Piramal Capital & Housing Finance Limited vs

Suchitra Kanuparthi, Member (Judicial)

IA 122 of 2022

This is an Application under Section 12A read with Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 seeking withdrawal of CIRP against the Corporate Debtor

Brief Facts:

The Applicant is an IRP of the Corporate Debtor. The Corporate Debtor was admitted into CIRP vide order of admission on 06.09.2021. By virtue of the order of admission, the IRP was appointed.

The IRP received intimation of CIRP on 12.09.2021 and immediately he issued public announcement on 14.09.2021 in two newspapers having circulation at the place of business of the Corporate Debtor.

The Applicant submits that pursuant to the Public Announcement, the Applicant received 134 claims aggregating to Rs. 5326.66 crores out of Rs. 2632.86 cores have been admitted. Further, the claims for Rs. 398.56 crores are not admitted and claims of Rs. 2305.36 crores are kept for verification. The tabular chart showing details of the claims received by the Applicant is as follows:

The Applicant submitted that before the constitution of CoC, one Mr. Anil Chhabria, member of the suspended Board of Directors of the Corporate Debtor preferred an Appeal No. 820 of 2020 before the Hon’ble National Company Law Appellate Tribunal challenging the admission Order dated 06.09.2021.

During the course of hearing, Mr. Anil Chhabria expressed his desire to settle with the debenture holder and requested for grant of sometime. The Hon’ble NCLAT vide its order on 05.10.2021 in Company Appeal No. 820 of 2021 was pleased to direct the Applicant not to constitute the CoC of the Corporate Debtor till the next date. The order of the Hon’ble NCLAT is reproduced below:

“Learned Counsel appearing on behalf of the Appellant submits that the Appellant in the ‘Ex-Director’ of the Respondent No. 2 Company; Respondent No. 2 Company is a ‘Debenture Holders’ and they have to pay 40 Crores to the ‘Debenture Holders’ and they have already paid 50% of the total amount. However, for the rest amount, the ‘Debenture Holders’ have filed the Application under Section 7 of the ‘Insolvency and Bankruptcy Code, 2016’ before the Ld. Adjudicating Authority and the Ld. Adjudicating Authority by an impugned order dated 06.09.2021 has initiated the CIRP against the Corporate Debtor-Respondent No. 2.

It is further submitted by the Appellant has made a proposal for settlement alongwith post dated cheques. It will take some time for settlement. Therefore, the CIRP may be stayed till the next date.

Learned Counsel appearing on behalf of the Respondent No. 1 (Financial Creditor) submits that she has received the settlement proposals alongwith post-dated cheques. However, she has to take the approval of the ‘Debenture Holders’ and that will take some time.

The Respondent No. 2-IRP appearing in person informed that the CoC has not been constituted as yet.

We have considered the submissions of the Ld. Counsel for the parties, as the parties are exploring the possibility of settlement. Therefore, we direct the IRP not to constitute the CoC till the next date.

Let the matter be fixed ‘for admission’ (as fresh case) on 29th  October, 2021.

The Applicant further submitted that the appeal came to be listed before the Hon’ble NCLAT on 23.11.2021, on which date, Mr. Anil Chhabaria paid Rs. 1 crore in respect of first settlement proposed and accordingly sought 20 days time to settle the matter. The Hon’ble NCLAT vide its order of 23.11.2021 was pleased to grant 30 days’ time to the parties to settle the matter and in the event the parties fail to arrive at a settlement, the Applicant was granted liberty to constitute the Committee of Creditors and to proceed further in accordance with law. The order of Hon’ble NCLAT dated 23.11.2021 is reproduced below:

It is represented on behalf of both sides that Rs. 1 Crore was paid in respect of some of portion/ part of the first settlement proposed, and on behalf of the Appellant 20 days time is sought for to settle the matter in entirety. However, this Tribunal, grants 30 days time to the parties to settle the matter and if there is any failure to arrive at the settlement within the time granted by this Tribunal from today, then the Resolution Professional is at liberty to constitute the ‘Committee of Creditors’ and to proceed further in accordance with law.

The Applicant further pointed out that the settlement agreement was executed between Mr. Anil Chhabria and the original Petitioner. Accordingly, the Appeal before Hon’ble NCLAT came to be dismissed as withdrawn on 05.01.2022. The order of Hon’ble NCLAT on 05.01.2022 is reproduced below:

It is represented on both sides that the matter has been settled between the parties and as such, the Learned Counsel for the Appellant seeks permission from this Tribunal to withdraw the instant Comp. App. (AT) (Ins) No. 820 of 2021. Acceding to his said request, the instant Comp. App. (AT) (Ins) No. 820 of 2021 is dismissed as withdrawn. No Costs.

It is open to the parties to file the Settlement terms copy before the ‘Adjudicating Authority’ and to seek appropriate remedy in the manner known to Law and in accordance with Law. If they so desire/advised.

