to approve any Resolution Plan. The

Offer of the Appellant was for Rs. 10 Crores whereas Resolution Plan which

has been approved proposes only payment of Rs. 09 Crores. The CoC has

arbitrarily proceeded not to approve the offer of the OTS of the Appellant and

proceeded to approve the Resolution Plan on 03.02.2021. In the minutes of

the CoC Meeting dated 03.02.2021 has been noticed that settlement is to be

formalized through NCLT when the CoC was aware that Settlement is to be

formalized by the CoC, it ought to have stayed its hand in proceeding to

approve the Resolution Plan and waited for final orders of the NCLT.

5. Learned Counsel for the Resolution Professional as well as the Learned

Counsel for the Bank has submitted that OTS Offer given by the Appellant

was never approved by the Bank. The Letter dated 16.10.2020 which was

written by the Bank itself indicates that the Appellant had to file an

Application under Section 12A mentioning the details of offer, source of

fund, payment schedule, etc.. The Letter dated 16.10.2020 of the Bank itself

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -8-

made it clear that OTS Settlement was not approved and offer was yet to be

considered and approved by the Bank, when the Bank had never approved

the Offer of OTS of the Appellant there is no question of filing an Application

under Section 12A of the Code. Appellant had filed an I.A. 60 of 2021 for

staying CIRP on which no order was passed by the Adjudicating Authority

staying the CIRP. CoC has rightly proceeded with the CIRP and approved the

Resolution Plan. The submissions of the Appellant that Offer of the Appellant

of Rs. 10 Crores is better than the Resolution Plan of Respondent No. 3 for

payment of Rs. 09 Crores, the CoC in its commercial wisdom has considered

the Resolution Plan as well as request made on behalf of the Appellant in its

meeting dated 03.02.2021 and has rightly proceeded to approve the

Resolution Plan. In the Resolution Plan approved, the personal guarantees

given by the promoters and directors having not been extinguished which

guarantee is sufficient to recover the dues of the Bank which are about Rs.

29 crores. The Respondent No. 3 in its Resolution Plan has also proposed to

invest Rs. 20 Crores in the Corporate Debtor. Learned Counsel for the

Resolution Professional also submitted that the RP has rightly proceeded to

place the Resolution Plan for consideration before the Adjudicating

Authority. The Bank has never accepted the OTS proposal of the Appellant

nor RP received any such communication by the Bank regarding the

acceptance of OTS of the Appellant hence there was no question of filing any

Application under Section 12A.

6. From the submissions of Learned Counsel for the Parties and

materials on record, following two questions arises for consideration:

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -9-

(i) Whether the OTS Proposal made by the Appellant vide

Letter dated 14.10.2020 was accepted/approved by the Central

Bank of India?

(ii) Whether the minutes of Committee of Creditors dated 03rd

February, 2021 indicates that OTS proposals made by the

Appellant was not considered and without consideration of the

OTS Proposal, CoC proceeded to approve the Resolution Plan of

the Respondent No. 3?

7. Both the questions are inter-related and inter-connected. We may first

notice the communication between the Appellant and the Bank regarding the

OTS Proposal. By letter dated 14.10.2020, the Appellant has submitted the

proposal. The Letter dated 14.10.2020 of the Appellant is to the following

effect:

"Re:......

At the outset, we thank you for taking time out of your busy schedule and meeting Mr. Manoj K Digga, CFO, SPML Group, on 12th October, 2020.

As discussed, we Bharat Hydro Power Corporation Limited being a shareholder and a stakeholder in the corporate debtor, are ready to pay agreed amount of Rs. 10 Crores to Central Bank of India, Kolkata in full and final settlement of all claims of your bank against the dues of the Company. We look forward to your confirmation/acceptance to our offer to enable us to cause requisite application u/s 12A of the IBC, 2016 to be prepared in consultation with

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -10-

the Bank's advocates for necessary orders from the NCLT, Chandigarh in this regard.

