NCLAT set aside the Adjudicating Authority's approval of a withdrawal proposal under Section 12A and the CIRP for the Corporate Debtor was revived.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra 9Technical Member) was hearing miscellaneous appeals and held that the Adjudicating Authority's approval of a withdrawal proposal under Section 12A, despite failing to meet the 90% threshold, was erroneous. The Appellate Tribunal emphasized the necessity for strict adherence to statutory provisions, particularly Section 12A, which mandates the requisite voting share. The flawed interpretation of Section 25A, concerning the rights of authorized representatives of financial creditors, was pivotal in setting aside the decision. Consequently, the CIRP for the Corporate Debtor was revived, with specific directives for the Estella Project, and responsibilities were outlined for the completion of the NCR Green Project.
The National Company Law Appellate Tribunal (NCLAT) recently deliberated on a significant case stemming from the Corporate Insolvency Resolution Process (CIRP) of 'Sidhartha Buildhome Pvt. Ltd.' This process commenced on March 4, 2021, initiated by Oriental Bank of Commerce (now merged with Punjab National Bank). Despite several resolution plans being proposed, including one under Section 12A by Mr. Sidharth Chauhan, and another from Alpha Corp Development Pvt. Ltd., none received approval.
The central issue revolved around the approval of a withdrawal proposal under Section 12A, which necessitated 90% approval from the Committee of Creditors (CoC). However, the Adjudicating Authority allowed the withdrawal proposal, despite failing to meet the mandated threshold, based on a contentious interpretation of Section 25A. This decision faced challenges through appeals filed by various parties involved.
During arguments, the Resolution Professional and certain homebuyers contested the decision, highlighting procedural irregularities and the failure to meet the requisite voting threshold. Conversely, Respondent No.4, the promoter/director, and some homebuyers supported the decision, emphasizing progress in project completion and the benefits of the withdrawal proposal.
The NCLAT's examination of relevant provisions of the Insolvency and Bankruptcy Code, particularly Section 12A and Section 25A, played a pivotal role in the conclusion. Despite acknowledging the progress made in project completion, the NCLAT upheld the need for consensus among financial creditors and the CoC's authority in approving withdrawal proposals. The flawed interpretation of Section 25A by the Adjudicating Authority led to the decision being set aside, and the CIRP for the Corporate Debtor was revived, focusing specifically on the Estella Project. The Resolution Professional was instructed to issue a fresh Form G for the Estella Project and complete the CIRP within 90 days, constituting a CoC for the project. Additionally, the responsibility for completing and handing over units of the NCR Green Project was placed solely on the promoter/director, with any failure potentially leading to a revival of the CIRP for the NCR Green Project. Finally, the decision set aside related orders and dismissed corresponding applications, with each party bearing their own costs.
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