Narendra Jindal vs Hdfc Bank Limited

(Arising out of the Order dated 08.04.2022 passed by the National Company Law Tribunal, New Delhi, Court-III, in (IB) No. 3370/ (ND)/2019)

IN THE MATTER OF:

Narendra Jindal Promoter & Managing Director of the Suspended Board of Directors of the Corporate Debtor D-328, Vivek Vihar Delhi 110095 ...Appellant Versus

1. Sharda Ma Enterprises Private Limited Through : Interim Resolution Professional - Mr. Vaneet Bhatia Regd Office: 352, Agarwal Chambers 3rd Floor, Veer Savarkar Block Shakarpur, Delhi 110095 Email: cirp.shardama@gmail.com ...Respondent No. 1

2. Mr. Vaneet Bhatia Interim Resolution Professional H. No. 19, Bharat Apartments Sector - 13 Rohini, New Delhi 110085 Email : vaneetbhatia4@gmail.com ...Respondent No. 2

3. Norvic Shipping North America Inc. (Operational Creditor) Through the Counsel for the Operational Creditor Mr. Aman Nandrajog VSA Legal 32, GF, South Extension -II Uday Park, New Delhi 110049 Email: office@vsalegal.in ...Respondent No. 3 -2- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

4. Committee of Creditors Sharda Ma Enterprises (P) Ltd. Regd Office: 352, Agarwal Chambers 3rd Floor, Veer Savarkar Block Shakarpur, Delhi 110095 Email: cirp.shardama@gmail.com ...Respondent No. 4

Present

For Appellant: Mr. Abhijeet Sinha, Mr. Atanu Mukherjee & Mr. KKR Das, Advocates.

For Respondents: Mr. Harshit Khare & Mr. Prafful Saini, for R-2. Ms. Tanya Hasija, Ms. Devina Bhandari & Mr.Vishal Ganda, for R-4/RP. Mr. Anmol Bansal, for HDFC bank. With Comp. App. (AT) (Ins) No. 506 of 2023 & I.A. No. 1653, 1654 of 2023

(Arising out of the Order dated 15.03.2023 passed by the National Company Law Tribunal, New Delhi Bench- III in New IA-4704/2022 in C.P. (IB) No. 3370/(ND)/2019 )

IN THE MATTER OF:

Narendra Jindal Promoter & Managing Director of the Suspended Board of Directors of the Corporate Debtor D-328, Vivek Vihar Delhi 110095 ...Appellant

Versus

1. HDFC Bank Limited Department for Special Operations 5th Floor, Ansal Classique Tower J-Block, Rajouri Garden New Delhi 110027 -3- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

Email: Anirudh.bhargav@hdfcbank.com ...Respondent No. 1

2. The Asstt. General Manager SAMB-II, 11th Floor Jawahar Vyapar Bhawan No. 1 Tolstoy Marg Janpath New Delhi - 110001. Email: sbi.50950@sbi.co.in ...Respondent No. 2

3. ICICI Bank Limited NBCC Palace Bhisham Pitahmah Marg New Delhi 110003. Email : anshu.j@icicibank.com ...Respondent No. 3

4. Mr. Vaneet Bhatia Resolution Professional H. No. 19, Bharat Apartments Sector - 13 Rohini, New Delhi 110085 Email : vaneetbhatia4@gmail.com ...Respondent No. 4

Present

For Appellant: Mr. Abhijeet Sinha, Mr. Atanu Mukherjee & Mr. KKR Das, Advocates.

For Respondents: Mr. Harshit Khare & Mr. Prafful Saini, for R-2. Ms. Tanya Hasija, Ms. Devina Bhandari & Mr.Vishal Ganda, for R-4/RP. Mr. Anmol Bansal, for HDFC bank. JUDGEMENT

( 25 .01.2024)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The two Appeals have been preferred by the same Appellant i.e.,

Mr. Narendra Jindal. In Company Appeal (AT) (Insolvency) No. 594 of 2022 -4- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

M/s Sharda Ma Enterprises Private Limited (in short 'Corporate Debtor') is

Respondent No. 1 and Mr. Vaneet Bhatia is the Respondent No. 2 herein, who

is the Interim Resolution Professional (in short 'IRP') of the Corporate Debtor,

Norvic Shipping North America Inc. is the Respondent No. 3 who is

Operational Creditor to the Corporate Debtor and Committee of Creditors (in

short 'CoC) of the Corporate Debtor is the Respondent No. 4. In this appeal,

the Appellant has challenged the Impugned Order dated 08.04.2022 admitting

the application filed by the Respondent No. 3 under Section 9 of the Insolvency

& Bankruptcy Code, 2016 (in short 'Code') and putting the Corporate Debtor

into Corporate Insolvency Resolution Process (in short 'CIRP').