We have already caused the Company to deposit Rs. 1.00 Crore in "No-Lien Account" with your Bank and upon receipt of your confirmation/acceptance, we will arranges to pay balance amount of Rs. 9.00 Crores, for which we request you to kindly consider the financial constraints caused due to ongoing pandemic, and provide us time for 12 months from the date of settlement u/s 12A to make payment in tranches so that the account can be settled in the best interest of both the parties. As discussed, we can make the tranches in such way so that the average maturity would not be more than 6 months as required by you.

We look forward to receiving your confirmation/acceptance so that the filing of application u/s 12A of IBC can be forthwith undertaken and necessary orders obtained to facilitate the aforesaid settlement.

Thanking you,

Yours faithfully

For Bharat Hydro Power Corporation Limited

(Authorised Signatory)"

8. In response to the Letter dated 14.10.2020, communication dated

16.10.2020 was sent by the Bank to the Corporate Debtor which is to the

following effect:

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -11-

"Reg: Offer for Compromise Settlement and filing of application u/s 12A of IBC, 2016

Ref: Letter dated 14.10.2020, sent by Bharat Hydro Power Corporation Ltd.

Dear Sirs,

We refer to the letter cited under reference sent by Bharat Hydro Power Corporation Ltd. addressed to our General Manager with a copy to us. In this connection we would like to inform you that CIRP is in progress as per NCLT, Chandigarh Order against the Corporate Debtor M/s. Luni Power Company Pvt. Ltd.

Therefore, if the Corporate Debtor (CD) intends to settle the matter under OTS, appropriate application is to be filed by the CD only u/s 12A of IBC in NCLT mentioning the details of Offer, Source of Fund, payment schedule etc. Bank's advocate has no role in filling of application u/s 12A. Therefore, Bank will file their response if ordered by NCLT. Bank may consider your OTS offer as per policy provided full agreed amount is proposed to be paid latest by 31st March, 2021.

Accordingly, you may take appropriate steps for filling of application in NCLT, Chandigarh U/S 12A.

Thanking you,

Yours faithfully,"

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -12-

9. The Letter dated 16.10.2020 is the only communication which was

received by the Appellant from the Bank regarding OTS Offer of the

Appellant. When we read the letter dated 16.10.2020 it clearly indicates that

OTS Offer dated 14.10.2020 was not accepted by the Bank rather the second

paragraph of Letter clearly indicates that if the Corporate Debtor intends to

settle the matter under OTS, appropriate application is to be filed by the

Corporate Debtor under Section 12A of the IBC, 2016 mentioning the details

of offer, source of fund, payment schedule etc. Thus the letter dated

16.10.2020 required further information as indicated in the Letter for

consideration of OTS Offer. After the Letter dated 16.10.2020, the Appellant

sent the Letter dated 09.11.2020 where they expressed and communicated

that they shall be depositing the amount of Rs. 09 Crores within 31st March,

2021, Rs. 1 Crore having already been deposited. The letter further mentions

that Application under Section 12A shall be provided to the RP with a copy

to the Bank for taking forward the matter. After Letter dated 09.11.2020,

there is no communication from the Bank accepting the OTS Offer

submitted by the Appellant through the Letter dated 14.10.2020 read with

Letter dated 09.11.2020. From the pleadings, it does appear that Application

under Section 12A was shared by the Appellant to the RP and the Bank, but

the said Application under Section 12A was never filed before the

Adjudicating Authority. The Resolution Professional has stated in his Reply

that he never received any acceptance from the Bank of OTS offer of the

Appellant hence there was no question of filing any Application under

Section 12A of the Code.

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -13-

10. Now we come to the minutes of the CoC meeting dated 03.02.2021 in

which Letter dated 02.02.2021 sent by the Suspended Board of Directors

regarding the offer of Appellant came for consideration. In the CoC Meeting

under heading B. Matters discussed/noted for information ii. the letter

dated 02/02/2021 received from Suspended Board of Director came for

consideration. Suspended Board of Directors of the Corporate Debtor-Shri

Amar Chand Bakliwal was present in the CoC Meeting and submitted a

representation with regard to the OTS Offer made by Shareholder of the

Company i.e. the Appellant. The said representation and Letter was noticed

in the minutes is to the following effect:

"ii. To take note of the letter received from the suspended Board of Directors dated 02/02/2021.

