2017 (7) TMI 1148 - AT - Insolvency and Bankruptcy

Corporate insolvency resolution process - permission to withdrawal - Held that - Before admission of an application under Section 7, it is open to the Financial Creditor to withdraw the application but once it is admitted, it cannot be withdrawn and is required to follow the procedures laid down under Sections 13, 14, 15, 16 and 17 of I&B Code, 2016. Even the Financial Creditor cannot be allowed to withdraw the application once admitted, and matter cannot be closed till claim of all the creditors are satisfied by the corporate debtor. Mere admission without subsequent step of advertisement having carried out, would not amount to refusal of claim of other creditors. Such submission as made by learned counsel for the appellant cannot be accepted in view of the provisions of the Act. The appellant requests to exercise inherent power, under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 which reads as follows 11. Inherent powers - Noting in these rules shall be deemed to limit or otherwise affect the inherent powers of the Appellate Tribunal to make such orders or give such directions as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Appellate Tribunal. However, as the said Rule 11 has not been adopted for the purpose of I&B Code, 2016 and only Rules 20 to 26 have been adopted in absence of any specific inherent power and where there is no merit, the question of exercising inherent power does not arise.

Summary

Issues Involved:
Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016; Withdrawal of application before and after admission; Settlement between parties affecting the admitted application; Exercise of inherent powers by the Appellate Tribunal.

Analysis:
The judgment pertains to an appeal by a Corporate Debtor against an order passed by the Adjudicating Authority admitting an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 by a financial creditor. The Adjudicating Authority found that a default had occurred when a cheque issued for redemption of debentures was dishonored, leading to the admission of the application for initiating the corporate insolvency resolution process.

The respondent, a financial creditor, argued that a settlement had been reached between the parties, with a partial payment made. However, the settlement could not be a ground to interfere with the admitted application unless there was another valid reason.

The judgment highlighted Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, which allows withdrawal of an application before admission. Once admitted, the application cannot be withdrawn, and the procedures under Sections 13 to 17 of the I&B Code must be followed. The Tribunal clarified that even the financial creditor cannot withdraw the application post-admission until all creditors' claims are satisfied by the corporate debtor.

The Tribunal emphasized that mere admission without subsequent steps like advertisement does not amount to the refusal of other creditors' claims. The appellant's request to exercise inherent powers under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 was rejected as Rule 11 was not adopted for the I&B Code, and only Rules 20 to 26 were applicable.

Ultimately, the Tribunal found no merit in the appeal and dismissed it, stating that the exercise of inherent powers was unnecessary in the absence of merit. The judgment concluded without imposing any costs on either party.