Tuesday, 4 October 2022

Imp. Rulings - Section 12A, Withdrawal Application

Imp. Rulings - Section 12A, Withdrawal Application 


Index;

  1. NCLT ND-III  (2024.08.28) in Pratham Expofab Pvt. Ltd. and Anr. Vs  Anil Matta (RP) and Anr. [IA/188/2024 in C.P.(IB)-995 of 2018] [Section 12A application post approval of Resolution Plan by CoC]

  2. NCLAT (2024.08.29) in Asha Chopra and Ors. v. Hind Motors India Ltd. and Ors..[(2024) ibclaw.in 531 NCLAT, Company Appeal (AT) (Insolvency) No. 1425-1428 of 2024 & I.A. No. 5180-5183 of 2024] [Withdrawal application during Liquidation process]

  3. NCLT Bangaluru (06.06.2022) in Shri. V S Varun,  Vs. M/s. South Indian Bank   [I.A. No. 63 of 2022 in CP (IB) No.366/BB/2019] [Liquidation period]

  4. Supreme Court (03.06.2022) in Vallal Rck v. M/s. Siva Industries And Holdings Limited And Ors [Civil Appeal Nos. 1811-1812 of 2022] [Commercial wisdom of CoC]

  5. NCLT  Mumbai-5 (06.08.2021) in Dinesh Gupta Vs. Rolta India Limited [M.A. No. 1196/2021 In C.P. No.1069/I&BP/NCLT/MAH/2020] [Proceeding-in-rem]

  6. NCLAT (28.11.2019) in Shweta Vishwanath Shirke & Ors. Vs. The Committee of Creditors & Anr. (Company Appeal (AT) (Insolvency) No. 601 of 2019) [Section-29A not applicable]

  7. NCLAT (28.08.2019) in Andhra Bank vs Sterling Biotech Ltd. [Company Appeal (AT) (Insolvency) No. 612 of 2019] [Section-29A not applicable]

  8. Supreme Court (25.01.2019) Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors.[Writ Petition (Civil) No. 99 of 2018].

  9. Supreme Court (14.12.2018) in Brilliant Alloys Private Limited Vs. Mr. S. Rajagopal & Ors. [Petition(s) for Special Leave to Appeal (C) No(s). 31557/2018] [Regulation - After EOI, not mandatory]

  10. NCLAT(09.08.2018) in V. Navaneetha Krishnan vs. Central Bank of India & Anr. [Company Appeal (AT) (Insolvency) Nos. 288 & 289 of 2018] [Liquidation process]

---------------------------------------------

1). NCLT ND-III  (2024.08.28) in Pratham Expofab Pvt. Ltd. and Anr. Vs  Anil Matta (RP) and Anr. [IA/188/2024 in C.P.(IB)-995 of 2018] held that;

  • # 6. The Ld. Counsel for the RP, on the other hand, stated that the prayers made in the I.A. cannot be allowed as the CoC of CD has already approved the Resolution Plan and an application under Section 30(6) of IBC, 2016 being C.A. No. 1489 of 2020 for approval of the Resolution Plan was filed by the RP way back on 21.02.2020. It is further stated that the settled position of law is that once the CoC has approved a Resolution Plan under Section 30(4) of IBC, 2016, it does not have jurisdiction or authority to consider a settlement proposal. 

  • 6.1 To support his contention, reliance has been placed on the judgement of Hon'ble NCLAT in “Hem Singh Bharana v. Pawan Doot Estate Pvt. Ltd., [CA (AT) (Ins) No. 1481 of 2022] in which it has been held that after approval of the Resolution Plan, CoC cannot entertain a settlement proposal.The order has also been affirmed by the Hon'ble Supreme Court on 30.01.2023 in “Hem Singh Bharana v. Pawan Doot Estate Pvt. Ltd, [2023 SCC OnLine SC 769]. Further, it is submitted that in “Nehru Place Hotels & Real Estates Pvt. Ltd. v. Sanjeev Mahajan & Ors.” [CA (AT) (Ins) No. 1715 and 1716 of 2023], it has been held that a settlement proposal under Section 12A of the IBC, 2016 cannot be put before the CoC after the approval of the Resolution Plan by the CoC. This view has also been affirmed by the Hon'ble Supreme Court on 05.02.2024 Sanjeev Mahajan v. Nehru Place Hotels and Real Estates Pvt Ltd & Ors., [Civil Appeal Nos 602-603 of 2024]. Further, in the matter of “Union Bank v. Mr. Kapil Wadhwan & Ors.” [(2022) ibclaw.in 88 NCLAT] also it has been held that there is no scope for negotiations once the CoC has approved the Resolution Plan. Relying on the above, the RP submitted that no such direction can be issued to the CoC. 

