NCLT cannot direct CoC to Consider Suspended Management's Settlement Proposal without granting Opportunity to SRA: NCLAT [Read Order]

The New Delhi Bench of the National Company Law Appellate Tribunal ( NCLAT ) held that the National Company Law Tribunal ( NCLT ) cannot direct Committee of Creditors ( “CoC” ) consider suspended management’s settlement proposal without granting opportunity to Successful Resolution Applicant ( “SRA” ).

The Resolution Plan submitted by the Appellant was approved by the CoC with 80.84% voting share. An application was filed by the Resolution Professional ( “RP” ) for approval of Resolution Plan, which is pending before the Adjudicating Authority. In a meeting, the proposal of Ex. Director for withdrawal of CIRP was considered and rejected by the CoC with 80.22% vote share.

The Adjudicating Authority passed an order directing the Applicant to deposit Rs.1 crore in CIRP Account of Corporate Debtor and the RP was directed to call a meeting of the CoC to examine the proposal made by Applicant vis-à-vis proposal made by SRA. Aggrieved by the said order, the Appeal has been filed.

The Counsel for the Appellant, challenging the order submitted that after approval of Resolution Plan of the Appellant by the CoC, there was no occasion for directing consideration of fresh settlement proposal submitted by Ex. Directors to be placed before the CoC, where the earlier Applications filed by the Ex. Directors under Section 12A were already considered and rejected twice by the CoC. It was submitted that after approval of Resolution Plan, there is no jurisdiction in the Adjudicating Authority to direct for consideration of any Application under Section 12A.

The Senior Counsel appearing for Respondent Nos.1 and 2 opposing the submissions of Senior Counsel for the Appellant submitted that Adjudicating Authority is not precluded from directing for consideration of 12A proposal submitted by the Ex. Director, since the Application for withdrawal of proceeding can be allowed at any stage of the CIRP. The mere fact that the Resolution Plan of the Appellant has been approved by the CoC, does not preclude the consideration of 12A proposal submitted by the Appellant. It was submitted that Adjudicating Authority has directed for consideration of the Application with certain conditions including deposit of Rs.1 crore by the Applicant.

A Three Member Bench of the Tribunal comprising Justice Ashok Bhushan, Chairperson, Barun Mitra, Member ( Technical ) and Arun Baroka, Member ( Technical ) observed that “We are of the view that Adjudicating Authority, ought to have allowed opportunity to SRA to respond to the Application filed by Respondent Nos.1 and 2, whose Resolution Plan has been approved by the CoC and which is pending consideration before the Adjudicating Authority. Without giving an opportunity to the Appellant, direction to the CoC to consider the Plan, cannot be sustained.”

To Read the full text of the Order CLICK HERE

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