Any Amount Proposed In Settlement Plan U/S 12A Of IBC Cannot Be Refunded If Plan Is Approved: NCLAT

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) held that any amount proposed in the settlement plan under section 12A of the IBC cannot be refunded if the plan is later approved and the CIRP is closed. In this case, a settlement plan was proposed by the appellant in which 3 crores rupees was proposed to be given to the financial creditors. This plan was later approved. Brief Facts This Appeal has been filed challenging the Order dated 26.07.2022 passed by the Learned Adjudicating Authority. By the Impugned Order, Adjudicating Authority has dismissed the I.A.1370/2021, aggrieved by which Order, this Appeal has been filed. The TJSB Sahakari Bank Ltd. filed an Application under Section 7 against Corporate Debtor M/s. Unimetal Castings Limited, (UCL) in C.P. (IB) No.3622/I&B/MB/2018. Vide Order dated 25.01.2019, for debt and default of ₹6,38,78,417/-, Section 7 Application was admitted and Tejas Jatin Parikh, Respondent No. 1 herein was appointed as Interim Resolution Professional (IRP) who was subsequently confirmed as Resolution Professional (RP). On 15.07.2019, CoC unanimously, voted for Liquidation of the Corporate Debtor. Respondent No. 4, the Promoter & Executive Director of the Corporate Debtor, UCL as well as Joshi Deodhar Engineering Company Limited (JDECL) (sister concern) sent a communication to the RP intimating his intention of submitting a Resolution Plan. IAs were filed by Respondent No. 4, the Tribunal on 11.02.2020, directed the CoC to consider the Settlement Proposal submitted by Respondent No. 4 for the revival of the Corporate Debtor. On 16.03.2020, a Memorandum of Understanding (MoU) was executed between the Appellants and CoC. As per the revised MoU, Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor as well as related entity was to be closed by 30.09.2020, with regard to closure of CIRP of related entity, Section 12A Application was to be filed and with regard to CIRP of the Corporate Debtor, Resolution Plan was required to be approved. With regard to CIRP against the related entity, i.e., JDECL, Section 12A Application was filed and payment of ₹3 Crores was made. The Adjudicating Authority passed an Order allowing the 12A Application. By Order dated 02.11.2020, consequently, the CIRP of JDECL came to be closed. Insofar as the CIRP of the Corporate Debtor, on 12.09.2020, Respondent No. 4 who is one of the Promoters of the Corporate Debtor submitted a Resolution Plan for Corporate Debtor. Resolution Plan was submitted without Performance Security Deposit. The CoC approved the Resolution Plan of the Corporate Debtor on 22.12.2020, subject to Resolution Applicant submitting ₹25 Lakhs as Performance Security Deposit. Appellant sent a letter to the CoC withdrawing from the settlement proposed under the revised MoU and thereafter filed an Application before the Adjudicating Authority. I.A. No. 1370/2021, praying for refund of amount of ₹3,25,00,000/-. Adjudicating Authority heard the I.A. No. 1370/2021 and by Impugned Order dated 26.07.2022, rejected the Application. Contentions The appellant submitted that first & second MoU, both contemplated closure of the CIRP of JDECL by 12A Application and approval of Resolution Plan in the CIRP of Corporate Debtor by 30.09.2020 which fact having not accomplished, the Appellant was entitled to refund of the amount. Per contra, the respondents submitted that Since Resolution Applicant did not deposit the Performance Security Deposit. The CoC of the Corporate Debtor on 20.11.2021 has approved the Liquidation of the Corporate Debtor and the Adjudicating Authority also passed Liquidation Order on 25.01.2020 against the Corporate Debtor. That It was due to lapse of the Resolution Applicant who is none other than Promoters of the Corporate Debtor that Resolution Plan of the Corporate Debtor could not be approved. That Appellant is third party to the CIRP and under the MoU, there was Clause XII, which was regarding the dispute resolution, Appellant could have taken recourse of the Clause XII of the MoU for its claim, if any, and the Application filed before the Adjudicating Authority for refund of the amount was not maintainable. NCLAT's Analysis The tribunal noted that from the facts brought on the record, it is clear that insofar as dues of JDECL is concerned, 12A Application was filed which was allowed by the Adjudicating Authority approving the 12A and the CIRP of JDECL thus came to be closed. Entire debt of the Financial Creditor with JDECL was ₹3 Crores, which CIRP stood closed and entire debt also discharged. The tribunal further noted that MoU also indicates that ₹25 Lakhs was to be paid with regard to debt of Corporate Debtor on execution of MoU and rest of the payments were made within 4 years as per the schedule given in revised MoU...

Any Amount Proposed In Settlement Plan U/S 12A Of IBC Cannot Be Refunded If Plan Is Approved: NCLAT

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Any Amount Proposed In Settlement Plan U/S 12A Of IBC Cannot Be Refunded If Plan Is Approved: NCLAT

Mohd Malik Chauhan

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