NCLAT Rescinds NCLT Order to Review Wadhwan’s Second Offer, Real Estate News, ET RealEstate

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NEW DELHI: The National Company Law Appeal Tribunal (NCLAT) has overturned an earlier order by the Mumbai bench of the NCLT, which ordered debt-ridden DHFL administrator to submit former promoter Kapil Wadhwan’s second settlement proposal before his lenders for consideration.

The appeals tribunal observed that NCLT had adopted instructions to consider Wadhwan’s second proposal, despite the fact that the creditors’ committee (CoC) of DHFL had already overwhelmingly approved the resolution plan of Piramal Capital & Housing Finance and that the administrator had applied before him for approval.

Citing a recent judgment by the Supreme Court in the Ebix Singapore case, the NCLAT said “there is no further room for negotiations between the parties once the CoC approves the resolution plan”.

“Said exercise was outside the jurisdiction of the contracting authority (NCLT), therefore untenable and subject to reversal,” a three-member bench of NCLAT said in its judgment issued on January 27, 2022.

NCLAT management came on a batch of petitions filed by Union Bank of India on behalf of the CoC, the administrator of DHFL and Piramal Capital & Housing Finance – the resolution candidate who successfully challenged the order of the NCLT.

Earlier on May 19, 2021, by passing an order, the National Company Law Tribunal (NCLT) ordered the administrator of Dewan Housing Finance Corporation Ltd (DHFL) to place Wadhwan’s second bid before the CoC for consideration, decision, vote and notify this within ten days.

This order was challenged by CoC, Administrator and Piramal in the NCLAT Insolvency Appeal Court.

Pending this appeal to the Appeal Tribunal, NCLT had on June 7, 2021 passed an order approving the resolution plan of Piramal Capital & Housing Finance Ltd.

During the proceedings, Union Bank had argued that there was no provision in the Insolvency and Bankruptcy Code (IBC) under which NCLT is empowered to make such an order. Furthermore, the second offer was submitted neither in accordance with the RFRP (Request for Resolution Plan) nor in accordance with Section 12A of the IBC Code.

Under Section 12A of the IBC, the court may allow the withdrawal of pending insolvency proceedings against a business under certain conditions. This application is filed by the company with the approval of 90 percent of the voting shares of the creditors’ committee.

According to the Claimants, throughout the Corporate Insolvency Resolution Process (CIRP) of DHFL, Wadhawan sent various letters and proposals, including the first offer, all of which were submitted to the CoC. The CoC was of the opinion that such proposals could not be considered.

The second offer was nothing but the first offer in a different form, he added.

The lenders had argued that such an order requiring the CoC to review every offer from the promoter, which formerly controlled DHFL, would severely hamper CIRP and cause undue delays, as well as negatively impact the sanctity of the process.

The order was passed by NCLT after Piramal’s resolution plan was approved by the CoC by an “overwhelming majority” and the administrator filed the plan in court for approval.

However, Kapil Wadhawan had argued that the second settlement proposal was different from the first settlement proposal. The only similarity is that it continues to be 150% superior to Piramal’s plan. According to him, the first settlement proposal was never examined in substance by the CoC and was rejected on hyper technical points.

Wadhawan had further argued that the alleging CoC’s objections were ill-conceived, because under the IBC, NCLT has the inherent power to make such orders.

Rejecting it, the NCLAT observed that the NCLT ordered the COC to consider Wadhawan’s second settlement offer when Pirmal’s resolution plan after lenders’ approval was pending arbitration before it.

“Such an instruction from the Adjudication Authority (NCLT) was passed despite the fact that the CoC of the debtor company had overwhelmingly approved the resolution plan for DHFL. The administrator had already filed the application for approval of the plan, and this request has been heard and reserved for the orders of the learned contracting authority,” the NCLAT said.

The appeals tribunal said that once a resolution plan is approved by a 100% voting share of the CoC, the NCLT’s jurisdiction is limited to determining whether the requirements of Section 30(2) ( requirements) have been met in the plan as approved. by the CDC.

“Once the requirements of the IBC have been met, both the deciding authority and the appeal authority are bound by the discipline of the statutory provisions. Neither the deciding authority nor the appeal authority ‘have unqualified jurisdiction in equity,’ the NCLAT said.

Insolvency proceedings were commenced against DHFL by NCLT on November 20, 2019 after admitting a plea by the Reserve Bank of India regarding governance issues and defaults.

NCLT had replaced the board of directors of DHFL and appointed an administrator to manage its affairs.

Last week, NCLAT, while issuing a separate judgment on 63 Moons Technologies’ motion, ordered DHFL’s lenders to reconsider their decision regarding the finance company‘s avoidable transaction valuation, while approving the resolution plan. insolvency submitted by Piramal Capital & Housing Finance Ltd. .

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