On 06.01.2022 one of the Creditors of the Corporate Debtor namely Piramal Capital & Housing Finance Limited called upon the Applicant to inform them as to why CoC was not constituted, despite the fact that Hon’ble NCLAT had granted a stay on constitution of CoC, only for a period 30 days vide its order dated 23.11.2021. The Creditor further alleged that in the event of any withdrawal Application is filed without convening a meeting of CoC and seeking requisite percentage of votes from the members of the CoC, the same shall tantamount to misconduct and violations of the provisions of IBC and CIRP Regulations.

The Applicant replied to the email of the Financial Creditor on 07.01.2022 and intimated that the settlement agreement is executed and as required under the order of 23.11.2021 by the Hon’ble NCLAT and as the conditions stipulated under the said order was duly complied with by the party, the question of constitution of CoC does not arise and also informed about the withdrawal of the said appeal on 05.01.2022. In pursuance of the withdrawal order of the Hon’ble NCLAT dated 05.01.2022, the parties therein were granted to file the said settlement terms before the Hon’ble Tribunal and seek appropriate remedy in accordance with law.

On 08.01.2022 the Creditor again addressed an email to the Applicant stating that calling upon the Applicant to immediately constitute the CoC, the Applicant on 10.01.2022 intimated the Creditor that they had approached the Hon’ble NCLT.

The Applicant submitted that none of the Creditors have impleaded in the Appeal before the Hon’ble NCLAT and that the Hon’ble NCLAT has ordered consent terms to be filed before the Hon’ble Tribunal, vide order dated 05.01.2022.

The Applicant has received Form FA from the Original Petitioner with the request to take necessary steps under Regulation 30A of CIRP. The Applicant also mentioned that the entire cost of CIRP has been paid and as such there is no requirement of furnishing a Bank Guarantee.

Hence, the Applicant prayed for withdrawal of CIRP against the Corporate Debtor under Section 12A of IBC.

IA 164 of 2022

The present Application is filed by Piramal Capital and Housing Finance Limited (PCHFL/Applicant) seeking intervention and objecting to the withdrawal of CIRP against the Corporate Debtor.

Post admission of CIRP, the IRP issued public notice and the Applicant previously known as Dewan Housing Finance Corporation Limited filed its claim of Rs. 2343,90,99,483/- to the IRP. The claim was lodged with the IRP on 25.09.2021.

The Applicant pointed out that by an order dated 07.06.2021, passed by this Tribunal, the Resolution Plan submitted by the Applicant namely Piramal Capital and Housing Finance Limited in respect of DHFL under Section 31 of the Code came to be approved. As per the terms of the Plan, the Applicant has taken over DHFL.

Despite the order of admission, over 4 to 5 months, the IRP till date failed to constitute Committee of Creditors in accordance with the Code and CIRP Regulations.

The order of admission was challenged by way of an Appeal to the Hon’ble NCLAT by one of the suspended Directors, Mr. Anil Chhabria, vide Company Appeal No. 820 of 2021. The Appeal was heard on 06.10.2021.

The said Appeal was listed before the Hon’ble NCLAT on October 5, 2021, on which date Mr. Chhabria informed the Hon’ble NCLAT that he wishes to settle the matter with SBICAPS Trustee Company Limited (“SBICAP”). Accordingly, vide Order dated October 5, 2021, the Hon’ble NCLAT directed the IRP to not constitute the CoC till the next date of the matter.

Upon becoming aware of the aforesaid Appeal, the Applicant filed an impleadment/intervention Application seeking impleadment/intervention in the said Appeal. However, as the said Appeal was allowed to be withdrawn by the Hon’ble NCLAT on 05.01.2022, Hon’ble NCLAT further directed that all the connected Interlocutory Applications were directed to be closed.

Thereafter, on January 5, 2022, the Hon’ble NCLAT dismissed the said Appeal, as withdrawn as the parties had settled. As a consequence, there was no impediment on the constitution of CoC.

However, as the IRP had failed to constitute the CoC, the Applicant was constrained to address an email to the IRP on January 5, 2022, inter alia stating that failing any settlement, the IRP was mandated to constitute the CoC as per the Order dated November 23, 2021, passed by the Hon’ble NCLAT. Further, the Applicant also highlighted that the IRP had no power to consider or file any application for withdrawal of CIRP without convening a meeting of the CoC on any such withdrawal application as per the provisions of Section 12A of the Code. Finally, the Applicant called upon the IRP to immediately constitute the CoC and desist from considering the CIRP withdrawal Application without convening a meeting of the CoC.