The Chairman informed the CoC members that a letter was received by the RP from the suspended board of directors vide dated 02/02/2021 regarding the application filed by one of the promoters of the CD.

Shri A C Bakliwal discussed the matter with the CoC members and made the following representation to the CoC:

"The Promoters of Luni Power Co. Pvt. Have discussed and agreed to the proposal of Central Bank of India (Sole Financial Creditor) for one time settlement of the outstanding amount of Luni Power Co. Pvt. Ltd. at Rs. 10 Crores, which has been agreed to be paid within 31st March, 2021. The Shareholders of the Company have

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -14-

already deposited Rs. 1 Crore in No Lien Account with the Bank, and are incurring interest/costs on the said amount. The promoters are also arranging balance fund for depositing with the Central Bank of India within 31st March, 2021, to completely settle all dues of the said Bank. Further, a shareholder of the Company, Bharat Hydro Power Corporation Ltd. has filed its application with NCLT Chandigarh stating the above settlement and for keeping the Corporate Insolvency Resolution Process (CIRP) in abeyance. The copies of the Application have been provided to the Central Bank of India and also to the Resolution Professional, Mr. Sachin Jathar. The above has been discussed with the Bank at various levels.

Further, the letter of Bharat Hydro Power Corporation Ltd dated 25th January, 2021, and my letter dated 2nd February, 2021 may please be put on record for necessary action by all concerned"

 The same was shared with the RP through email.

The CoC took note of the letter. For the

convenience of the attendees of the meeting, Shri Anil Goel delineated the broad process of withdrawal of application during the CIRP. He drew the attention of the members to CIRP Regulation 30A which deals with the withdrawal of application. The provisions of the regulations are listed below:

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -15-

..............

There were detailed deliberations of the modalities of the withdrawal of the application. It was observed that though an application was filed with the NCLT, Chandigarh, the other dimensions of the process such as providing any bank guarantee, the application, Form-FA, etc. was not done; only the letter from the suspended board of directors was shared. The CoC member-official of the lender in know of the matter, indicated that though the officials of the CD were in talks with the Bank for long, the matter regarding settlement was yet to be formalized through NCLT. The CD has filed an application in this regards with the NCLT, Chandigarh Bench and adjudicating Authority is yet to decide upon the same. The CoC felt that the CIRP needs to be continued and the steps in the process need to be covered accordingly. Giving due consideration to the developments at hand, the CoC decided that they would continue with the CIRP and proceed with the decisioning on the Resolution Plan at hand."

11. The above discussion before the CoC clearly indicates that Form-FA

was never provided. It was also noted that officials of Corporate Debtor were

in talk with the Bank and matter regarding the settlement was yet to be

formalized through NCLT. CoC resolved that CIRP need to be continued and

steps in the process need to be covered accordingly. The CoC when decided

to proceed to consider the Resolution Plan at hand it is implicit the OTS

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -16-

Offer made by the Appellant was never accepted. At this stage, we may

notice the provisions pertaining to filing Application under Section 12A of

the Code. Section 12A of the Code provides as follows:

"Section 12A: Withdrawal of application admitted under section 7, 9 or 10.

12A. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be prescribed."

12. Regulation 30A of the Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for Corporate Person) Rules, 2016 provides a

methodology of filing a withdrawal application under Regulation 30A.

Regulation 30A is as follows:

"30A. Withdrawal of application.

30A. (1) An application for withdrawal under section 12A may be made to the Adjudicating Authority -

(a) before the constitution of the committee, by the applicant through the interim resolution professional;

(b) after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be:

Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36A, the

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -17-

applicant shall state the reasons justifying withdrawal after issue of such invitation. (2) The application under sub-regulation (1) shall be made in Form FA of the Schedule accompanied by a bank guarantee-

(a) towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of sub-regulation (1); or

(b) towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) of sub- regulation (1).

(3) Where an application for withdrawal is under clause (a) of sub-regulation (1), the interim resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt.

(4) Where an application for withdrawal is under clause (b) of sub-regulation (1), the committee shall consider the application, within seven days of its receipt.

