NCLAT (09.01.2024) in Sandeep Gupta Vs. JM Financial Asset Reconstruction Company Ltd. & Anr. [Company Appeal (AT) (Ins.) No. 1192 & 1193 of 2022] held that;
If the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, NCLT, and thereafter, NCLAT can always set aside such decision under Section 60 of the Code.
Proposal clearly covered 100% dues of all creditors including Financial Creditors. The aforesaid proposal was in addition to payment of entire balance CIRP cost of Rs.2,80,43,124/-.
Section 12A provides for withdrawal of the application admitted under Section 7 or 9, on an application made by the applicant with the approval of 90% voting share of the Committee of Creditors. Application has to be filed as per procedure provided under Regulation 30A.
The objective of Section 12A and Section 29A are totally different. Section 29A is a provision which debars certain categories of applicants from submitting Resolution Plan whereas Section 12A is entirely different provision where CIRP can be withdrawn after admission.
The question of ineligibility of Promoters to submit the proposal does not arise under Section 12A.
All creditors including the Financial Creditors under the scheme of IBC are only entitled to receive 100% of their admitted debt. The proposal which has now been submitted after receipt of email from Resolution Professional giving details of admitted claim and CIRP dues clearly indicate that entire dues are offered to be deposited by the Appellant.
As Noted above, on 10.10.2023, time was given to deposit, however, within threedays voting was held in which proposal was dissented, which clearly shows anxiety of the CoC to somehow reject the proposal.
“We find substance in the submission of learned counsel for the Appellant that intent of UVARCL is to somehow take over prime prized asset of the Corporate Debtor i.e. Hyatt Regency, Mumbai and handover the assets to some Prospective Resolution Applicant which is known to UVARCL only.
we are satisfied that the decision of the CoC is arbitrary in not approving 12A Proposal which Proposal offered to pay entire debt of Financial Creditors as well as all other creditors.
We, thus, hold the Proposal submitted by the Appellant on 11.08.2023 as revised on 04.10.2023 acceptable to liquidate the debt of the Corporate Debtor and close CIRP and to make payment of debts of all Creditors.
Excerpts of the order;
These four appeals have been filed by the Suspended Director of the Corporate Debtor – Asian Hotels (West) Ltd. and shareholders of Corporate Debtor challenging the order passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi Bench IV admitting Section 7 application filed by the Financial Creditor as well as orders passed in two Interlocutory Applications. These appeals arising out of same proceedings were heard together and are being decided by this common judgment. Company Appeal (AT) (Ins.) No.1192-1193 of 2022 and Company Appeal (AT) (Ins.) No.1338- 1339 have been filed by the Suspended Directors of the Corporate Debtor – Asian Hotels (West) Ltd. challenging order dated 16.09.2022 passed by the Adjudicating Authority admitting Section 7 application filed by the Financial Creditor in C.P. (IB) No.571/PB/2021. Another order under challenge in these appeals is the order dated 16.09.2022 passed in I.A. No.3041 of 2022 filed by JM Financial Asset Reconstruction Company Ltd. by which order the Adjudicating Authority permitted the JM Financial Asset Reconstruction Company Ltd. to be substituted in place of Yes Bank, the original Financial Creditor. Company Appeal (AT) (Ins.) No.1341 of 2022 has been filed by the Appellants who are Shareholder of the Corporate Debtor of about 88% challenging the order dated 16.09.2022 by which Section 7 application filed by the Financial Creditor has been admitted. Company Appeal (AT) (Ins.) No. 1271 of 2022 has been filed by Asian Hotels (East) Ltd. and shareholders of the Corporate Debtor challenging order dated 05.08.2022 by which I.A. No. 5699/PB/2021 filed by the Appellant for impleadment in Section 7 application has been rejected.
