Stci Finance Limited vs Parinee Developers Private Limited

IN THE MATTER OF: VipulDilip Shah &Ors. ...Appellants Vs. Parinee Developers Pvt. Ltd. Through RP Subhash Chandra Modi &Anr. ...Respondents

Present:

For Appellant: Mr. Ashish Dholakia, Sr. Advocate with Mr. Anuj P. Agarwala, Mr. Aayush Agarwala, Advocates

For Respondent: Mr. B. Gopalakrishnan, Advocate for R1 Mr. ArunKathpalia, Sr. Advocate with Ms. Surekha Raman, Ms. Ferzana Behramkamdin, Ms. Aashi Sirohiwala, Mr.Vijay Valsan, Ms. Diksha Gupta, Advocates for R2

With Company Appeal (AT)(Ins.) No. 442 of 2021

IN THE MATTER OF: STCI Finance Ltd. ...Appellant Vs. Parinee Developers Pvt. Ltd. Through RP Subhash Chandra Modi ...Respondent

Present: For Appellant: Mr. Arun Kathpalia, Sr. Advocate with Ms. Surekha Raman, Ms. Ferzana Behramkamdin, Ms. Aashi Sirohiwala, Mr. Vijay Valsan, Ms. Diksha Gupta, Advocates

For Respondent: Mr. B. Gopalakrishnan, Advocates for R1,

ORDER

(Through Virtual Mode)

05.08.2021: We have heard Ld.Counsels for the parties at length.

2. The Appellant Vipul Dilip Shah & five Ors. being Promoters and

Shareholders of the Parinee Developers Pvt. Ltd. (Corporate Debtor) have 2

filed the Appeal CA (AT) (Ins) No. 451 of 2021 and STCI Finance Ltd.

(Financial Creditor) has filed the Appeal CA (AT) (Ins) No. 442 of 2021. In

both the Appeals the order dated 31.05.2021 has been assailed whereby ld.

Adjudicating Authority (National Company Law Tribunal, Mumbai Bench,

Mumbai, Court-II) dismissed the Application I.A. No. 264 of 2021 in CP (IB)

No. 4147/MC/C-II/2019 filed under Section 12A of the IBC.

3. Brief facts of these Appeals are that STCI Financial Ltd. (Financial

Creditor) filed Application under Section 7 of the IBC against the (Corporate

Debtor) Parinee Developers Pvt. Ltd. The Application was admitted by the

Adjudicating Authority vide order dated 09.06.2020 and Subhash Chandra

Modi was appointed as an Interim Resolution Professional (IRP). Thereafter,

the CoC was duly constituted and resolved to appoint IRP as RP during its

meeting dated 18.07.2020. on 08.12.2020 the Promoters sent a settlement

proposal which outlined plan for revival of operation of the Corporate Debtor

and full payment to the lenders including principal, interest and all the

expenses.

4. On 08.02.2021 during the CoC meeting the RP placed for FA before

the Members of CoC of the Corporate Debtor and a Resolution was placed

for their votes. The CoC has approved the Resolution (Settlement Deed) with

99.91 % votes in favour of the Resolution, thereby approving the settlement

and withdrawal of the Application admitted under Section 7 of the IBC.

Thereafter, the RP as per the direction of the CoC filed an Application I.A.

No. 264 of 2021 under Section 12A of the IBC. Ld. Adjudicating Authority

after hearing ld. Counsels for the parties, vide impugned order dated

31.05.2021 dismissed the Application filed under Section 12A of the IBC.

Comp. App. (AT)(Ins.) No. 451 of 2021 & 442 of 2021 3

5. Being aggrieved with this order the aforesaid Appeals have been filed.

6. Ld. Sr. Counsel Mr. Arun Kathpalia representing Financial Creditor in

CA (AT)(Ins) No. 442 of 2021 submits that ld. Adjudicating Authority has

entered into an issue which is totally irrelevant and beyond the scope under

Section 12A of the IBC. The parties have amicably settled their dispute and

terms of the settlement do not violate any provision of law.

