NCLAT’s Order Rejecting AA’s Directions to Consider Settlement Proposal Without Allowing SRA to Respond Was to Be Upheld | SC

Case Details: Pratham Expofab (P.) Ltd. v. One City Infrastructure (P.) Ltd. - [2024] 163 taxmann.com 206 (SC)

Judiciary and Counsel Details

• Dr Dhananjaya Y. Chandrachud, .CJI., J.B. Pardiwala & Manoj Misra, JJ.
• Nakul Dewan, Sr. Adv. Mrinal Harsh Vardan, Kailash Ram, Yougender Singh, Ms Himanshi Mehta, Rajat Bawaniwal, Ms Amrita Jha, Advs. & Dawneesh Shaktivats, AOR for the Appellant.
• Sunil Fernandes , Sr. Adv. Nishant Verma, Ms Rajshree Chaudhari, Ms Diksha Dadu, Siddharth V., Advs. & Ms Anuja Pethia, AOR for the Respondent.

Facts of the Case

In the instant case, the CIRP was commenced against the corporate debtor, and the resolution plan submitted by the respondent (i.e. successful resolution applicant) was approved by the Committee of Creditors (CoC) with an 80.84% voting share.

An application seeking approval of the resolution plan filed by the RP was pending before the Adjudicating Authority (NCLT). Meanwhile, respondent No. 1 (i.e. the ex-director of the corporate debtor) filed an application under section 12A of the IBC for settlement, which was allowed by the NCLT directing the respondent to deposit Rs. 1 crore in the CIRP account of the corporate debtor. Further, the RP was directed to call a meeting of the CoC to examine the appellant’s proposal vis-a-vis the respondent’s proposal.

Thereafter, the Respondent filed an application against the NCLT’s order on the ground that the resolution plan of the appellant was approved by the CoC and, there was no occasion for directing consideration of a fresh settlement proposal submitted by ex-directors to be placed before CoC.

The NCLAT, vide the impugned order, held that the appellant submitted a proposal for settlement when the application was pending before the NCLT for approval of the resolution plan. The NCLT ought to have given the SRA an opportunity to submit a response to an application filed under section 12A, and, therefore, the impugned order passed by the NCLT was to be set aside. Then, an appeal was made to the Supreme Court.

Supreme Court Held

The Supreme Court held that, in view of the facts, there was no reason to interfere with the impugned order passed by the NCLAT. Therefore, an instant appeal was to be dismissed.

List of Cases Reviewed

• One city Infrastructure (P.) Ltd. v. Pratham Expofab (P.) Ltd. [2024] 160 taxmann.com 321 (NCLAT- New Delhi) (para 1) affirmed.