# 2. Brief background facts giving rise to these appeals need to be first noticed before noticing certain facts and events which took place during pendency of these appeals:
i. The Corporate Debtor – Asian Hotel (West) Ltd. is a company registered on 08.01.2007 with registered office situated at 6th Floor, Aria Towers, JW Marriot, Aerocity Asset Area 4 Hospitality District Near IGI Airport, New Delhi. The Corporate Debtor is running hotel Hyatt Regency, Mumbai.
ii. The Corporate Debtor availed financial assistance from Yes Bank on 21.04.2016, Term Loan amounting to Rs.180 Crores and further Term Loans in different Tranches totalling to Rs.200 Crores. Overdraft facility of Rs.27 Crores was also availed by the Corporate Debtor. In the year 2020, a FITL Term Loan and a FITL-LRD facility was availed on 01.09.2020.
iii. The Corporate Debtor served its all financial obligations to Yes Bank till 31.03.2021. Due to pandemic COVID-19 lockdown was enforced w.e.f. 25.03.2020 and during the period of COVID hotel business was worse affected.
iv. During the COVID, Government of India in order to support the business enterprises severely affected by the COVID-19 introduced Emergency Credit Lines Guarantee Scheme (ECLGS). Under the ECLGS, eligible borrowers could avail of additional credit lines in form of additional working capital/term loan facility on the basis of 100% guarantee coverage sanctioned under the ECLGS.
v. The Corporate Debtor applied for additional facility of Rs.40 Crore under ECLGS 2.0 on 24.11.2020. The Yes Bank issued sanction letter on 03.05.2021, which was accepted by the Corporate Debtor on 04.05.2021, however, the Bank did not release the amount sanctioned under ECLGS on the ground that certain conditions which are to be fulfilled by the Corporate Debtor have not been fulfilled.
vi. The default was committed by the Corporate Debtor in paying the instalments of April, 2021. There was default committed by the Corporate Debtor for loan and with regard to other facilities during April, 2021 to August, 2021.
vii. On 30.07.2021, Bank issue a Loan Recall Notice recalling the entire loan amount along with interest. On the same date, notice under Section 13(2) was issued by Yes Bank.
viii. On 19.08.2021, the Yes Bank filed Section 7 application before the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench IV claiming a default of an amount of Rs.264,07,35,129/- as on 13.08.2021.
ix. The Yes Bank also took possession of assets on 21.08.2021 under SARFAESI Act, 2002.
x. The Corporate Debtor filed a counter affidavit in Section 7 application filed in November, 2021. The Corporate Debtor in its counter affidavit opposed the Section 7 application. It was pleaded that the Corporate Debtor having fulfilled its obligations under the Credit Facility upto 31.03.2021, however, due to severe blow on the operations of the Corporate Debtor’s sole hotel at Mumbai i.e. Hyatt Regency instalments could not be paid by April, 2021. It was pleaded that the Applicant has unlawfully refused to release the amount of Rs.38.5 Crore against the ECLGS and had the amount be released, the Company wold not have been a defaulter since on the date of Loan Recall Notice i.e. 30.07.2021 the total default was less than Rs.12 Crore. It was pleaded that the application has been filed as sheer abuse off process of law. The Government of India had taken several protective measures to held the business to survive from COVID-19 effect but the Yes Bank unmindful of disastrous consequences on Hotel business has proceeded under SARFAESI as well as under Section 7. In the Counter Affidavit it is stated that the company is fully alive to its obligation and will perform the same in right earnest, provided the Bank release funds against the EGLGS and give suitable time to the Company to resume its operation in post pandemic period. It is submitted that all the obligations were met till 31.03.2021, which demonstrate Company’s bonafide and willingness to abide by the terms of facilities granted by the Bank.
xi. On 09.12.2021, an I.A. No. 5699/PB/2021 was filed by Asian Hotels (East) Ltd. praying for impleadment in the application filed by the Yes Bank under Section 7.
xii. On 01.06.2022, the Yes Bank issued notice for sale of financial assistance/loan of the Corporate Debtor.
xiii. On 21.06.2022, the Yes Bank assigned the debt of the Corporate Debtor to JM Financial Asset Reconstruction Company Ltd. I.A. No. 3041 of 2022 was filed by JM Financial Asset Reconstruction Company Ltd. for substitution in place of original Financial Creditor – Yes Bank. I.A. was opposed by the Corporate Debtor.