(5) Where the application referred to in sub-

regulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with the approval of the committee, to the Adjudicating Authority on behalf of the applicant, within three days of such approval.

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -18-

(6) The Adjudicating Authority may, by order, approve the application submitted under sub- regulation (3) or (5).

(7) Where the application is approved under sub- regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under sub-regulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code."

13. The proviso of Regulation 30-A sub-rule (1) (b) which is applicable in

the facts of the present case needs to be noticed. The proviso to Regulation

30-A (1)(b) reads as under:

"Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation."

14. Thus, withdrawal Application under Section 12A after the constitution

of CoC is to be dealt in further two sub-heads. There is stringent

requirement which is to be mentioned by the Appellant for withdrawal if the

Application is made after the issue of invitation of EoI. In the present case,

EoI was published on 15.09.2020 and even the OTS Offer made by the

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -19-

Appellant was after publication i.e. 14.10.2020 thus present is the case

where invitation of EoI was made much earlier than OTS offer hence there

has to be some reason justifying the withdrawal after issue of such

invitation. Present is a case where Application under Section 12A was never

filed before the Adjudicating Authority. Thus, for withdrawal, in the present

facts of the case, specific reasons were required justifying withdrawal when

the OTS Offer was made after publication of Form-G. In so far as the first

submission of the Appellant that CoC never considered the OTS Offer is

concerned, the minutes of 08th CoC Meeting held on 03.02.2021 as extracted

above clearly indicates that OTS was duly considered, the suspended

Directors of the Corporate Debtor made representation and presentation of

its full cause before the CoC. CoC after considering his representation,

decided to proceed with the approval of the Resolution Plan which clearly

indicates that OTS was never accepted.

15. Further on the record, there is no material to indicate that OTS Offer

of the Appellant was ever accepted by the Bank. We had also noticed the

Letter dated 16.10.2020 which requires certain information from the

Appellant for consideration of the OTS Offer. Thus the present is a case

where OTS offer of the Appellant was never accepted hence occasion to

proceed under route of Section 12A did not arise.

16. Coming to the second question that the offer of the Appellant is better

than offer in the Resolution Plan. Suffice it to say that it is in the domain of

the CoC and it is the commercial wisdom of the CoC while approving the

Resolution Plan considering all aspects. OTS Offer made by the Appellant

was very much before the CoC in the same Meeting which was considered

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -20-

and in the same CoC Meeting, Resolution Plan was approved with the

upfront payment of Rs. 4.5 Crores with further conditions.

17. We may also in this context notice the Reply of the Bank which was

filed to Company Application No. 70 of 2021. The Central Bank of India in

its reply has categorically stated that it has never approved the OTS of the

Appellant. In the affidavit filed by the Bank in this Appeal, the Bank has also

given reason for approving the Resolution Plan in Paragraph D(ii) and E.

Following has been pleaded:

"D. The answering Respondent had never accepted the OTS offer/proposal allegedly projected to have been culminated vide correspondence from 14th Oct, 2020, 16th Oct, 2020 and 09th Nov. 2020. Resultantly no bindng arrangement/agreement quo one time settlement was ever executed between the Appellant and the answering Respondent:

That, an attempt has been made by the Appellant to portray existence of an alleged acceptance of one-time settlement offer by the answering Respondent on the basis of correspondences [being emails dated 14.10.20, 16.10.20, 09.11.20] ["the relevant correspondence"] between the Appellant and the answering Respondent. Therefore, it is utmost important to highlight the true purpose and rationale of the relevant correspondences exchanged between the Appellant and the answering Respondent. Tabular treatment of relevant correspondences would fortify the

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -21-

stance of the answering respondent that the answering Respondent had never accepted the OTS offer proposed by the Appellant and that it was merely at the stage of discussion and thus no binding obligations were ever ensued between the Appellant and the answering Respondent. The tabular treatment of the relevant correspondences relied upon by the Appellant are extracted as hereunder:

