Judgment Summaries (NCLAT) – Union Bank of India v. Kapil Wadhawan

  February 10, 2022

CASE SUMMARY

In the matter of Union Bank of India v. Kapil Wadhawan and Others

{NCLAT, Principal Bench, New Delhi; January 27, 2022}

FACTS: The appeals were filed against the order dated May 19, 2021, passed by the NCLT, Mumbai directing the Administrator of Dewan Housing Finance Limited (“DHFL”) to place the Second Settlement Proposal before the Committee of Creditors (“CoC”). The Second Settlement Proposal was put forth by Mr. Kapil Wadhawan and the Tribunal directed that this proposal should be considered by the CoC, be put to vote, and it should inform the Tribunal of their decision within 10 days.

Union Bank of India (“Appellant”) filed the present appeal on behalf of the CoC and submitted that the Resolution Plan had been approved by the CoC and the application to approve it was pending before the Tribunal. That the Reserve Bank of India (“RBI”) had issued the ‘no objection’ based on the ‘fit and proper criteria’ to the persons who would control the Financial Service Provider after approval of the Resolution Plan by the CoC.

Since the Second Settlement Proposal was neither a Resolution Plan nor an application under Section 12A of the Insolvency and Bankruptcy Code, 2016 (“Code”), it was argued that the direction to consider the same by the Tribunal lacked jurisdiction.

ISSUE: Whether the Adjudicating Authority can direct the CoC to consider and vote upon a second offer while the Resolution Plan has been approved by the CoC and awaits the approval of the Adjudicating Authority?

HELD: Relying on the judgment passed by the Supreme Court in Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited the NCLAT observed that after the Resolution Plan is approved by the CoC it cannot be construed as a ‘contract’ that is governed under the Contract Act while it awaits the approval from the Adjudicating Authority. Thus, there was no scope for negotiations between the parties once the Resolution Plan was approved by the CoC.

Further, the NCLAT observed that once the provisions of the Code are complied with, neither the Adjudicating Authority nor the Appellate Tribunal has an equity-based jurisdiction under the provisions of the Code. Thus, it was held that the order of NCLT, Mumbai was unsustainable and set aside.

Full text of the order accessible here.

 

 

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