xiv. The Adjudicating Authority vide order dated 05.08.2022 rejected I.A. No. 5699/PB/2021 filed by Asian Hotels (East) Ltd. for impleadment. Company Appeal (AT) (Ins.) No. 1271 of 2022 has been filed by Asian Hotels (East) Ltd. challenging order dated 05.08.2022.
xv. The Adjudicating Authority heard the parties on Section 7 application as well as on I.A. No.3041 of 2022, I.A. No. 4021 of 2022 and by impugned order dated 16.09.2022 admitted Section 7 application filed by the Financial Creditor. I.A. No.3041 of 2022 filed by JM Financial Asset Reconstruction Company Ltd. to be substituted in place of Yes Bank was also allowed. Aggrieved by orders dated 16.09.2022, appeals have been filed, as noted above.
xvi. Company Appeal (AT) (Ins.) No. 1192-1193 of 2022 was heard by this Tribunal on 29.09.2022 on which date notices were issued and this tribunal passed following interim order:
“In the meantime, CoC will not take any final decision regarding resolution.”
xvii. During pendency of the appeal, by assignment dated 30.11.2022, the JM Financial Asset Reconstruction Company Ltd. has assigned its debt to UV Asset Reconstruction Company Ltd (UVARCL). After assignment of debt in favour of UV Asset Reconstruction Company Ltd. IAs have been filed by UV Asset Reconstruction Company Ltd. in the appeals for substituting it in place of JM Financial Asset Reconstruction Company Ltd. which application were taken up by this Tribunal and parties were granted time to file reply vide order dated 11.01.2023. The appeals were listed before this Tribunal and were heard from time to time. I.A. No. 3897-3898 of 2023 in Company Appeal (AT) (Ins.) No. 1192-1193 of 2022 was filed by Appellant – Sandeep Gupta, Suspended Director stating that proposal under Section 12A has been submitted to the CoC on 11.08.2023 by the Promoters and Suspended Directors of the Corporate Debtor and Shareholders aggregating to 88% shareholding in the Corporate Debtor along with photocopy of the Bank Guarantee of INR 40 Crore, which came for consideration before the CoC on 18.08.2023, where the Promoters were asked to produce original Bank Guarantee for verification, which Bank Guarantee submitted to the Resolution Professional on 21.08.2023.
In the application following prayers have been made:
“a. Pass an interim order, thereby restraining the CoC and the RP to take any other steps or actions in the Corporate Insolvency Resolution Process till such time as the CoC considers and decides the 12A proposal filed by Applicants, including the Appellant;
b. Pass an order directing the CoC to accept the 12A proposal filed by the applicants including the Appellant;
c. Set aside the impugned orders dated 16.09.2022 passed by the Ld. Adjudicating Authority in CP (IB)-571/2021;
d. Pass such other or further orders as this Hon’ble Tribunal may deem fit and proper in the facts and circumstances of the present matter and in the interest of justice.”
xviii. To the similar effect I.A. No.3903-3904 of 2023 has been filed by Mr. Sudhir Gupta, Suspended Director of the Corporate Debtor in Company Appeal (AT) (Ins.) No.1338-1339 of 2023. Another application being I.A. No.3905 of 2023 was filed in Company Appeal (AT) (Ins.) No. 1341 of 2022 by Asian Hotels (East) Ltd., shareholders of the Corporate Debtor paying for similar reliefs. The above applications filed by the Applicants came before this Tribunal on 29.08.2023, on which date this Tribunal directed learned counsel for the Respondent to obtain instruction.
xix. After 13th meeting of CoC dated 18.08.2023, original Bank Guarantee was submitted to the Resolution Professional, which was also verified by the Resolution Professional. 14th CoC meeting held on 14.09.2023, where CoC noted, which was recorded in the minutes, that the proposal does not provide for an upfront payment. CoC indicated that if entire money is deposited with the Resolution Professional upfront, the member of CoC shall consider the proposal positively.
