The National Company Law Appellate Tribunal (NCLAT), New Delhi bench comprising Judicial Member Justice M. Venugopal, Technical Members V. P. Singh and Dr. Ashok Kumar Mishra, held that there was no scope for negotiations between the parties once the CoC had approved the Resolution Plan.
The facts of the present appeal were also similar to the above common set of appeals. The Union Bank of India filed this appeal on behalf of the CoC of DHFL against the Order of the Adjudicating Authority in I.A. No. 2431 of 2020 under the common Company Petition No. 4258 of 2019, whereby Adjudicating Authority has directed the Administrator to place the Settlement Proposal dated December 29, 2020, sent by Respondent No. 1, i.e. Kapil Wadhwan before the CoC for its consideration. During the pendency of the present Appeal, Adjudicating Authority had passed an Order approving the Resolution Plan.
After passing of the first impugned Order, dated May 19 2021, whereby the Adjudicating Authority disposed of the IA No.2431 of 2020 filed under Section 60(5)(c) of the I&B Code, 2016 read with rule 11, NCLT Rules, directed the Administrator to place 'the second settlement proposal of Kapil Wadhwan' before the CoC for its consideration, decision and voting and inform the outcome of the same within ten days was orally requested to stay the said Order, rejected by the Adjudicating Authority.
The Appellate Authority had heard the argument of the learned counsel for the parties and perused the record. Based on the Appeals, the following issues had arisen before this Appellate Tribunal. Whether after Approval of the resolution plan by the COC and pending Approval, the Adjudicating Authority can direct the COC to convene a meeting and place the settlement proposal as offered for consideration, decision and voting on that within a certain period?
Admittedly in the instant case, the Adjudicating Authority vide the Impugned Order had directed the COC to consider the 'IInd Settlement Offer of Ist Respondent when the Resolution Plan after Approval from CoC was pending adjudication u/s 31 of the Code.
The CoC contended that the settlement offer was neither submitted in compliance with the RFRP nor with Section 12 A of the I&B Code and related Regulations. Such a direction of the Adjudicating Authority was passed despite that the CoC of the corporate debtor had by an overwhelming majority approved the Resolution Plan of DHFL. The Administrator had already filed the plan approval application, and that application was heard and reserved for orders by the learned Adjudicating Authority.
It is pertinent to mention that the Hon'ble Supreme Court in the case of Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Ltd, reported in REED 2021 SC 09523, has very recently dealt with the same issue which has arisen in this appeal.
The ratio of the Judgement in case of Pratap Technocrats (P) Ltd. v. Monitoring Committee of Reliance Infratel Ltd. and Another, REED 2021 SC 08515, is fully applicable in this case, “…once the requirements of IBC have been fulfilled, the Adjudicating Authority and the appellate Authority are duty-bound to abide by the discipline of the statutory provisions. It needs no emphasis that neither the adjudicating Authority nor the appellate Authority has an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework."
Based on the law laid down by the Hon'ble Supreme Court in the cases mentioned above, it was clear that: (i) Once the Resolution Plan was approved by a 100 per cent voting share of the CoC. The jurisdiction of the Adjudicating Authority was confined by the provisions of Section 31(1) to determining whether the requirements of Section 30(2) have been fulfilled in the plan as approved by the CoC. (ii) Once the requirements of the IBC had been fulfilled, the Adjudicating Authority and the Appellate Authority were duty-bound to abide by the discipline of the statutory provisions. Neither the Adjudicating Authority nor the Appellate Authority had an unchartered jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework. (iii) The jurisdiction of the Adjudicating Authority was confined by the provisions of Section 31(1) to determining whether the requirements of Section 30(2) had been fulfilled in the plan as approved by the CoC. (iv) There was no scope for negotiations between the parties once the CoC had approved the Resolution Plan. Thus, contractual principles and common law remedies, which did not find a tether in the wording or the intent of the IBC, could not be imported in the intervening period between the acceptance of the CoC and the Approval by the Adjudicating Authority.
In the instant case, the Appellate Authority found that after Approval of the Resolution Plan by the Committee of Creditors, the application was pending before the Adjudicating Authority under Section 31 of the Insolvency and Bankruptcy Code, 2016, for Approval of the resolution plan the Adjudicating Authority accordingly while disposing of the Interim Application, IA no. 2431 of 2020, directed the CoC to consider the 'IInd Settlement Proposal' of the First Respondent, i.e. Applicant/ Promoter, within ten days and take an appropriate decision.
Considering the ratio of the Judgement of the Hon'ble Supreme Court in the case of Ebix Singapore, REED 2021 SC 09523, the Appellate Authority observed that there was no scope for negotiations between the parties once the CoC had approved the Resolution Plan. Thus, contractual principles and common law remedies, which did not find a rope in the wording or the intent of the IBC, could not be imported in the intervening period between the acceptance of the CoC Approved Resolution Plan and the Approval by the Adjudicating Authority. The said exercise was beyond the jurisdiction of the Adjudicating Authority hence unsustainable and liable to be set aside.
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