No Settlement can be directed by way of Order under IBC: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has held that any kind of settlement cannot be directed by way of Order under Insolvency and Bankruptcy Code, 2016 (IBC).

A bunch of company appeals filed challenging the Impugned Order passed by the ‘Adjudicating Authority’ which has allowed the Application filed by the ‘Resolution Professional’ under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (the Code), seeking approval of the ‘Resolution Plan’ submitted by the Consortium of Mr. S.M. Kamal Pasha and Mr. Syed Fahad, (SRA). While allowing the Application for approval of the Plan, the ‘Adjudicating Authority’ has dismissed the objections filed by the Appellant/ ‘Promotor of the Corporate Debtor’ to the Application preferred by the Resolution Professional.

It was alleged that the ‘Adjudicating Authority’ had wrongly directed for project wise CIRP; that the CoC was improperly constituted and that the amount in the Resolution Plan entitled for Kotak Mahindra Bank Limited (the Kotak Bank) is much more than the actual Claim admitted by the Resolution Professional (the RP).

Further stated that the amount claimed was Rs. 36,27,00,000/- whereas the amount provided for under the Plan was Rs. 46,00,00,000/-, which is inclusive of ‘interest’, which ought not to have been charged after the quantum of the Claim amount HAD already crystalized. The other issue raised by the Appellant is that the Resolution Plan value is less than the Liquidation value and also that the ‘SRA Consortium’ is ineligible under Section 29A of the Code as they have been disqualified on account of non-filing of the Financial Statements of their Companies.

It was evident from the record that there is no 12A Application, filed by the Appellant herein, seeking any kind of settlement. The Promotor being an Micro, Small & Medium Enterprises (MSME) is given an opportunity under the Provisions of the Code to present a Plan. At the same time, the Code does not contemplate any kind of preference to be given to an MSME Promotor by the CoC while accepting a Resolution Plan.

A two member bench of Justice M. Venugopal, Member (Judicial) and Shreesha Merla, Member (Technical) held that “Any kind of settlement is between the Parties and no settlement can be directed by way of an Order under the Provisions of IBC, 2016, specifically keeping in view the ratio of the Hon’ble Apex Court in the matter of ‘E. S. Krishnamurthy & Ors. Vs. Bharath Hi-tech Builders Private Limited’ reported in [(2022) 3 Supreme Court Cases 161].”

The NCLAT dismissed the Company petition.

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