xx. On 27.09.2023 when the appeal was taken, Appellants submitted before this Tribunal that Appellants are offering entire amount to be deposited along with interest. This Tribunal directed the said proposal to be placed before CoC to take a decision and in event CoC accepts the proposal, the Resolution Professional shall file an application, after deposit of the entire amount by the Appellant, under Section 12A for closure of the CIRP.
xxi. Subsequent to order dated 27.09.2023, 15th CoC meeting took place on 10.10.2023 where it was noted that proposal has been submitted by the Shareholders of the Corporate Debtor holding approx. 88% shareholding in the Corporate Debtor. It was noted that on 04.10.2023 the relevant shareholders submitted a Revised Settlement Proposal in which the proposers have envisaged to deposit the entire admitted outstanding dues, without any haircut within six weeks from approval of the Revised 12A Proposal by the CoC. It was recorded in the minutes that the Proposers will deposit the entire monies within six weeks and only thereafter CoC shall consider the Revised 12A Proposal of the relevant Shareholders. The CoC asked the Resolution professional to keep the proposal in abeyance and the CoC will consider it once the monies are deposited.
xxii. After aforesaid minutes of the CoC meeting dated 10.10.2023, the appeal was taken on 17.10.2023, where counsel for the Appellant submitted that they are ready to deposit the amount in Court within four weeks from the said date. This Tribunal passed order on 17.10.2023 directing the Appellant to deposit the entire outstanding amount less 40 Crores which is already deposited as Bank Guarantee within four weeks in the Court in a Fixed Deposit Receipt to the Registrar of NCLAT. Appellant was also directed to file an affidavit bringing on record the proof of payments.
xxiii. The 16th meeting of CoC was held on 13.10.2023, where the Revised 12A Proposal was put to vote and the CoC dissented the proposal. It is relevant to notice that CoC consists of only two Financial Creditors i.e. (i) UV Asset Reconstruction Co. Ltd. (UVARCL) (Voting Share 98.84%), and (ii) PTC India Financial Services Ltd. (PTC) (Voting Share 1.16%).
xxiv. In pursuance of order dated 17.10.2023, a Compliance Affidavit has been filed by the Appellant bringing on record materials to indicate that FDR, as permitted by the Court, has been deposited.
xxv. On 24.11.2023, the appeals and applications were heard and Compliance Affidavit filed by the Appellant was noted. Submission of one Prospective Resolution Applicant was also noticed that against the order dated 17.10.2023 passed by this Tribunal appeal has been filed before the Hon’ble Supreme Court where order has been passed on 21.11.2023. Time was allowed to Prospective Resolution Applicant to bring the said order on record. The Counsel for the Financial Creditor submitted that amount deposited is not by the Appellant but by a third party. This Tribunal directed learned counsel for the Financial Creditor to obtain instructions, whether the financial creditor is willing to accept the amount deposited to liquidate their debt or not and the said statement shall be made by an affidavit.
xxvi. In pursuance of order dated 24.11.2023, an affidavit has been filed on 04.12.2023 stating that the Financial Creditor is not agreeable to accept the amount deposited by the Corporate Debtor. It was stated that Revised 12A Proposal has been twice disapproved by the CoC and the CoC in its commercial wisdom has not approved the 12A Proposal. It is further stated in the Affidavit that funds deposited on 15.11.2023 is actually Saraf Group/Public Shareholders of Asian Hotels (West) Ltd. The deposit made by Novak Hotels Pvt. Ltd is deposit made by a third party. In the Affidavit certain other objections were raised regarding 12A Proposal submitted by the Appellant. The counter affidavit to Affidavit dated 04.12.2023 filed by the Financial Creditor was filed by the Appellants. All the parties were heard on 20.12.2023 and orders were reserved.
# 11. The main question to be considered and answered in these Appeals is as to whether decision of CoC, in which UVARCL has 98.84% voting share, to reject the proposal under Section 12A dated 11.08.2023 as revised on 04.10.2023 is arbitrary and unsustainable?
