India – NCLT Rejects Application For Withdrawal Of Corporate Insolvency Resolution Process Of Corporate Debtor Stating Bankruptcy Court Needs To Be Vigilant And That Only Unprejudicial Settlement Plans Should Be Permitted To Succeed.

Order dated: 12 August 2021."
 

Summary:
 

In the present matter, the NCLT rejected the application filed by the promoter of the corporate debtor for withdrawing the corporate insolvency resolution process of the corporate debtor and accordingly admitted the resolution professional's application for liquidation of the corporate debtor. The promoter, although ineligible to submit a resolution plan was trying to restructure the loans under the pretext of a settlement proposal.
 

The NCLT rejected settlement proposal stating that bankruptcy court needs to be vigilant in withdrawal of application cases and only unprejudicial settlement plans should be permitted to succeed. The NCLT rejected the withdrawal application on several grounds inter alia being that the settlement proposal made by the promoter was not a settlement proposal but a ‘business restructuring plan’ as without even receiving enough credit from the promoter, the committee of creditors (CoC) had approved the withdrawal plan. Secondly, as per the settlement plan, there was no final offer made by the promoter of the corporate debtor and also the acceptance made by the CoC in this regard. There was no finality between the promoter of the corporate debtor and the CoC as per the settlement proposal. Therefore, there was an ambiguity in the terms of settlement. Thirdly, the CoC has not protected itself against default by the promoter once the proposal is approved which transcends beyond the scope of Code.
 

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