2. The Second Appeal i.e., Company Appeal (AT) (Insolvency) No. 506 of

2022 has been filed by the same Appellant i.e., Mr. Narendra Jindal and HDFC

Bank Limited the Financial Creditor is the Respondent No. 1, the Assistant

General Manager SAMB-(II) is the Respondent No. 2, ICICI Bank is the

Respondent No. 3 and Mr. Vaneet Bhatia the Resolution Professional is the

Respondent No. 4, aggrieved by the Impugned Order which did not allow the

application under Section 12A of the Code.

Both these Appeals have been preferred under Section 61 of the Code.

3. Both these Appeals are stated to be connected and both were conjointly

argued by the parties and heard by us accordingly.

-5-

Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

4. Heard the Counsel for the Parties and perused the records made available

including the cited judgements.

Company Appeal (AT) (Insolvency) No. 594 of 2022

5. The Corporate Debtor is in business of trading in coal and for developing

coal facilities. One consortium of banks comprises of State Bank of India of

Bikaner and Jaipur (later merged into SBI), SBI of Patiala and HDFC Bank

Limited granted credit facilities to the Corporate Debtor.

6. It is the case of the Appellant that during 2014, the Government of India

diverted entire coal to the thermal power plants to meet the power crises and no

coal was allocated to the coal trader like the Corporate Debtor. The Appellant

explained that earlier the Corporate Debtor used to precure the coal through e-

auction from Coal India Limited and due to non-availability of coal, the

Corporate Debtor initiated for import of coal from Indonesia.

7. The Appellant submitted that during the relevant period, there has been

continuous fall in international prices of coal and the Corporate Debtor suffered

severe loses with each import and during this financially difficult period, the

Corporate Debtor entered into a Charter Party Agreement dated 25.02.2016 with

the Operational Creditor for shipment of coal ex- vessel 'MV. Beks Nazik'.

The Appellant admitted that the Operational Creditor invoices No. DFR-16-

037-2 for USD 1,57,234.17 could not be paid by the Corporate Debtor due to -6- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

de-monetization and implementation of GST regime. The Appellant also stated

that in the meanwhile his account was also categorized as NPA in March, 2017

by the Lenders.

8. The Appellant stated that subsequent to failure on the part of the

Corporate Debtor to make payment to the Operational Creditor, a Settlement

Agreement was entered between the Corporate Debtor and the Operational

Creditor to pay the entire outstanding amount of USD 1,57,234.17 in 13

instalments and the Corporate Debtor made the payment of first two instalment

totalling USD 25,000/- but defaulted in making the payment of 3rd instalments

which was due on 31.03.2019.

9. The Operational Creditor issued demand notice under Section 8 of the

Code on 16.10.2019 and filed an application before the National Company Law

Tribunal, New Delhi, Court- III (in short 'Adjudicating Authority') on

03.12.2019 No. CP (IB) No. 3370/ ND/ 2019 .

10. It is the case of the Appellant that he entered into the fresh settlement

with the Operational Creditor after filing the application under Section 9 of the

Code by the Operational Creditor and the Corporate Debtor was willing to settle

the outstanding due of USD 1,57,234.17 at 75% of payable amount within a

period of 12 months in monthly instalments and therefore the Adjudicating

Authority should have taken the same on record and should have given an -7- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

opportunity to the Corporate Debtor to revive therefore, the Impugned Order is

perverse and need to be set aside.

11. In this connection, we also note from the reply submitted on behalf of the

Corporate Debtor by IRP wherein the Respondent No. 2 i.e., IRP gave the

background of the case and submitted that subsequent to the CIRP, the

Respondent No. 2 published Form A on 10.04.2022 inviting claims against the

Corporate Debtor and Respondent No. 2 vide e-mail dated 11.04.2022 also

intimated HDFC Bank, SBI and ICICI Bank regarding initiation of the CIRP

along with a request to them to file their claims before 22.04.2022 being the last

date for receipt of claims. The Respondent No. 2 confirmed that he received

three claims from of bankers and two claims from two Operational Creditors,

namely, Department of Commercial Tax, Katni MP and Department of Income

Tax, New Delhi.