# 12. We may first notice the statutory scheme which has been brought by insertion of Section 12A in the I&B Code by Act 26 of 2018 w.e.f. 06.06.2018. It is to be noted that prior to insertion of Section 12A there was no provision in the Code for withdrawal of CIRP except Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Hon’ble Supreme Court in “(2018) 15 SCC 687, Uttara Foods and Feeds Private vs Mona Pharmachem” made observations requiring amendment in the Rules. Section 12A was inserted by Act 26 of 2018 which provides as follows:
“12A. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent voting share of the committee of creditors, in such manner as may be specified.”.
# 13. Consequential amendments were also made in Insolvency and Bankruptcy Board of India. (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 by inserting Regulation 30A by notification dated 25.07.2019. Regulation 30A provides as follows: . .
# 14. The Hon’ble Supreme Court had occasion to consider Section 12A in “Swiss Ribbons Pvt Ltd. & Anr. vs. Union of India, (2019) 4 SCC 17” in which various provisions of I&B Code including 12A were under challenge. In Para 83 of the judgment following has been laid down:
“83. The main thrust against the provision of Section 12-A is the fact that ninety per cent of the Committee of Creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the Committee of Creditors do not have the last word on the subject. If the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, NCLT, and thereafter, NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12-A also passes constitutional muster.”
# 15. The Hon’ble Supreme Court categorically held that “If the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, NCLT, and thereafter, NCLAT can always set aside such decision under Section 60 of the Code.”.
# 16. Now we may first notice proposals which were submitted by the Appellants under 12A. The proposal was submitted by email dated 11.08.2023 to the Resolution Professional which was addressed to the CoC as well as the Resolution Professional. The proposal was submitted by both the Suspended Directors, Sandeep Gupta and Sudhir Gupta as well as Robust Hotels Ltd. and its associates and public Shareholders. 17. The proposal submitted on 11.08.2023 came for consideration before the 13th meeting of CoC held on 18.08.2023 where it was noted in Agenda Item No. A5 that RP apprised the CoC that Promoters and its associates and Robust Hotels and its associates holding together approx. 88% shareholding in the Corporate Debtor have submitted proposal along with copy of Bank Guarantee of INR 40 Crore. 18. After deliberation and discussion and the queries asked by UVARCL, it was stated on behalf of the UVARCL that they are willing to accept the proposal upon receipt or original Bank Guarantee and its verification and the Resolution Professional was requested to verify the original Bank Guarantee. In the concluding part of Minutes of Item No. A5 following has been stated:
“Concluding the discussions, RP stated that once the original bank guarantee is received from the Relevant Shareholders, the RP shall proceed with the verification process of the bank guarantee as requested by CoC members and apprise the members of CoC about outcome of such verification of bank guarantee to take the process forward.”
# 19. As noted above, applications were filed by both Suspended Directors in the company appeals, where the applicants after referring to the proposal under 12A dated 11.08.2023 and Minutes of CoC held on 18.08.2023 has prayed for following reliefs:
“a. Pass an interim order, thereby restraining the CoC and the RP to take any other steps or actions in the Corporate Insolvency Resolution Process till such time as the CoC considers and decides the 12A proposal filed by Applicants, including the Appellant;
b. Pass an order directing the CoC to accept the 12A proposal filed by the applicants including the Appellant;
c. Set aside the impugned orders dated 16.09.2022 passed by the Ld. Adjudicating Authority in CP (IB)-571/2021;
d. Pass such other or further orders as this Hon’ble Tribunal may deem fit and proper in the facts and circumstances of the present matter and in the interest of justice.”