On January 7, 2021, the IRP responded to the aforesaid email and stated “the Applicant SBI Cap Trustee has entered into settlement with the Appellant as per the order of the Hon’ble NCLAT, New Delhi, dated 23.12.2021. In the hearing held on 5th of January, 2022, the Hon’ble NCLAT has directed the parties to file form FA (12A) withdrawal to the Adjudicating Authority. Hence the question of constituting CoC does not arise, as at present. Order is yet to be uploaded on the site.”

Thereafter, on January 8, 2022, the Applicant once again called upon the IRP to immediately constitute the CoC and desist from considering any CIRP withdrawal Application without convening a meeting of the CoC.

Finally, on January 10, 2022, the IRP informed the Applicant that an Application has been filed before this Hon’ble Tribunal for withdrawal of the CIRP against the Corporate Debtor and accordingly the IRP will not be constituting the CoC, contrary to the settled provisions of the Code and the CIRP Regulations.

Reply by Suspended Directors:

The Suspended Board of Directors sought for withdrawal of CIRP against the Corporate Debtor and further that the Company Radius Estates Project Private Limited be allowed to function independently through its Board of Directors. They also pointed out that IA filed by the IRP states as follows:

i) The Coc was not constituted in view of NCLAT Order dated 06.10.2021 in Appeal No. (AT) (INS) 820 of 2021 “We direct the IRP not to constitute the CoC till the next date” and thereafter Orders dated 29.10.2021, 23,11.2021 and 05.01.2022.

ii) The parties have settled their dispute and have filed Consent Terms dated 05.01.2022 before NCLAT.

iii) The NCLAT had passed Order dated 05.01.2022 in Appeal No. (AT) (INS) 820 of 2021 in view of the settlement between the parties and prior to CoC being constituted.

iv) The SBICAP Trustee Company Limited, the Financial Creditor has filed Form FA dated 11.01.2022.

v) The suspended Board of Directors have made payment under settlement arrived at between the parties thereby made payment of Rs. 1 crore on 18.11.2021 and Rs. 2 crores on 23.12.2021 during the pendency of the Appeal before NCLAT, therefore the settlement has been accepted and acted upon by the parties.

The suspended Board of Directors support the Application of the IRP for withdrawal of the Company Petition and also confirmed that they are opposing the Application filed by the Piramal Capital Housing Finance Limited on the ground that the Application filed by the PCHFL is barred by the principle of estopel. But in fact, PCHFL has filed similar objections before the Hon’ble NCLAT and Hon’ble NCLAT had not granted leave to PCHFL. Therefore, PCHFL cannot agitate the same objections, grounds, reasons and reliefs before this Tribunal.

The order of Hon’ble NCLAT dated 05.01.2022 has taken judicial notice of the settlement between the parties and has permitted the parties to file settlement terms before the Adjudicating Authority. In fact, Hon’ble NCLAT had directed to IRP not to constitute the CoC and that position continued till 05.01.2022.

The suspended Board of Directors further pointed out that PCHFL (erstwhile DHFL) by the Administrator of DHFL, have in the year 2019 filed Application IA 257 in CP No. 4258 of 2019 challenging the irregularity and related party transactions against the Radius Group of Companies.

PCHFL have also filed proceedings against the Personal Guarantee given by Sanjay Chhabria and Ritu Chhabria for loans availed by Radius States Project Private Limited under Section 95 of the Code.

Findings:

Heard the Counsel for the Applicant-IRP, heard learned Senior Counsel for the Objector-PCHFL and the Counsel for the suspended Board of Directors and perused the records.

The only question for consideration is whether the withdrawal of CIRP can be allowed under Section 12A of the Code.

Post Admission of CIRP, an Appeal against the order of admission was filed by Mr. Anil Chhabria vide Company Appeal No. 820 of 2021. The Hon’ble NCLAT on 05.10.2021 had stayed the CIRP till next date in view of the fact, the Appellant had made proposals for settlement along post-dated cheques. The Hon’ble NCLAT further directed the IRP not to constitute the CoC till the next date of hearing.

On 23.11.2021, the Hon’ble NCLAT categorically recorded that Rs. 1 crore was paid in view of the settlement proposed and the Applicant sought 20 days’ time to settle the claim in entirety. Hon’ble NCLAT further granted 30 days’ time to the parties to settle the matter and also held that if there is any failure to arrive a settlement within the time granted, the Resolution Professional is at liberty to constitute Committee of Creditors and proceed in accordance with law.

On 05.01.2022, the Hon’ble NCLAT further allowed the Company Appeal 820 of 2021 to be withdrawn and observed that it is open to the parties to file settlement terms before the Adjudicating Authority. All the connected Interlocutory Applications were directed to be closed. The Order of Hon’ble NCLAT is as follows:

It is represented on both sides that the matter has been settled between the parties and as such, the Learned Counsel for the Appellant seeks permission from this Tribunal to withdraw the instant

Comp. App. (AT) (Ins) No. 820 of 2021. Acceding to his said request, the instant Comp. App. (AT) (Ins) No. 820 of 2021 is dismissed as withdrawn. No Costs.

