By Mahmia Raj- Law College Dehradun
CITATION: SLP(C) 31557 / 2018
APPLICABLE LAW: INSOLVENCY AND BANKRUPTCY 2016
AUTHOR OF THE JUDGEMENT: HON’BLE JUSTICE ROHINTON FALI NARIMAN & HON’BLE MR. JUSTICE NAVIN SINHA
It is quite possible that sometimes once the application for initiating CIRP process under Section 7,9 and 10 of the IBC code is filed, the creditor reached at the settlement by the corporate debtor and wants to withdraw the application to take out a corporate debtor from the hold of IBC. IBC (Adjudicating Authority) Rule 2016 under Rule 8 covers only those situations where the Adjudication Authority may allow to withdraw such application before its admission. Nevertheless, what about the situation where the creditor reached at the settlement post-admission, the IBC (Adjudicating Authority) Rule 2016 is silent about it.
The instant case is pertaining to a similar issue whereby the Hon’ble Supreme Court gave judgment on a similar issue.
FACTS OF THE CASE
The Petitioner Brilliant Alloys Pvt. Ltd filed an application under Section 10 of the IBC for volunteering initiating Corporate Insolvency Resolution Process before NCLT Chennai. The NCLT accepted the application and imposed moratorium under Section 14 of the IBC and Resolution Professional was appointed. Soon after the issue of invitation for expression of interest, the creditor arrived at the settlement with the corporate debtor. The Resolution professional filed an application under section 60(5) instead of Section 12A of the code to withdrawal of the application for CIRP process and to remove Corporate Debtor from the clutches of the code as a settlement was reached after the issue of invitation for expression of interest.
APPLICABLE PROVISION OF THE CODE:
A- SECTION 12A -WITHDRAWAL OF APPLICATION ADMITTED UNDER SECTION 7, 9 OR 10
This section of the code provides that the Adjudicating Authority may allow the withdrawal of the application filed under the above-stated Section if the COC approves such application with ninety percent of the voting shares.
B- SECTION 60(5)
This Section provides that the NCLT have the jurisdiction to entertain or dispose of any application or proceedings by or against a corporate debtor or corporate person.
JUDGEMENT OF THE NCLT
The Division Bench of the NCLT passed an order and it dismissed the application made by the Resolution Professional on the ground that stating that since Regulation 30A of the IBBI(Insolvency Resolution Process for Corporate Persons) Regulations, 2016 imposes conditions for withdrawal of application that it has to be filed before the invitation for expression of interest, Therefore the NCLT cannot pass an order allowing the withdrawal ignoring such conditional clause.
Aggrieved by order of the NCLT, the Corporate debtor filed a Special Leave Petition under Article 136 of the Constitution of India.
MAIN ISSUE BEFORE HON’BLE SUPREME COURT OF INDIA
Can withdrawal of application for Corporate Insolvency Resolution Process be allowed after the issuance of an invitation for expression of interest?
JUDGEMENT OF THE HON’BLE SUPREME COURT
The Division Bench of the Hon’ble Supreme court heard this petition and observed that the reason why the NCLT did not allow the withdrawal of such application because it was solely dependent on the Regulation 30 A Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 which specifically state that an application for withdrawal can be filed by IRP or RP before the issue of expression of interest.
The Hon’ble Supreme Court held that according to them, this regulation of IBBI has to read along with Section 12A of the IBC Code which specifically provides power to Adjudicating Authority to allow such withdrawal of the application if the Committee of Creditors approves it. Further, this Section does not contain any such stipulations, and the stipulation under 30 A of IBBI Regulation can only be construed as a directory which varies from case to case. Therefore, the Hon’ble Supreme court allowed the withdrawal in the instant case.
The Hon’ble Supreme Court was clear with it applicability of regulation30A in the instant case and gave it judgement on the issue. The judgement of this case created broader implication on the Essar Steel case which was then pending before the Supreme Court as the promoters of Essar Steel approached the Supreme Court for withdrawal of CIRP on the ground that they were ready to settle all debt of Essar Steel. After the judgement of the case, an amendment was made in Regulation 30A on 25th July 2019 which remove such stipulation. Now regulation 30A allow the withdrawal of such application even after the issue of expression of interest. However, the applicant has to give reasons for justifying such withdrawal after the issue of such invitations.