# 20. IAs were filed on 25.08.2023. After filing of IAs, Respondent was asked to obtain instructions by order of this Tribunal dated 29.08.2023. The 14th meeting of CoC was held on 14.09.2023 where in Agenda Item No.5 proposal received under 12A was deliberated. The Minutes note that original Bank Guarantee was submitted on 21.08.2023 which was verified by the Resolution Professional. In the CoC, it was stated on behalf of the UVARCL that 12A proposal does not provide for upfront payment to the creditors of the Corporate Debtor, therefore, proposal is not acceptable in current form. However, it was submitted that they would be happy to consider a proposal positively if there is a new proposal backed by deposit of 100% outstanding till date and legal expenses with the RP which can be distributed instantly upon CoC approval. The minutes of meeting dated 14.09.2023 records following in Agenda Item No. A5:
“Both the members of the CoC were of the opinion that the entire settlement amount should be deposited upfront and therefore the present 12A proposal was not acceptable to the members of the CoC. However, it was reiterated that if the entire money is deposited with the RP upfront along with the new proposal, the members of the COC will consider the proposal positively.
It was also mutually decided that the figure to be deposited by the proposers shall be estimated considering the time period till 30 September 2023 which shall include all costs incurred up till that time in conducting the CIRP of the Corporate Debtor and interests accruing up till that time and if there shall be any adjustments to the amount arrived at, the same shall also be considered by the proposers.”
# 21. After minutes of meeting dated 14.09.2023, a revised proposal was submitted by the Appellants the said proposal was forwarded to both the CoC and the Resolution Professional. The revised proposal dated 04.10.2023 proposed to deposit the entire admitted outstanding dues of the financial creditors, operational creditors and other creditors without any haircut i.e. INR 361,69,75,766/- as furnished by the Resolution Professional by email dated 28.09.2023 detailed in Schedule I. With regard to expenses to the tune of Rs.5,99,11,097/-, it was mentioned that the Appellant would be willing to pay reasonable legal expenses for which necessary details were asked for. It is useful to extract the proposal, which is to the following effect:
# 28. When we look into the sequence of events and proposal under 12A, it is clear that proposal which was submitted by the Appellant clearly indicated the persons who were proposing the proposal and the proposal clearly mentioned that entire dues of Financial Creditors, Operational Creditors, Employees, Workmen, Government Dues and other creditors are proposed to be paid. The Resolution Professional communicated the details vide email dated 28.09.2023, hence, in the Revised Proposal dated 04.10.2023, the Appellant has proposed to make payment of entire outstanding amount i.e. INR 361,69,75,766/-. We have already noted the proposal dated 04.10.2023 and the details of Creditors as contained in Schedule I. Proposal clearly covered 100% dues of all creditors including Financial Creditors. The aforesaid proposal was in addition to payment of entire balance CIRP cost of Rs.2,80,43,124/-.
# 29. We have already looked into minutes of meeting of the CoC held on 18.08.2023, 14.09.2023, 10.10.2023 and 13.10.2023. In the 13th CoC meeting, the UVARCL resolved to first verify the Bank Guarantee given along with the proposal, which was verified and noted in the minutes dated 14.09.2023. In minutes dated 14.09.2023 proposal was not accepted on the ground that it do not provide for upfront payment. The minutes clearly mentioned that if entire money is deposited with the RP upfront, the members of the CoC will consider the proposal positively. Fresh proposal was given on 14.10.2023. On 10.10.2023, the CoC decided to give six weeks’ time to the Appellant to deposit the entire amount and thereafter to take a decision on the 12A proposal and proposal was to be kept in abeyance. However, within three days to said decision, voting was held on 13.10.2023 and proposal was dissented by the Financial Creditors.
# 30. Shri Maninder Singh, learned senior counsel appearing for UVARCL has first raised objection on the ground that Section 12A cannot circumvent Section 29A. Section 29A contains a provision which deals with persons not eligible to submit a resolution plan. The eligibility is clearly to submit a Resolution Plan which is clear from the opening words of Section 29A:
“29A. Person not eligible to be resolution applicant. – A person shall not be eligible to submit a resolution plan, if such person,…”
# 31. Section 12A provides for withdrawal of the application admitted under Section 7 or 9, on an application made by the applicant with the approval of 90% voting share of the Committee of Creditors. Application has to be filed as per procedure provided under Regulation 30A. The objective of Section 12A and Section 29A are totally different. Section 29A is a provision which debars certain categories of applicants from submitting Resolution Plan whereas Section 12A is entirely different provision where CIRP can be withdrawn after admission. The proposal is submitted by Applicant before the CoC and if the proposal is approved by 90% CoC, Regulation 30A provides for procedure for withdrawal. If the CoC approval is granted with 90% vote share, an application has to be filed by the IRP/RP in Form FA. The question of ineligibility of Promoters to submit the proposal does not arise under Section 12A.