12. The Respondent No. 2 stated that in terms of Section 21(1) of the Code,

he constituted the CoC on 30.04.2022 and three Financial Creditors were taken

as member of the CoC with 19.94% voting right to HDFC, 56.83 voting rights

to SBI and 23.23% voting rights to ICICI Bank.

13. The IRP/ Respondent No. 2 submitted that on 18.05.2022, the Suspended

Board of Directors of the Corporate Debtor claimed to have entered into a

settlement agreement with the Operational Creditor agreeing to pay USD -8- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

1,00,000/- and therefore, he received Form-FA dated 18.05.2022 under

Regulation 30A of CIRP Regulation, 2016 signed by the Operational Creditor

with a request to terminate the CIRP. The Respondent No. 2 convened the

meeting of CoC on 23.06.2022 for seeking approval of CoC for withdrawal of

CIRP in terms of Section 12A r/w Regulation 30 A for CIRP Regulation 2016.

However, the HDFC Bank being Member of CoC with 19.94% voting share

voting, opposed the said resolution. The said resolution was required to be

approved by the CoC with 90% of the voting share and therefore, resolution for

withdrawal of CIRP could not be passed.

14. It is the case of the Respondent No. 2 that in view of non approval of

withdrawal application by CoC, the Respondent No. 2 did not submit the

application for withdrawal of CIRP proceeding as mandated by Regulation 30A

of CIRP Regulation before the Adjudicating Authority.

15. We also note that the Appellant filed I.A. No 3238 of 2022 in Company

Appeal (AT) (Insolvency) No. 594 of 2022 before the Adjudicating Authority

seeking the directions to IRP not to proceed with the transaction audit in terms

of Section, 43, 45, 50 & 66 of the Code. The said application was opposed by

the Answering Respondent/ HDFC being devoid of any merit made with mala-

fide intention. The Answering Respondent/ HDFC reiterated that in the 5th

Meeting of CoC held on 22.09.2022, the HDFC Bank confirmed that they have -9- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

taken final decision for not granting an approval for withdrawal of CIRP

proceedings and further submitted that in view of failure of the settlement, the

Resolution Professional is duty bound to continue its duties to conclude the

CIRP in time bound manner and further requested to get removed stay by this

Appellate Tribunal on Form G, thereby, allowing the Respondent No. 1 to carry

out his duties pertaining to CIRP in accordance with the Code and help the

Financial Creditors to recover their money and revive the Corporate Debtor.

Company Appeal (AT) (Insolvency) No. 506 of 2022

16. In this appeal, the Appellant gave details of various joint lenders Meeting

especially the 4th Joint Lenders Meeting held on 22.02.2022 in which the

Corporate Debtor submitted comprehensive proposal vide letter dated

22.02.2022 for Rs. 22 Crores against the outstanding amount of Rs. 69 Crores

and requested the consortium lenders to allow the Corporate Debtor

accordingly.

17. It is the case of the Appellant that during hearing the pending Appeal,

despite discussions about the settlement with the Creditors, the Adjudicating

Authority passed order for initiating of CIRP on 08.04.2022 and the IRP took

over on 11.04.2022.

18. The Appellant submitted that after the fresh settlement agreement with

the Operational Creditor, the matter was pending before the Adjudicating -10- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

Authority and during this period, the SBI being the lead bank of consortium

vide their letter dated 06.06.2022 approved the revised settlement proposal and

revised payment schedule of the Corporate Debtor to pay Rs. 22 Crores.

19. The Appellant also submitted that as Promoters/ the Suspended Directors

of the Corporate Debtor made part payment toward compromised settlement to

bankers. However, despite their best efforts, the HDFC, during 5th Meeting of

CoC held on 28.09.2022 denied approval of Form FA for withdrawal

application of CIRP and recorded the following :-

"Sh. Anirudh Ji. HDFC Bank confirmed that their decision making authority has denied approval on "Form FA"

(Withdrawal Application) and this being the final decision from their higher authorities."

20. The Appellant submitted that during pending of the Appeal bearing

Company Appeal (AT) (Insolvency) No. 594 of 2022, this Appellate Tribunal

vide its order dated 05.10.2022 directed the Adjudicating Authority to hear I.A.