7. Ld. Sr. Counsel for the Appellant further submits that Ld.

Adjudicating Authority ought not have disregarded the unanimous

Resolution of the CoC in exercise of their commercial wisdom and with a

view to ensure repayments of debts and continuity of business of the

Corporate Debtor which is over all main objective of the IBC.

8. Ld. Adjudicating Authority has erred in its finding with respect to the

CoC having taken law in its own hand in as much as more delayin

complying with procedural requirement under the IBC do not and cannot

pose any detriment to the commercial wisdom of the CoC to approve the

settlement deed. The finding of Ld. Adjudicating Authority has to absence of

a backup plan is contrary to the terms of the settlement deed itself which

expressly provides that in the case of any default in making outstanding

payments in terms of the settlement deed, the lenders would have the right

to move the Adjudicating Authority for revival of CIRP. However, dismissed

the Application under Section 12A of the IBC on the basis of irrelevant

considerations and hyper-technical observations.

9. Ld. Counsel for the Appellant in CA (AT) (Ins) No. 451 of 2021

supports the argument advanced by the Ld. Sr. Counsel for the Appellant

Comp. App. (AT)(Ins.) No. 451 of 2021 & 442 of 2021 4

representing Financial Creditors. Ld. Counsels for the Respondents

(Corporate Debtor) also in agreement with the aforesaid submissions.

10. After hearing Ld. Counsels for the parties, we have gone through the

impugned order.

11. Ld. Adjudicating Authority has dismissed the Application under

Section 12A of the IBC mainly on grounds that: (i) The IBC and CIRP

Regulation provide for various activities to be completed in a time bound

manner and model time lines is provided for the same. However, the CoC

has not complied the provisions of IBC as well as Regulation. (ii) In the

settlement there is condition that after receipt of the approval for withdrawal

of the Application under Section 7 of the IBC within 60 days, they would

receive their outstanding amount constituting monetary committee is not

inline of IBC and CIRP Regulation, (iii) No backup plan is provided in case of

failure to meet short fall within the time line agreed by the parties. (iv) The

Settlement proposal contends a lot of uncertainty and depends on future

events.

12. We have considered the ground for dismissal of the Application. We

are of the considered view that the legislation has provided a procedure for

withdrawal of Application under Section 7, 9 or 10 of the IBC. In this case,

the CoC has been constituted, therefore, the Application for withdrawal

approved by the 99.9% voting shares of the CoC and the Application has

been filed through the RP as provided under Regulation 30A of the IBBI

(Insolvency Resolution Process for Corporate Persons) Regulations, 2016

(Regulations).

Comp. App. (AT)(Ins.) No. 451 of 2021 & 442 of 2021 5

13. We have gone through the settlement deed.There is a provision in the

settlement deed that in case the settlement fails, the lenders may file

Application for revival of CIRP or may file Application for initiation of

contempt proceedings against the promoters of the Company. None of the

conditions of settlement is against the provisions of IBC and Regulation and

CoC has taken a commercial decision by voting shares of 99.9%. In such a

situation, it is not appropriate to dismiss the Application on the ground that

the CoC has not taken steps in time bound manner as provided in IBC and

Regulations.

14. We are of the view that the impugned order is not sustainable in law.

Hence, it is hereby set aside, the Application under Section 12A is allowed

and the Application filed by STCI Finance Ltd. under Section 7 of the IBC is

withdrawn. Resultantly, the Corporate Debtor Company is released from all

the rigour of law and is allowed to function independently through its board

of directors with immediate effect. The settlement deed has already taken on

record and reproduced verbatim in the impugned order, such terms of the

settlement shall be binding on all the parties of the settlement.

15. As per the Settlement, the payment of IRP/RP's fees and CIRP costs

shall be borne by the Corporate Debtor.

Thus, the Appeals are allowed as aforesaid, no order as to costs.

[Justice Jarat Kumar Jain] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

sc

Comp. App. (AT)(Ins.) No. 451 of 2021 & 442 of 2021