# 32. We, thus, are of the view that submission of Shri Maninder Singh that by proposal under Section 12A the Appellants are trying to circumvent Section 29A cannot be accepted.
# 33. Another submission pressed by learned counsel for UVARCL is that the proposal submitted by Suspended Directors is with the aid of third parties. It is relevant to notice that proposal dated 11.08.2023 as well as Revised Proposal dated 04.10.2023 clearly mentions the details of persons on whose behalf the proposal is submitted. Proposal dated 11.08.2023 came for consideration before the CoC in its 13th CoC meeting on 18.08.2023, where it was noted that the RP has appraised the details of Applicants who have submitted the proposal and Robust Hotels and its associates, public shareholders having approx. 88% equity shareholding were clearly noticed in the minutes, which we have extracted above in this order. The CoC being satisfied of the Applicants, first decided to get the original Bank Guarantee verified and after verification when the matter was considered in meeting dated 14.09.2023 the proposal was not approved on the ground that it does not provide for upfront payment. We have already noticed the resolution that in event 100% amount is deposited, the proposal shall be positively considered. Again in the 15th CoC meeting, no issue was raised with regard to locus of the Applicants who have submitted the proposal and the CoC also unanimously resolved to give six weeks’ time to the Applicants to deposit entire amount. During the oral submissions objections are sought to be raised which did not find any consideration in the CoC meeting, rather the CoC has not shown to have any objection with regard to consideration of any proposal on such ground, which is now sought to be advanced. The submission advanced by learned counsel for the UVARCL clearly indicate that the whole intent is to somehow find one or other reason to support its decision to not approve the 12A proposal.
# 34. All creditors including the Financial Creditors under the scheme of IBC are only entitled to receive 100% of their admitted debt. The proposal which has now been submitted after receipt of email from Resolution Professional giving details of admitted claim and CIRP dues clearly indicate that entire dues are offered to be deposited by the Appellant. As noted above, on 10.10.2023, time was given to deposit, however, within three days voting was held in which proposal was dissented, which clearly shows anxiety of the CoC to somehow reject the proposal.
# 37. We are of the view that after considering the submissions made by counsel for the parties and the materials brought on the record there is no non-compliance in the deposit made by the Appellant in the Court as per order dated 17.10.2023 nor there is any shortcoming or infirmity in the amounts deposited in the FDR and anxiety of UVARCL to somehow for one or other reason reject the proposal under 12A is more than apparent. From the record it is clear that the UVARCL was assigned the debt after filing of present appeals on 30.11.2023 for a consideration of Rs.295 Crores. Whatever claim is admitted in the CIRP is being paid full and the UVARCL is being proposed total payment of Rs.329,14,82,024/-. It is also to be noted that all creditors including Operational Creditors, Employees and Workmen and Government dues are getting 100% of their dues under the Proposal. We find substance in the submission of learned counsel for the Appellant that intent of UVARCL is to somehow take over prime prized asset of the Corporate Debtor i.e. Hyatt Regency, Mumbai and handover the assets to some Prospective Resolution Applicant which is known to UVARCL only.
# 39. The Hon’ble Supreme Court disposed of the appeal leaving the issue to be addressed by NCLAT (this Tribunal). As noted above, an interim order was passed in this Appeal to the effect that in the CIRP CoC will not take any final resolution. The order was passed as early as on 29.09.2022 and the UVARCL obtained assignment much after i.e. on 30.11.2023. The Resolution Plans were also invited by the Resolution Professional with the aforesaid interim order operating. The Prospective Resolution Applicants have only right for consideration of their Resolution Plan by the CoC in accordance with the CIRP process. Mere fact that they have submitted a Resolution Plan does not give them any right to get their plan approved, especially when CoC was interdicted from not considering plan by interim order passed in these Appeals. We may also notice the resolution which was passed by the CoC in 15th CoC meeting held on 10.10.2023 by which one of the Resolution Applicant was allowed to withdraw its EMD. CoC granted its consent to approve the request of the consortium to withdraw from CIRP process and to refund the earnest money. It is useful to notice decision of the CoC at Item No. B2: . .