No. 4704 of 2022 and accordingly the proceeding took place before the

Adjudicating Authority and several hearings were held. The parties presented

their submissions before the Adjudicating Authority.

21. It is the case of the Appellant that he brought before the Adjudicating

Authority the aspect of the compromised settlement which has been taken place

with the Operational Creditor and the Financial Creditor and therefore one of -11- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

the Financial Creditor i.e., the HDFC could not have been allowed to object to

such settlement and therefore the decision of the HDFC bank offering to the

application filed under Section 12A of the Code, cannot be treated as

commercial wisdom in accordance with the law.

22. The Appellant tried to differentiate the case under Section 12 A of the

Code vis-à-vis Section 30(4) of the Code and stated that the sustainability and

viability of the Resolution Plan is covered under Section 30(4) of the Code

which involve the element of commercial wisdom of the CoC but in case of

withdrawal of CIRP under Section 12A of the Code, what is required to be

examined by the CoC is what would be beneficial in the larger interest of the

Creditors of the Corporate Debtor.

23. The Appellant assailed the Adjudicating Authority who dismissed IA No.

4704 of 2022 merely on the ground of commercial wisdom of the CoC without

looking into spirit of the Code, which is meant for revival of the Corporate

Debtor and not for recovery mechanism for the bankers.

24. The Appellant highlighted that SBI and ICICI Bank together holding

approximately 80% of the voting shares were in support of withdrawal of

application in Form FA, whereas the HDFC holding 19.94% was not supporting

and such solitary act of HDFC can only be treated as arbitrary, capricious and

unreasonable act on part of HDFC.

-12-

Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

25. Concluding his arguments, the Appellant submitted that the Impugned

Order dated 15.03.2023 should be set aside and his Appeal should be allowed.

26. Per Contra, the Respondent No. 1 i.e., HDFC Bank denied all averments

made by the Appellant.

27. The Respondent No. 1 stated that in the 7th CoC meeting on 06.06.2023,

CoC discussed appeal filed by the Appellant and it was pointed out that the

Appellant was hampering the CIRP process and further suggested that said

appeal should be withdrawn by the Appellant. The Respondent No. 1 submitted

that the representative of SBI requested Resolution Professional to bring to the

notice of this Appellate Tribunal that SBI has confirmed the withdrawal of OTS

agreement agreed between SBI and the Appellant herein.

28. The Respondent No. 1 stated that in view of said withdrawal of alleged

settlement with SBI, the Appeal has become infructuous.

29. The Respondent No. 1 refuted the averment of the Appellant that the

stand taken by the HDFC is arbitrary and in counter argument the Respondent

No. 1 stated that total amount of claim as per Form C was Rs. 29,04,57,295/- on

the debt of commencement of CIRP and the amount offered by the Appellant

was merely Rs. 4.97 Crores which is not even 18% of total outstanding payable

by the Corporate Debtor and in view of such huge haircut of more than 82%, the -13- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

Respondent No. 1 did not find any commercial wisdom to accept the application

of the Appellant to withdraw the CIRP proceedings.

30. The Respondent No. 1 strongly pleaded that as lender and as an

independent Financial Creditor, despite being part of consortium of lenders,

HDFC never agreed to the proposal made by the Respondent No. 1. The

Respondent No. 1 further submitted that no other Financial Creditor could have

offered binding offer on behalf of the Respondent No. 1. Thus, the alleged

settlement proposal mentioned by the Appellant is neither binding on the

Respondent No. 1 nor on the Members of the CoC.

31. The Respondent No. 1 also refuted that the averment of the Appellant

regarding alleged agreement and settlement with the Financial Creditor w.r.t.

properties being incorrect as it was regarding charge of the property owned by

the promoters and not owned by the Corporate Debtor.

32. The Respondent No. 1 cited judgment of the Hon'ble Supreme Court of

India in the matter of Kalpraj Dharamshi v. Kotak Investment Advisors Ltd.,

[(2021) 10 SCC 4] and also cited judgment of this Appellate Tribunal in the

matter of 'Shaji Purushothaman v. Union Bank of India, [(2019 SCC OnLine

NCLAT 1151)], in support of his case.

33. In addition, the Respondent No. 1 cited judgment of Hon'ble Supreme

Court of India Vallal RCK v. Siva Industries and Holdings Ltd., [(2022 SCC -14- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

OnLine SC 717)], wherein it was held that NCLT/ NCLAT cannot adjudicate

the differences arising of CoC.

