SCI (25.08.2021) in Kamal K. Singh Vs. Dinesh Gupta & Anr. [Civil Appeal No. 4993 of 2021] held that;
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. This will be decided after hearing all the parties concerned and considering all relevant factors on the facts of each case.
Excerpts of the order;
Leave granted.
(2) This appeal arises out of a judgment and order dated 06.08.2021 passed by the National Company Law Tribunal, Mumbai Bench, in I.A. NO.1196 of 2021 in Company Petition (IB) No.1069 of 2020, rejecting the application filed by the respondent no.1 under Rule 11 of the National Company Law Tribunal Rules, 2016 (for short, “the NCLT Rules”) praying inter alia for withdrawal of company petition and to set aside the initiation of Corporate Insolvency Resolution Process (CIRP) based on the settlement between the parties arrived before the constitution of Committee of Creditors (CoC).
(3) We have heard learned counsel for the parties. It is not in dispute that CoC has not been
constituted so far. This Court in Swiss Ribbons Private Limited and Anr. v. Union of India and Others – (2019) 4 SCC 17 has held that at any stage, before a Committee of Creditors is constituted, a party can approach National Company Law Tribunal (NCLT) directly and that the Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, allow or disallow an application for withdrawal or settlement. It was held thus :
“82. 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. This will be decided after hearing all the parties concerned and considering all relevant factors on the facts of each case.” (emphasis supplied)
(4) In the instant case, as noticed earlier, the applicant-respondent no.1 had made an application before the NCLT, Mumbai Bench, under Rule 11 of the NCLT Rules for withdrawal of company petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) on the ground that the matter has been settled between the Corporate debtor and the applicant-respondent no.1.
(5) Having heard learned counsel for the parties and having regard to the facts and circumstances of the case, we are of the view that the applicant respondent no.1 was justified in filing the application under Rule 11 of the NCLT Rules for withdrawal of the company petition on the ground that the matter has been settled between the parties.
(6) The appeal is accordingly allowed. The order of the NCLT dated 06.08.2021 is hereby set aside and the company petition, for which withdrawal application was filed under Rule 11 of the NCLT Rules, is ordered to be withdrawn. No costs.
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