It is open to the parties to file the Settlement terms copy before the ‘Adjudicating Authority’ and to seek appropriate remedy in the manner known to Law and in accordance with Law. If they so desire/advised.

All connected Interlocutory Applications are closed.

The Applicant-IRP brought to the notice that post public announcement he has received 134 claims aggregating to Rs. 5326.66 crores, out of which claims of Rs. 2632.86 crores have been admitted, claims of Rs. 398.56 crores were not admitted and claims for Rs. 2305.36 crores were kept under verification.

In view of the order of Hon’ble NCLAT 05.01.2022, the Application for withdrawal was filed by the RP along with Form-FA and consent terms as executed between the Financial Creditor and Corporate Debtor. Form FA is reproduced below:

The consent executed between the parties further capture that the Financial Creditor has received payment of Rs. 1 Crore as on 18.11.2021 and it was agreed between the parties that the Suspended Directors of the Corporate Debtor INR 25,14,85,487/- along with interest by 15.05.2022 towards full and final settlement. The Corporate Debtor propose to settle the amounts in the following manner:

Sr No.

Date of Payment

Amount

1.

22

December 2021

Rs. 2,00,00,000/-

2.

31

January 2022

Rs. 5,00,00,000/-

3.

28

February 2022

Rs. 6,00,00,000/-

4.

31

March 2022

Rs. 7,50,00,000/-

5.

30

April 2022

Rs. 4,64,85,487/-

6.

15

May 2022

Interest up till 15 May 2022

The consent terms also record that the Suspended Director of the Corporate Debtor has paid the following amounts against the dues:

i. Payment of INR 1,00,00,000/- (Indian Rupees One Crore Only) on 18 November 2021 through RTGS; and

ii. Payment of INR 2,00,00,000/- (Indian Rupees Two Crores Only) on 23 December 2021 vide a pay order bearing no. 015947.

The consent terms is reproduced below:

It is relevant to refer to the judgment of Hon’ble Supreme Court in Swiss Ribbons reported in (2019) 4 SCC 2017, wherein the Hon’ble Supreme Court at para 82 held that once the Court gets triggered by admission of Creditors petition under Section 7 and 9, the proceedings before the Adjudicating Authority is collective proceedings in rem. The Hon’ble Supreme Court has also a considered question wherein a withdrawal Application is filed before the constitution of CoC, it was categorically held that at any stage where the Committee of Creditors is not yet constituted, a party can approach NCLT directly, the Tribunal may in its inherent powers under Rule 11 of NCLT Rules may allow or disallow any Application for withdrawal of settlement. Para 82 of the judgment is reproduced below:

“It is clear that once the Code gets triggered by admission of a Creditor’s petition under Sections 7 to 9, the proceeding that is before the Adjudicating Authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual Corporate Debtor is allowed to settle its claim. A question arises as to what is to happen before a Committee of Creditors is constituted (as per the timelines that are specified, a Committee of Creditors can be appointed at any time within 30 days from the date of appointment of the Interim Resolution Professional). We make it clear that at any stage where the Committee of Creditors is not yet constituted, a party can approach NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, 2016, allow or disallow an Application for withdrawal or settlement”.

It is also relevant to refer to Rule 11 of NCLT Rules which empowers the Tribunal to allow the withdrawal of CIRP under Section 12A of the Code. Rule 11 of NCLT is as follows:

“Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal”.

This Bench is conscious of the fact that IRP has received 134 claims aggregating to Rs. 5326.66 crores, out of which claims of Rs. 2632.86 crores have been admitted, claims of Rs. 398.56 crores were not admitted and claims of Rs. 2305.36 crores were kept under verification, cannot be brushed aside. This raises a red flag and is of serious concern in view of the factual matrix that Radius Group is undergoing financial turmoil and if the withdrawal of CIRP is permitted, it will lead to multiplicity of proceedings and the Creditors are seeking effective Resolution of the Corporate Debtor.

This Bench notes that there has been unconscionable settlement between the parties by virtue of the settlement agreement which proposes the payment of Rs. 3 crores as against the entire claim of Rs. 23,85,42,463/-and offers staggered payment to be paid in six instalments. Therefore, the purported settlement lacks bona fide. Hence, this Bench is of the opinion that the interest of the Creditors will not be protected if the withdrawal of the CIRP against the Corporate Debtor is allowed. The Bench has no doubt in its mind that considering the CIRP proceedings are in rem, the substantial claims of the Financial Creditors cannot be disregarded, in view of part settlement of a single Creditor.

In view of the aforesaid this Bench rejects IA No. 122 of 2022 and orders as follows.

(a) IA No. 164 of 2022 is allowed.

(b) The CIRP against the Corporate Debtor would continue.

(c) IA No. 122 of 2022 is dismissed.