Case: VALLAL RCK Vs. M/S SIVA INDUSTRIES AND HOLDINGS  LIMITED AND OTHERS

3. The facts in brief giving rise to the present appeals are as under:IDBI Bank Limited had filed an application under Section 7 of the IBC for initiation of Corporate Insolvency Resolution Process (hereinafter referred to as the CIRP) in respect of the Corporate Debtor. The learned NCLT, vide its order dated 4th July 2019, admitted the said application. As a result of which, CIRP in respect of the Corporate Debtor was initiated. The RP had presented a Resolution Plan before the CoC, submitted by one M/s Royal Partners Investment Fund Limited. However, since the said Plan received only 60.90% votes of the CoC and could not meet the requirement of receiving 66% votes, the said Plan could not be approved.4. The RP, on 8th May 2020, filed an application being IA/837/IB/2020 under Section 33(1)(a) of the IBC seeking initiation of liquidation process of the Corporate Debtor. The appellant, who is the promoter of the Corporate Debtor, filed a settlement application being IA/647/IB/2020 before the NCLT under Section 60(5) of the IBC, showing his willingness to offer one-time settlement plan. The appellant sought necessary directions to the CoC to consider the terms of Settlement Plan as proposed by him. From the month of October to December 2020, the 13th, 14th and 15th meetings of the CoC were held to consider the Settlement Plan as submitted by the appellant. Deliberations took place in the said meetings with regard to the said Settlement Plan and the final settlement proposal which was submitted by the appellant came to be considered by the CoC in its 16th meeting held on 18th January 2021. Initially, the said Settlement Plan received only 70.63% votes. However subsequently, one of the Financial Creditors viz. International Assets Reconstruction Co. Ltd. (hereinafter referred to as IARCL) having voting share of 23.60%, decided to approve the said Settlement Plan and intimated the RP about the same.5. Since the said Settlement Plan stood approved by more than 90% voting share, the RP filed an application before the learned NCLT seeking necessary directions based on the request of IARCL. Vide its order dated 29th March 2021, the learned NCLT ordered the RP to reconvene a meeting of CoC and place the e-mail of IARCL before it. Accordingly, the 17th CoC meeting was convened on 1st April 2021, wherein the said Settlement Plan was approved with a voting majority of 94.23%. Accordingly, the RP filed an application being MA/43/CHE/2021 in IBA/453/2019 before the learned NCLT seeking withdrawal of CIRP initiated against the Corporate Debtor in view of the approval of the said Settlement Plan by CoC.6. The learned NCLT, vide its order dated 12th August 2021, while holding that the said Settlement Plan was not a settlement simpliciter under Section 12A of the IBC but a Business Restructuring Plan, rejected the application for withdrawal of CIRP and approval of the Settlement Plan. Vide another order of even date, the learned NCLT initiated liquidation process of the Corporate Debtor in IA/837/IB/2020 as well. Being aggrieved thereby, the appellant preferred two appeals before the learned NCLAT. Vide the common impugned judgment dated 28th January 2022, the same came to be dismissed. Hence, the present appeals.7. Notice was issued by this Court in the present appeals on 11th March 2022. While issuing notice, this Court also granted stay of the impugned judgment. Insofar as the respondent No.1 is concerned, no one appeared. Shri Abhishek Swaroop, learned counsel appearing on behalf of the respondent No.2 also does not wish to contest the matter. As such, we could have very well allowed the appeals as being uncontested. However, since an important question with regard to interpretation of Section 12A of the IBC arises, we are inclined to consider the matter for deciding the said issue.

Reasoning: 18. A perusal of the said Regulation would reveal that where an application for withdrawal under Section 12A of the IBC is made after the constitution of the Committee, the same has to be made through the interim resolution professional or the resolution professional, as the case may be. The application has to be made in Form-FA. It further provides that when an application is made after the issue of invitation for expression of interest under Regulation 36A, the applicant is required to state the reasons justifying withdrawal of the same. The RP is required to place such an application for consideration before the Committee. Only after such an application is approved by the Committee with 90% voting share, the RP shall submit the same along with the approval of the Committee to the adjudicating authority. It could thus be seen that a detailed procedure is prescribed under Regulation 30A of the 2016 Regulations as well.19. In the case of Swiss Ribbons Privated Limited and Another v. Union of India and Others (2019) 4 SCC 17,  one of the challenges made was with regard to validity of Section 12A of the IBC. It was argued that the figure of 90% voting share was arbitrary. It was the contention that though the withdrawal was just and proper, the CoC could exercise the power arbitrarily to reject such a settlement. While rejecting the said contention, this Court observed thus: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.20. It could thus be seen that this Court has found that if the CoC arbitrarily rejects a just settlement and/or withdrawal claim, the learned NCLT and thereafter the learned NCLAT can always set aside such decision under the provisions of the IBC.21. This Court has consistently held that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the IBC. It has been held that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. A reference in this respect could be made to the judgments of this Court in the cases of K. Sashidhar v. Indian Overseas Bank and Others (2019) 12 SCC 150,  Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Others (2020) 8 SCC 531,  Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others (2020) 11 SCC 467,  Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another (2021) 10 SCC 401,  and Jaypee Kensington Boulevard Apartments Welfare Association and Others v. NBCC (India) Limited and Others (2022) 1 SCC 401 .22. No doubt that the aforesaid observations have been made by this Court while considering the powers of the CoC while granting its approval to the Resolution Plan.23. As already stated hereinabove, the provisions under Section 12A of the IBC have been made more stringent as compared to Section 30(4) of the IBC. Whereas under Section 30(4) of the IBC, the voting share of CoC for approving the Resolution Plan is 66%, the requirement under Section 12A of the IBC for withdrawal of CIRP is 90%.24. When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stake-holders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the statute or the Rules.25. In the present case, the proceedings of the 13th, 14th and 15th meetings of CoC would clearly show that there were wide deliberations amongst the members of the CoC while considering the Settlement Plan as submitted by the appellant. Not only that, the proceedings would also reveal that after suggestions were made by some of the members of the CoC, suitable amendments were carried out in the Settlement Plan by the appellant. One of the members of the CoC having voting share of 23.60%, though initially opposed the Settlement Plant, subsequently decided to support the same. Accordingly, the NCLT itself, vide order dated 29th March 2021, directed the RP to reconvene the CoC meeting. As per the directions of the NCLT, on 1st April 2021, the 17th meeting of the CoC was reconvened, wherein the Settlement Plan was approved by 94.23% votes.26. It is thus clear that the decision of the CoC was taken after the members of the CoC, had due deliberation to consider the pros and cons of the Settlement Plan and took a decision exercising their commercial wisdom. We are therefore of the considered view that neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of CoC.27. This Court has, time and again, emphasized the need for minimal judicial interference by the NCLAT and NCLT in the framework of IBC. We may refer to the recent observation of this Court made in the case of Arun Kumar Jagatramka v. Jindal Steel and Power Limited and Another (2021) 7 SCC 474:95. ….However, we do take this opportunity to offer a note of caution for NCLT and NCLAT, functioning as the adjudicatory authority and appellate authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. As we have noted earlier in the judgment, the IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India. As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principles of the IBC…..