The Delhi bench of the National Company Law Tribunal ( NCLT ) held that the Adjudicating Authority cannot consider a Settlement Proposal, even of a higher value than the Resolution Plan, after the approval of the Resolution Plan by the Committee of Creditors (‘CoC’).
Mr. Sanjeev Mahajan, the Applicant promoter of Nimitaya Hotel & Resorts Pvt. Ltd, the Corporate Debtor submitted a One-Time Settlement ( OTS ) Policy to Indian Bank, the Respondent Bank.
The Resolution Professional (“RP”) bypassed the required process under the Insolvency and Bankruptcy Code, 2016 (“IBC”) and the IBBI (Corporate Insolvency Resolution Process) Regulations, 2016, and forwarded the Settlement Proposal to the bank, which rejected it without negotiation. During the 8th CoC Meeting with Indian Bank as the Sole CoC Secured Financial Creditor, the proposal was also rejected without explanation.
The Resolution Plan of Nehru Place Hotels and Real Estate Pvt. Ltd. (Successful Resolution Applicant) was approved with 100% voting in the 14th CoC Meeting. Later, the Applicant submitted a revised Settlement Proposal for Rs. 120 crores, which was higher than the approved Resolution Plan. The revised proposal was rejected by the Respondent bank without valid reasons.
The Applicant filed an application challenging the CoC’s rejection of the Settlement Proposal and sought to direct the Respondent Bank to deliberate and decide on the Settlement Proposal.
The Applicant contended that no genuine opportunity was given by the CoC to discuss and negotiate the submitted Settlement Proposal. Further, he claimed that the CoC failed to maximize stakeholder value by repeatedly ignoring the said proposal and approving a Resolution Plan that overlooks approximately Rs. 500 crores owed to other Operational Creditors.
The Coram comprising Shri Mahendra Khandelwal (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member) held that the Adjudicating Authority cannot consider a Settlement Proposal, even of a higher value than the Resolution Plan, after the approval of the Resolution Plan by the CoC.
It was observed that after the CoC approved the Resolution Plan, the Applicant submitted another Settlement Proposal on 21.03.2023, allegedly higher than the approved Resolution Plan. However, the said proposal was also rejected by the Respondent Bank. Though the CoC comprises only the Indian Bank, the decision by the Respondent Bank’s Competent Authority is effectively the commercial wisdom of the CoC.
The NCLT did not accept the Applicant’s claim that the Settlement Proposal exceeds the value of the approved Resolution Plan and observed that the acceptance or rejection of such a proposal is within the commercial wisdom of the CoC.
In conclusion, the Tribunal ruled that the issues raised by the Applicant cannot be accepted and no directions can be issued to the CoC for reconsideration of his Settlement Proposal.
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