Offer by Reply by Bank dated Rejoinder by Appellant dated 16.10.2020 by Respondent Appellant 14.10.2020 sent No. 2 to Appellant dated 09th by Appellant to November, Respondent No. 2020 by 2 Appellant to Respondent No. 2

-Offered to pay No acceptance by the Bank. The Appellant 10 crores to offered to pay Central Bank. -Condition precedents sought the complete by Bank for mere amount by -Alleged 1 crore consideration [not acceptance] 31 st March, in 'No-Lien of offer, namely: 2021; Account' however, did proposed to be -Details of Offer. not provide set off and other -Source of Fund. further proposed stipulations as to pay 9 crores -Payment Schedule, etc. asked for by within 12 the Bank. months. -Conformity to pay 9 crores latest by 31.03.2021 -Further, vide -Sought the said confirmation/acc It is only after the aforestated correspondenc eptance of Bank requisite details are provided; e, the prior to filing of the Bank may consider the Appellant Section 12A offer. In no manner can such sought Bank's application a response be taken as Offer accord and emanating from the Bank. It approval to is mere negotiations being

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -22-

discussed amongst the the Appellant and the Bank. Application u/s 12A.

Reference to the Section 12A in the said correspondence Meaning has to be read historically to thereby that deduce and decipher the true the Appellant intent of the Bank vide the admits that said correspondence. the Bank was yet to confirm

-Mere reference of Section 12- the OTS Offer A in communication by the as otherwise Bank is no ground to deduce would not admission at the behest of have sought the Bank. for Bank's confirmation.

................

ii. In any case, reference to the reply of the answering Respondent to the I.A. No. 60/2021 as well as I.A. No. 70/2021 categorically and unequivocally confirms the rejection of the OTS as proposed by the Appellant.

..............

E. That as on date the total liability accrued upon the Corporate Debtor is INR 27,54,82,826/- approx. [around 27.5 crores]. The said liability as even burgeoning and thus in any case and n no manner can a mere OTS for INR 10 Crores be commercially more viable for the answering Respondent and on this ground alone, the present appeal deserves dismissal at the threshold."

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -23-

18. As observed above, the commercial wisdom of CoC to approve the

Resolution Plan cannot be judicially reviewed by this Tribunal. Learned

Counsel for the Appellant has relied on the Judgment of this Tribunal in

[(2022) SCC OnLine NCLAT 86] "Periasamy Palani Gounder (Promoter

and Erstwhile Director) Appu Hotels Ltd. Vs. Radhakrishnan

Dharmarajan, RP Appur Hotels Ltd. & Anr." to support his submissions

that CoC is obliged to consider the Settlement Offer in Paragraph 145 and

146, following has been laid down:

"145. Based on the pleadings of the parties, it appears that a settlement offer was made, and a 12 A application was to be submitted after getting the consent of 90% members of the COC. In the circumstances, the appellant requested to consider the settlement proposal in the COC. However, COC was never called to consider the settlement offer. The Resolution Professional has contended that the COC has rejected the settlement offer in its 9th meeting. This statement is also not as per the minutes of the 9th COC meeting. It appears from the minutes of the 9th COC that only a Resolution Plan was discussed in that meeting. After that, the Resolution Plan was sent back to the resolution applicant by CoC for reconsideration and revision. In the 9 COC meetings, no discussion about the settlement offer occurred. It is essential to mention that after admission of the petition and formation of the Committee of Creditors, Section 12A application for withdrawal could only be accepted if the CoC approves the

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -24-

proposal with a 90% vote share. It is undisputed that COC, under its commercial wisdom, had full liberty to either accept or reject the settlement offer. But consideration of the settlement offer is essential. At this juncture, this tribunal "Worth recalls and recollects" the judgement of Hon'ble 3 Member Bench of this Tribunal in Company Appeal (AT) (Ins) No.91 of 2019 dated 6 September 2019 between Shaji Purusothaman v Union Bank of India and others (reported in MANU/NL/0438/2019) whereby and whereunder at paragraph 9 it is observed that;

"if an application u/s 12 A is filed by the Appellant, the Committee of Creditors may decide as to whether the proposal given by the appellant for settlement in terms of Section 12 A is better than the resolution plan as approved by it, and may pass appropriate order. However, as such decision is required to be taken by the "Committee of Creditors", we are not expressing any opinion on the same."