34. The Respondent No. 1 referred to Section 21(6) of the Code and stated

that as part of consortium arrangement, each Financial Creditor is required to

authorise its agent to act on its own behalf to the extent of its voting share.

Therefore, no other Financial Creditor could bind other Financial as claimed by

the Appellant.

35. The Respondent No. 1 also refuted averment of Appellant regarding

interplay between Section 30(4) and Section 12A of the Code and emphasised

that the commercial wisdom of the CoC is with regard to all matters and not

limited to one or other aspect.

36. The Respondent No. 1 stated that that in light of the aforementioned

provision, the settlement proposed by the Appellant herein has failed to procure

a ninety per cent vote in accordance with Section 12A of the Code. The

Respondent No. 1 also stated that the Form FA submitted by the Appellant

before CoC was based on the Settlement Agreement dated 18.05.2022 executed

between Norvic Shipping North America INC, the Operational Creditor and

Sharda Ma Enterprises the (Corporate Debtor) and Respondent No. l and other

Financial Creditors are not parties to the said Settlement Agreement. -15-

Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

37. Concluding his arguments, the Respondent No. 1 requested to dismiss the

appeal with costs.

38. The Respondent No. 2 i.e., SBI also opposed the appeal treating it as

misconceived and an attempt to mislead this Appellate Tribunal by making false

statement.

39. The Respondent No. 2 submitted that the Appellant at various places in

the instant appeal, has falsely mentioned that the Respondent No. 2 who is the

Lead Bank of the Lenders consortium and a member of the CoC of the

Corporate Debtor has issued an acceptance letter dated 06.06.2022. The

Respondent No. 2 clarified that Consortium Lenders led by SBI approved the

Compromise settlement offered by the Ex-Promoters of the Corporate Debtor.

The Respondent No. 2 submitted that the said letter was issued by SBI only on

its own behalf and no authorisation was granted by ICICI Bank or HDFC Bank

to SBI to issue the said compromise acceptance letter on behalf of ICICI Bank

or HDFC Bank.

40. The Respondent No. 2 reiterated that at no stage the Respondent No. 2

gave any assurance to the Corporate Debtor on behalf of other bankers as in any

case he was not authorised to do so.

41. The Respondent No. 2 also refuted the wrong statement by the Appellant

that is the lead bank is always the final authority in case of difference of opinion -16- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

amongst the members of consortium and submitted that there is no such

statutory provisions the Respondent No. 2 cited the judgments "Swiss Ribbons

Pvt. Ltd. Vs. Union of India & Ors. AIR (2019) 4 SCC 17", the relevant portion

of the aforementioned judgment is reproduced herein below:

"53. The main thrust against the provision of Section 12A is the fact that ninety per cent of the committee of creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the committee of creditors do not have the last word on the subject. If the committee of creditors arbitrarily rejects a just settlement and/or withdrawal claim, the NCLT, and thereafter, the NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12A also passes constitutional muster."

(Emphasis Supplied) -17- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

42. The Respondent No. 2 submitted that final OTS letter dated 06.06.2022

stood expired as the Appellant vide its OTS letter dated 22.02.2022 made the

statement that entire compromise settlement account in respect of the loan

account will be paid latest by 31.03.2023 but the Appellant filed to comply with

the terms of OTS proposal dated 22.02.2022 and therefore, the alleged

settlement by SBI with the Appellant is no more valid and legal.

43. Concluding his arguments, the Respondent No. 2 supported fully the

Impugned Order passed by the Adjudicating Authority and opposed any relief

to be granted to the Appellant.

44. The Respondent No. 4 i.e, the Resolution Professional has also briefed

this Appellate Tribunal by filling the Status Report.

45. In Company Appeal (AT) (Insolvency) No. 594 of 2022 the main issue is

whether the Adjudicating Authority committed any error in accepting the CIRP

application of the Operational Creditor. We have noted during our discussion in

the earlier paragraphs and found that there was clear debt of more than Rs. 1

Crore payable to the Operational Creditor which remain unpaid and the the

Operational Creditor filed the application under Section 9 of the Code. The

Adjudicating Authority accepted the same and initiated the CIRP.

