Settlement between parties cannot be directed by way of an order under IBC: NCLAT

Arun Kumar Vs Sripriya Kumar (NCLAT Chennai)

NCLAT Chennai held that any kind of settlement is between the Parties and no settlement can be directed by way of an Order under the Provisions of Insolvency and Bankruptcy Code, 2016 (IBC, 2016).

Facts- The present appeal is preferred against the impugned order, whereby and whereunder the ‘Adjudicating Authority’ has allowed the Application filed by the ‘Resolution Professional’ u/s. 30(6) of the Insolvency and Bankruptcy Code, 2016, seeking approval of the ‘Resolution Plan’ submitted by the Consortium of Mr. S.M. Kamal Pasha and Mr. Syed Fahad. While allowing the Application for approval of the Plan, the ‘Adjudicating Authority’ has dismissed the objections filed by the Appellant herein / ‘Promotor of the Corporate Debtor’ to the Application preferred by the Resolution Professional.

Succinctly put, the main issues raised by the Appellant / Promotor of the Corporate Debtor is that the ‘Adjudicating Authority’ had wrongly directed for project wise CIRP; that the CoC was improperly constituted and that the amount in the Resolution Plan entitled for Kotak Mahindra Bank Limited is much more than the actual Claim admitted by the Resolution Professional. It is the further case of the Appellant that the amount claimed was Rs. 36,27,00,000/- whereas the amount provided for under the Plan was Rs. 46,00,00,000/-, which is inclusive of ‘interest’, which ought not to have been charged after the quantum of the Claim amount HAD already crystalized. The other issue raised by the Appellant is that the Resolution Plan value is less than the Liquidation value and also that the ‘SRA Consortium’ is ineligible u/s. 29A of the Code as they have been disqualified on account of non-filing of the Financial Statements of their Companies.

Conclusion- The Promotor being an MSME is given an opportunity under the Provisions of the Code to present a Plan. At the same time, the Code does not contemplate any kind of preference to be given to an MSME Promotor by the CoC while accepting a Resolution Plan. The CoC in its commercial wisdom examines the criteria for maximisation of value of assets and protecting the interest of all stakeholders. Therefore, the contention of the Appellant that being an MSME Promotor he ought to have been given a preference is unsustainable, more so when the Appellant did not furnish any Resolution Plan but now at a belated stage, after the approval by the ‘Adjudicating Authority’, is offering an amount in settlement. Any kind of settlement is between the Parties and no settlement can be directed by way of an Order under the Provisions of IBC, 2016, specifically keeping in view the ratio of the Hon’ble Apex Court in the matter of ‘E. S. Krishnamurthy & Ors. Vs. Bharath Hi-tech Builders Private Limited’ reported in [(2022) 3 Supreme Court Cases 161].

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