146. In this case, CoC never considered the settlement proposal submitted by the Appellant. Although, after getting the settlement proposal, it was incumbent upon the resolution professional to call the COC meeting to consider the settlement proposal. It is essential to mention that the settlement offer could not have been rejected without consideration by the COC."

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -25-

19. As noted above, present is a case where OTS offer of the Appellant was

placed before the CoC in its meeting dated 03.02.2021 by the Suspended

Board of Directors and was thoroughly considered.

20. Learned Sr. Counsel for the Respondent-Mr. Krishnendu Dutta has

placed reliance on Judgment of this Tribunal in Company Appeal (AT) Ins.

No. 304 of 2022 in the matter of "Avantha Holdings Ltd. & Anr. Vs. Mr.

Abhilash Lal, Resolution Professional for Jhabua Power Limited & Ors".

This Tribunal in the above case had considered the OTS Offer made by the

Promoter and Shareholder of the Corporate Debtor which was not accepted

and Resolution Plan was approved. In the above case, this Tribunal made

following observations in Paragraph 11 and 15:

"11. Section 12A does not entitle Promoters of the Corporate Debtor to submit a Settlement Plan as is claimed by the Appellant. The Appellant has claimed before the Adjudicating Authority that the Settlement Plan submitted by the Appellant had not been considered by the CoC by any application of mind and it has been arbitrarily rejected. The pre-condition of accepting any withdrawal Application under Section 12A is on approval Company Appeal (AT) (Insolvency) No. 304 of 2022 14 by CoC by 90% of its voting shares. CoC having never granted its approval, Section 12A route was never open for withdrawal of CIRP. Furthermore, Section 12A proposal submitted by the Appellant was examined by the CoC in its meeting dated 05.03.2021. It is useful to notice the Minutes of the 12th Meeting of the CoC, where it did not

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -26-

agree with the withdrawal Application under Section 12A and following observations have been noted by the CoC:

"RP requested comments from the CoC members in the matter of the proposal forwarded by Mr. B. Hariharan, Director of Avantha Holdings Limited to the RP and some members of CoC (circulated to all members by RP upon receipt). The representatives of PFC submitted that the proposal submitted by the promoters does not conform with Sec 12A of the IBC and the same should be noted in the hearing on the next date of hearing. This was agreed to by other members of the CoC who voiced a unanimous view that they do not want to pursue any withdrawal under Section 12A or go ahead with the proposal submitted by the promoters. The same was take on record."

...............

15. We are of the considered opinion that Section 12A proposal cannot be forced upon the lenders. The Promoters, who led to insolvency process of Corporate Debtor cannot claim to submit a Resolution Plan indirectly by way of proposal under Section 12A and ask the lenders to evaluate their Resolution Plan. Something which is not permissible directly by virtue of prohibition under Section 29A for submitting Resolution Plan by the Promoters, cannot be permitted to be done indirectly. Further, the commercial wisdom of the CoC, which is

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022 -27-

reflected in its Meeting dated 05.03.2021 and 21.04.2021 is not liable to be judicially reviewed."

21. The Judgment of this Tribunal in Avantha Holdings Ltd. (supra) fully

supports the submissions of Learned Sr. Counsel for the Respondent.

22. In view of the fore-going discussion, we find that there is no error in

the Order of the Adjudicating Authority dated 19th April, 2022 passed

rejecting I.A. No. 70 of 2021. The Adjudicating Authority also did not commit

any error in passing the Order dated 19th April, 2022 approving the

Resolution Plan as prayed in I.A. No. 134 of 2021 filed by the Resolution

Professional. No grounds have been made out to interfere with the Impugned

Orders passed in these Appeals. Both these Appeals are dismissed. All the

I.As are disposed of.

[Justice Ashok Bhushan] Chairperson

[Mr. Barun Mitra] Member (Technical)

NEW DELHI 18th August, 2022 Basant B.

Company Appeal (AT) (Insolvency) No. 544, 591 of 2022