46. In this connection, we have gone through the reply of the Respondent

No. 3 i.e., the Operational Creditor filed before us stating that "an incorrect -18- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

version of settlement agreement dated 18.05.2022 has been placed on record of

this Hon'ble Tribunal by the Appellant". The Respondent No. 3 also stated that

USD 25,000/- was indeed paid by the Corporate Debtor on 10.05.2022 through

Zenibyte Creative Pte. Limited who paid on behalf of the Corporate Debtor, but

the second instalment of USD 25,000/- was made with the delay of 9 days

which would entitle the Respondent No. 3 to the entire amount along with the

interest immediately and no further instalments have been paid by the Corporate

Debtor to the Operational Creditor.

47. We note that the issue regarding withdrawing application by the

Appellant was discussed in 7th CoC Meeting held on 06.06.2023 and the

relevant extract of the minutes reads as under :-

"All the CoC members enquired from Suspended Director, Mr Narendra Jindal with regard to reason for filing an appeal against the Hon'ble NCLT dismissal order and requested him to withdraw the appeal application before the Hon'ble NCLAT at the earliest. Since his appeal is hampering the CIRP process and further stay on publication of "Farm G" is unnecessary delaying the CIRP process, wherein time is the essence.

Suspended Director, Mr Narendra Jindal assured the CoC members that he will withdraw his Appeal application before the NDOH i.e. 24th July, 2023.

-19- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

Further, Sh. Amit Goyal Ji, (DGM) State Bank of India requested the RP to bring to the notice of Hon'ble NCLAT in the NDOH with regard to withdrawal of existing OTS agreement earlier entered with the SBI Bank and as on date there is No OTS agreement in existence with the SBI Bank either.

RP assured him that same will be communicated to the Hon'ble NCLAT in the next NDOH."

(Emphasis Supplied)

48. We have also noted that the Appellant himself accepted the fact regarding

debt and tried to defend his case by stating that he owned two properties which

could have been used to settle the outstanding dues of the Operational Creditor.

In this connection, we find that the appellant failed time and again, in

making the payments to the Operational Creditor and due to his failure to meet

the prior commitments, the first settlement was entered with the Operational

Creditor dated 25.01.2019 whereby, he agreed to make the payment of USD

1,57,234.17 in 13 instalment. However, the Corporate Debtor could make the

payment of only two instalments. Thus, the OTS entered between the Corporate

Debtor and the Operational Creditor failed.

49. We observe that subsequent to admission of CIRP on 08.04.2022, the

Suspended Management of the Corporate Debtor through the Appellant entered

into second settlement with the Operational Creditor dated 18.05.2022 and -20- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

according to which the Corporate Debtor agreed to make the payment @ 75%

of the outstanding dues in 12 instalments. However, he could make payment of

first instalment through someone else and second instalment was paid 9 days

late and subsequently no instalment was paid. We note that in the meantime,

the RP has invited the claims and has received the claims from three banks,

namely, SBI, ICICI and HDFC and claims from two Operational Creditors.

50. We note that this Appellate Tribunal in the appeal filed by the Appellant

in the meantime, gave interim relief to the Appellant stating that as Resolution

Professional should not proceed further.

51. We would like to refer to cited judgment on commercial wisdom aspect,

namely, Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., [(2021) 10

SCC 4]. The relevant extract has been reproduced hereinafter:

"174. It is also pointed out, that in pursuance of the order dated 5-8-2020 [Kotak Investment Advisors Ltd. v. Krishna Chamadia, 2020 SCC OnLine NCLAT 590] passed by Nclat, CoC has approved the resolution plan of KJAL on 13-8- 2020. However, since we have already held, that the decision of Nclat dated 5-8-2020 [Kotak Investment Advisors Ltd. v. Krishna Chamadia, 2020 SCC OnLine NCLAT 590] does not stand the scrutiny of law, it must follow, that the subsequent approval of the resolution plan of KJAL by CoC becomes non est in law. For, it was only to abide by the directions of Nclat. We are of the view that -21- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

nothing would turn on it. The decision of CoC dated 13-2- 2019/14-2-2019 is a decision, which has been taken in exercise of its "commercial wisdom". As such, we hold, that the decision taken by CoC dated 13-2- 2019/14-2-2019, which is taken in accordance with its "commercial wisdom"

and which is duly approved by NCLT, will prevail. Further, Nclat was not justified in interfering with the stated decision taken by CoC."

(Emphasis Supplied)

52. We note the decision of the Hon'ble Supreme Court of India on 12A of

the Code rendered in Shaji Purushothaman (Supra) on commercial wisdom of

the CoC. The relevant extract of the said judgment has been reproduced

hereinafter:

"9. If an application under Section 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.