[Link Synopsis]

-----------------------------------------------------

2). NCLAT (2024.08.29) in Asha Chopra and Ors. v. Hind Motors India Ltd. and Ors..[(2024) ibclaw.in 531 NCLAT, Company Appeal (AT) (Insolvency) No. 1425-1428 of 2024 & I.A. No. 5180-5183 of 2024] held that; 

  • Section 12A itself contemplates withdrawal of the Application with the approval of the 90% voting share of the CoC in such manner as may be prescribed. The CoC exist till continuation of the CIRP and after the Order passed under Section 33 for Liquidation, the CoC does not continues so as to take a decision for withdrawal of an Application under Sections 7, 9 & 10. 

  • The Statutory Scheme of IBC thus clearly contemplates that withdrawal of Application is permissible only during CIRP period with the approval of 90% vote shares of the CoC. The Scheme of Liquidation and the Liquidation Regulations do not contemplate any withdrawal under Section 12A.

  • Thus, in the Liquidation Process, Compromise or Arrangement is contemplated as per Regulation 2B which clearly negates the submission of the Appellant that withdrawal is permissible only under Section 12A.

  • In view of the clear Statutory Scheme as delineated by 12A, Section 33 and Regulation 2B of the Liquidation Regulation, we are of the view that during Liquidation period, an Application under Section 12A is not permissible.

  • Regulation 31A did not require constitution of SCC with regard to the Liquidation which has commenced years ago from the provision for SCC came into the Regulation.

[ Link Synopsis ]

---------------------------------------------------

3). NCLT Bangaluru (06.06.2022) in Shri. V S Varun,  Vs. M/s. South Indian Bank   [I.A. No. 63 of 2022 in CP (IB) No.366/BB/2019] held that;

  • The Promoter submitted the letter dated 07.12.2021 along with the revival plan of the corporate debtor. The Bank also submitted its letter dated 07.12.2021 intimating their withdrawal of claim on account of settlement.

  • Even during the Liquidation period, if any person, not barred U/s.29A of the Code satisfy the demands of the Committee of Creditors, such person may move before the Adjudicating Authority for withdrawal of the proceedings.

  • If the CoC resolve with more than 90% voting share to accept the settlement proposal of the Petitioner and to allow for drawal of the CP, neither the NCLT nor the Hon'ble NCLAT shall interfere with the same unless the decision of the CoC is wholly capricious, arbitrary, irrational and de hors the provisions of the Statue or the Rules.

[ Link - Synopsis ]

---------------------------------------------

4). Supreme Court (03.06.2022) in Vallal Rck v. M/s. Siva Industries And Holdings Limited And Ors [Civil Appeal Nos. 1811-1812 of 2022] held that;

  • When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. 

  • The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the statute or the Rules.

  • It could thus be seen that this Court has found that if the CoC arbitrarily rejects a just settlement and/or withdrawal claim, the learned NCLT and thereafter the learned NCLAT can always set aside such decision under the provisions of the IBC.

[ Link - Synopsis ]

---------------------------------------------

5). NCLT  Mumbai-5 (06.08.2021) in Dinesh Gupta Vs. Rolta India Limited [M.A. No. 1196/2021 In C.P. No.1069/I&BP/NCLT/MAH/2020] held that; 

  •  . . when a petition under is admitted/triggered it becomes a proceeding in rem and even the creditor who has triggered the process would also lose control of the proceedings as Corporate Insolvency Resolution Process is required to be considered through the mechanism provided under the IB Code.

  • Decisions of the Hon’ble Supreme Court and the Hon’ble NCLAT clearly demonstrate that even in the event the original creditor and corporate debtor settle their disputes prior to constitution of the COC, this Hon’ble Tribunal still has sufficient jurisdiction to reject an application under Section 12A of the IBC if the facts and circumstances of the case before it warrant such rejection.

  • It is settled law that a judicial authority ought not to pass orders which would aid and/or further multiplicity of proceedings. In the present case, considering that over 75 nos. of Petitions under Sections 7 and 9 of the IBC are already pending against the Corporate Debtors, allowing the present withdrawal will evidently result in multiplicity of proceedings which ought to be avoided by this Tribunal.

