NCLAT (19.07.2021) in Lalit Kumar Kesarimal Jain Vs. JM Financial Trustee Company Pvt. Ltd. & Ors [Company Appeal (AT) (Ins) No. 357 & 358 of 2021] held that;
It is the settled law that to meet the justice this Appellate Tribunal can exercise its inherent powers under Rule 11 of NCLAT Rules, 2016. We are of the considered view that this is a fit case for exercising the inherent powers under Rule 11 of NCLAT Rules, 2016. Thus, the aforesaid applications are allowed and CIRP against the Corporate Debtor has terminated.
Excerpts of the order;
19.07.2021: Heard on I.A. No. 1337 & 1338 of 2021 Applications under Rule 11 of NCLAT Rules, 2016. This matter was listed for hearing on 06.08.2021. Meanwhile, The Appellant has filed aforesaid Applications; therefore, today this matter is listed for orders on interim applications.
# 2. Ld. Sr. Counsel for the Appellant submits that on 30.06.2021 the parties have amicably settled the dispute between them and entered into a settlement agreement on the same day.
# 3. He further submits that as per the settlement agreement the CIRP costs and fees of Interim Resolution Professional (IRP) shall be borne by the Corporate Debtor Company. It is informed that in the light of settlement agreement the Respondent No. 1 through IRP has filed I.A. No. 1142 of 2021 before the Adjudicating Authority under Regulation 30 A (1) (a) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016.
# 4. In this matter the constitution of the Committee of Creditors (COC) was stayed by this Appellate Tribunal, therefore, withdrawal of the CIRP pre-constitution of CoC will not bar other Creditors for pursuing their remedies under law including Section 7 or 9 of the IBC, therefore, no harm or prejudice caused to any claimant. In view of the above facts and circumstances, it is prayed that this Appellate Tribunal may exercise its inherent powers under Rule 11 of NCLAT Rules, 2016 and terminate the CIRP initiated vide order dated 20.04.2021 passed by the Adjudicating Authority in CP No. 960-961 of 2020.
# 5. Ld. Sr. Counsel for the Respondent No. 1 (Financial Creditor) is in agreement with the submissions made by the Ld. Sr. Counsel for the Appellant (Corporate Debtor) and submits that the CIRP may be terminated.
# 6. Ld. Counsel for the IRP has stated at bar that the IRP has already received the fees upto 30.06.2021 and the Corporate Debtor Company shall pay the remaining fees of IRP and CIRP costs.
# 7. After hearing Ld. Sr. Counsels for the parties, we have gone through the record.
# 8. Brief facts of this case are that the Financial Creditor (R-1) filed CP No. 960-961 of 2020 before the Adjudicating Authority under Section 7 of the IBC for initiating CIRP against the Corporate Debtor (Kumar Urban Development Pvt. Ltd.) Ld. Adjudicating Authority vide impugned order dated 20.04.2020 admitted the Application.
# 9. Being aggrieved the Appellant who is Promoter/Director of the Corporate Debtor has preferred this Appeal.
# 10. We have considered the submissions of Ld. Counsels for the parties. It is the settled law that to meet the justice this Appellate Tribunal can exercise its inherent powers under Rule 11 of NCLAT Rules, 2016. We are of the considered view that this is a fit case for exercising the inherent powers under Rule 11 of NCLAT Rules, 2016. Thus, the aforesaid applications are allowed and CIRP against the Corporate Debtor has terminated. The Corporate Debtor is free from the rigours of the CIRP. The settlement agreement is taken on record. The parties shall bound by the terms and conditions of the settlement agreement and the same is deemed to be part of this order. Resultantly, CA (AT) (Ins) No. 357 & 358 of 2021 are disposed of and the interim order is vacated, the date of hearing 06.08.2021 is cancelled. No order as to costs.
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We know that Section 12 A provides the withdrawal of application by Applicant, and in manner provided under CIRP Regulation 30A, in first scenario 30-A (1)(a)- An applicantion of withdrawal could be made by Applicant through IRP before constitution of COC. and on satisfaction AA may allow the withdrawal of CIRP which is termed as Termination of CIRP. and regulation 30A also requires submission of bank guanrantee for sum equivalent to CIRP Cost up to date of application for withdrawal.
ReplyDeleteConcept of 90% voting approval falls where COC formed.
here it is notable that the given case provides that Financial Creditor has made settlement with Corporate debtor and compliance of regulation 30A in term of procedure and payment of CIRP Cost is done.
so there is no necessity of using Rule 11 for termination of CIRP.
interesting point is here, the application is made at pre COC constitution period where only one claimant Financial creditor raised question about solvency and filed section 7 application, so NCLAT approved and accepted the Settlement Agreement and made it part of order with binding to all parties.
however if this case fall for settlement an withdrawal than OTS/Proposal should satisfy the requirement of COC and must be approved by 90% voting shares of COC.
why Rule 11 used not understand?
It's quite interesting to note that Rule 11 has become a very powerful tool for NCLT/NCLAT, as an alternative to Article 142 of the Constitution of India, under power lies with Hon'ble Supreme Court only.
DeleteArticle 142 of Constitution of India
“142. Enforcement of decrees and orders of Supreme Court and unless as to discovery, etc.-
(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or orders so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, in such manner as the President may by order prescribe.
(2) Subject to the provisions of any law made in this behalf by Parliament, the Supreme Court shall, as respects the whole of the territory of India, have all and every power to make any order for the purpose of securing the attendance of any person, the discovery or production of any documents, or the investigation or punishment of any contempt of itself.”
The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
10. Filing of application and application fee.—(1) Till such time the rules of procedure for conduct of proceedings under the Code are notified, the application made under subsection (1) of section 7, sub-section (1) of section 9 or sub-section (1) of section 10 of the Code shall be filed before the Adjudicating Authority in accordance with rules 20, 21, 22, 23, 24 and 26 of Part III of the National Company Law Tribunal Rules, 2016.
The above rules do not provide for application of Rule 11 of NCLT rules, for proceedings before AA under IBC