# 40. The CoC having decided to refund the EMD of one of the Prospective Resolution Applicant, there cannot be any difficulty in refunding EMD of all of the Prospective Resolution Applicants in event the Proposal under 12A is ultimately found to be acceptable. We, thus are of the view that in view of the aforesaid, we at the instance of Prospective Resolution Applicant cannot direct the CoC to evaluate the Resolution Plan which it has received. The said course cannot be allowed to be directed since the Proposal under 12A has to be finally determined as to whether it deserves to be accepted and the decision of the CoC to refuse to accept Proposal is arbitrary and unsustainable.
# 41. We having noticed the relevant facts and sequence of events and minutes of 13th to 16th CoC meetings as well as Proposal submitted by the Appellant dated 11.08.2023 and Revised Proposal dated 04.10.2023, we are satisfied that the decision of the CoC is arbitrary in not approving 12A Proposal which Proposal offered to pay entire debt of Financial Creditors as well as all other creditors. From the minutes of 14th and 15th CoC, it is clear that CoC has expressed its willingness to accept the proposal if entire amount is deposited, however, opportunity was not granted by the CoC and within three days from 10.10.2023 meeting i.e. on 13.10.2023 they dissented the proposal although they initially granted six weeks’ time to deposit the amount. When in pursuance of order dated 17.10.2023, the entire amount has been deposited, the UVARCL refused to accept the amount which shows its malafide intent. Thus, the facts and circumstances and sequence of events clearly proves that decision of the CoC not accepting the proposal for payment of 100% dues is arbitrary and unsustainable. We, thus, hold the Proposal submitted by the Appellant on 11.08.2023 as revised on 04.10.2023 acceptable to liquidate the debt of the Corporate Debtor and close CIRP and to make payment of debts of all Creditors.
# 42. In result, I.A. No. 3987-3988 of 2023 in Company Appeal (AT) (Ins.) No.1192-1193 of 2022 as well as I.A. No.3903-3904 of 2023 in Company Appeal (AT) (Ins.) No.1338-1339 of 2022 and I.A. No. 3905 of 2023 in Company Appeal (AT) (Ins.) No. 1341 of 2022 deserve to be allowed and are hereby allowed. While allowing the aforesaid IAs, we decide all the Appeals in following manner:
(i) The Proposal under 12A submitted by the Appellant dated 11.08.2023 as revised on 04.10.2023 is accepted. The CIRP is closed. The order dated 16.09.2022 admitting Section 7 application is set aside.
(ii) The amount deposited by the Appellant in pursuance of order dated 17.10.2023 in which lien is marked to the Registrar, NCLAT is directed to be remitted to the Resolution Professional for distribution of 100% dues of all Creditors. Resolution Professional may also invoke the Bank Guarantee of Rs.40 Crore already deposited. The Registrar, NCLAT shall intimate both the Banks; Kotak Mahindra Bank and IDBI Bank in reference to FDR in which lien is marked to the Registrar, NCLAT to discharge the lien and remit amount to the Resolution Professional in the bank account as to be communicated by the Resolution Professional to both Kotak Mahindra Bank and IDBI Bank in which remittance shall be made in one week from today. The Resolution Professional shall distribute the amount so deposited within further period of three weeks.
(iii) Company Appeal (AT) (Ins.) No.1192-1193 of 2022, Company Appeal (AT) (Ins.) No.1338-1339 of 2022 and Company Appeal (AT) (Ins.) No. 1341 of 2022 are disposed of as above.
(iv) In view of orders passed in above Appeals, no orders are required in Company Appeal (AT) (Ins.) No.1271 of 2022, which is dismissed having become infructuous.
Parties shall bear their own costs.
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