(Emphasis Supplied) -22- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

53. We also refer to ratio of Vallal RCK (Supra) which restricted scope of

about judicial interference on 12A matter under the Code. The relevant extract

of the said judgment has been reproduced hereinafter:

"23. As already stated hereinabove, the provisions under Section 12-A IBC have been made more stringent as compared to Section 30(4) IBC17. Whereas under Section 30(4) IBC, the voting share of CoC for approving the resolution plan is 66%, the requirement under Section 12-A IBC for withdrawal of CIRP is 90%.

24. When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be capricious, arbitrary, irrational and dehors the provisions of the statute or the Rules."

(Emphasis Supplied) Here we have noted that HDFC has taken decision as the likely recovery

from the Corporate Debtor was found to be less than 18% which fall

in the commercial wisdom domain and there is no arbitrary or irrational

decision on the part of the Financial Creditor/ CoC. -23-

Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

54. We note that the Adjudicating Authority in their order dated 08.04.2022

discussed all facts and noted that the Corporate Debtor has failed to comply the

terms of settlement with the Operational Creditor dated 25.01.2019 and did not

make the payment as required. The Adjudicating Authority came to conclusion

that there has been debt and default and therefore, ordered for initiation of CIRP

against the Corporate Debtor by appointing Mr. Vaneet Bhatia as the IRP.

55. In view of above discussions, we do not find any error in the Impugned

Order dated 08.04.2022 passed by the Adjudicating Authority and therefore,

Company Appeal (AT) (Insolvency) No. 594 of 2022 stand dismissed.

56. As regard, the Second Appeal challenging the dismissal of I.A. No. 4074

of 2022 filed by the Appellant as on application for withdrawal of CIRP, we

note that the HDFC, having the voting share of 19.94% was not in favour of the

same and gave its clear vote against the same.

57. We also note from the averments of the HDFC that against total claim of

Rs. 29.05 Crores, the Appellant offered only Rs. 4.97 Crores which is less than

18 % of the outstanding dues payable. Therefore, the HDFC as Financial

Creditor did not support the 12A application filed by the Appellant, considering

commercial wisdom and we do not find any error here.

58. We have also noted from the averments made by the SBI, where the SBI

categorically stated that it never gave the assurance on behalf of the other -24- Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

bankers and the OTS proposal of the SBI dated 06.06.2022 also stood expired in

view of non-compliance of terms and condition committed by the Appellant

vide its OTS proposal dated 22.02.2022. Thus, we hold that no banker is

willing to support the application of the Appellant for withdrawal from CIRP.

59. We find that in view of provisions laid down under Section 12A of the

Code, it is crystal clear that, once CoC is constituted, there is a mandatory

requirement of 90% of the voting shares of the CoC in favour of the resolution

for withdrawal of the CIRP of the Corporate Debtor and if the voting of the

CoC is below 90% then the application of withdrawal cannot be allowed and

hence it need to be dismissed. In the present case the Respondent No. 1 with

19.94% voting did not support 12A Application filed by the Corporate Debtor,

hence the Adjudicating Authority rightly gave its verdict.

60. We note that both the SBI as well as HDFC have opposed the present

appeals and requested this Appellate Tribunal to dismiss the same in order to

find resolution of the Corporate Debtor and in order to recover their money.

61. In this connection, we note Section 12A, which is reproduced as under :- -25-

Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

[12A. Withdrawal of application admitted under section 7, 9 or 10. -

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 specified.]"

(Emphasis Supplied)

62. The Section 12A of the Code is very clear that any withdrawal of CIRP

by the Appellant need to have minimum voting support of 90% of the CoC and

in the present case never met this threshold. Thus, the Adjudicating Authority

could not direct for settlement to the HDFC in contravention of the Code.

63. We also take into consideration the various judgments where it has been

held by the Hon'ble Supreme Court of India that commercial wisdom is non

judiciable and there is extremely limited scope for judicial intervention.

64. In view of above discussion, we do not find any merit in the appeal

bearing Company Appeal (AT) (Insolvency) No. 506 of 2023 and same stand

dismissed.

-26-

Comp. App. (AT) (Ins.) No. 594 of 2022 & Comp. App. (AT) (Ins.) No. 506 of 2023

65. In fine, both appeals fail, devoid of any merit and stand dismissed. No

Cost. Interlocutory Application, if any, stand Closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

Sim