  • Hon’ble Supreme Court in “Swiss Ribbons Pvt. Ltd. vs. Union of India” held that “at any stage where the Committee of Creditors is not yet constituted, a party can approach NCLT directly, the Tribunal may in exercise of the inherent powers under Rule 11 of NCLT Rules may allow or disallow an application for withdrawal of CIRP. The claim and rights of other creditors as it stands is not prejudiced/altered by the withdrawal of CIRP of Corporate Debtor.

  • The Bench has no doubt in its mind that considering that CIRP proceedings are in rem, the substantial claims of Financial Creditors cannot be disregarded or ignored in view of the purported settlement of certain employees of the Corporate Debtor.

[ Link - Synopsis

----------------------------------------

6). NCLAT (28.11.2019) in Shweta Vishwanath Shirke & Ors. Vs. The Committee of Creditors & Anr. (Company Appeal (AT) (Insolvency) No. 601 of 2019) held that;

  • # 12. From Section 12A and the decision of the Hon’ble Supreme Court in ‘Swiss Ribbons Pvt. Ltd. & Anr.’ (Supra), it is clear that the Promoters/Shareholders are entitled to settle the matter in terms of Section 12A and in such case, it is always open to an applicant to withdraw the application under Section 9 of the ‘I&B Code’ on the basis of which the ‘Corporate Insolvency Resolution Process’ was initiated.

  • # 13. In view of the aforesaid provisions of law, we hold that Section 29A is not applicable for entertaining/considering an application under Section 12A as the Applicants are not entitled to file application under Section 29A as ‘resolution applicant’.

  • # 14. In the present case, the ‘Corporate Insolvency Resolution Process’ was initiated pursuant to an application under Section 7 filed by the ‘Andhra Bank’ (Appellant herein). The application under Section 12A having been approved by the ‘Committee of Creditors’ more than 90% of the voting share, it was not open to the Adjudicating Authority to reject the same and that too on a ground of ineligibility under Section 29A, which is not applicable.

[ Link - Synopsis ]

-----------------------------------------------

7). NCLAT(28.08.2019) in Andhra Bank vs Sterling Biotech Ltd. [Company Appeal (AT) (Insolvency) No. 612 of 2019] held that;

  • As the  application under Section 12A having been approved by the ‘Committee of Creditors’ more than 90% of the voting share, it was not open to the Adjudicating Authority to reject the same and that too on a ground of ineligibility under Section 29A, which is not applicable.

[ Link - Synopsis ]

------------------------------------------------

8). Supreme Court (25.01.2019) Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors.[Writ Petition (Civil) No. 99 of 2018]. Held that;

  • Section 12A  is not violative of Article 14 

  • # 52. 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 the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the concerned parties and considering all relevant factors on the facts of each case.

  • # 53. The main thrust against the provision of Section 12A is the fact that ninety per cent of the committee of creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the committee of creditors do not have the last word on the subject. If the committee of creditors arbitrarily rejects a just settlement and/or withdrawal claim, the NCLT, and thereafter, the NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12A also passes constitutional muster.

[ Link Synopsis ]

-----------------------------------------

9). Supreme Court (14.12.2018) in Brilliant Alloys Private Limited Vs. Mr. S. Rajagopal & Ors. [Petition(s) for Special Leave to Appeal (C) No(s). 31557/2018] held that;

  • The only reason why the withdrawal was not allowed, though agreed to by the Corporate Debtor as well as the Financial Creditor -State Bank of India and the Operational Creditor-Respondent No.3, is because Regulation 30A states that withdrawal cannot be permitted after issue of invitation for expression of interest. 

  • According to us, this Regulation has to be read along with the main provision Section 12A which contains no such stipulation. 

  • Accordingly, this stipulation can only be construed as directory depending on the facts of each case. 

[ Link - Synopsis ]

----------------------------------------

10). NCLAT(09.08.2018) in V. Navaneetha Krishnan vs. Central Bank of India & Anr. [Company Appeal (AT) (Insolvency) Nos. 288 & 289 of 2018] held that;

  • Even during the liquidation period if any person, not barred under Section 29A, satisfy the demand of ‘Committee of Creditors’ then such person may move before the Adjudicating Authority by giving offer which may be considered by the ‘Committee of Creditors’, and if by 90% voting share of the ‘committee of creditors’, accept the offer and decide for withdrawal of the application under Section 7 of the I&B Code.............the order of liquidation passed by the Adjudicating Authority will not come in the way of Adjudicating Authority to pass appropriate order.

[ Link - Synopsis ]

-------------------------------------------


No comments:

Post a Comment

Disclaimer:

The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.