2017 (5) TMI 1635 - Tri - Companies Law

Corporate insolvency process - permission to withdraw the Petition - Held that - Application filed under Section 9 of the IBC 2016, for initiating Corporate Insolvency Resolution Process, has been admitted on 20/04/2017 and in compliance of the order dated 20/04/2017 publication of notice was made in Newspapers for inviting claim from other creditors and for declaration of Moratorium. It appears from the provisions of Section 9(5)(ii)(b) that if repayment of the debt amount is made by the Operational Debtor, then adjudicating authority has power to reject the Petition, before admission of the Petition. After the admission, the Petition acquires the character of Representative suit and through publication of Notice in Newspapers, applications have been invited from all the creditors of the company to file their claim before IRP. After admission of the Petition under IBC 2016, the Petition cannot be dismissed on the basis of compromise between Operational Creditor and Operational Debtor, because other creditors of the company have also right to file their claim. After admission of Petition under IBC 2016, the nature of petition changes to representative suit and the lis does not remain only between Operational Creditor and Operational Debtor. Therefore, Operational Creditor and Operational Debtor alone have no right to withdraw the Petition after admission. On the above basis it is clear that the Application regarding permission to withdraw the Petition is not maintainable at this stage and therefore, the IA deserves to be dismissed.

Summary

Issues:
1. Withdrawal of the Petition under Section 9 of the Insolvency and Bankruptcy Code 2016 (IBC-2016).
2. Authority of the adjudicating body to reject the application for Corporate Resolution Process.
3. Nature of the petition post-admission under IBC 2016.
4. Maintainability of the application for withdrawal of the Petition.

Analysis:
1. The Insolvency Resolution Professional (IRP) submitted a progress report indicating that the Committee of Creditors (CoC) decided to abstain from voting in the first meeting and deferred decisions to the next meeting post-circulation of the information memorandum. The Corporate Debtor filed IA No. 226/KB/2017 seeking to withdraw the Petition after an amicable resolution with the Applicant. The Petitioner expressed intent to withdraw the Petition, leading to the application for withdrawal.

2. The Petition was filed under Section 9 of IBC 2016, admitted by the Tribunal, and an IRP appointed. The Operational Debtor settled with the Operational Creditor post-public announcement. The IBC 2016 empowers the adjudicating authority to reject the Corporate Resolution Process application if the Operational Debtor repays the debt. The process commences upon admission, and post-admission, the Petition transforms into a representative suit inviting claims from all creditors.

3. The nature of the Petition changes post-admission under IBC 2016, evolving into a representative suit involving all creditors, not limited to the Operational Creditor and Debtor. The Petition cannot be withdrawn unilaterally after admission as other creditors have the right to file their claims. The Petition's dismissal based on a compromise between the Operational parties is not permissible post-admission.

4. The Tribunal concluded that the application for withdrawal of the Petition, IA No. 226/KB/2017, was not maintainable at that stage. The Tribunal dismissed the application, directing the IRP to proceed as per the provisions of IBC 2016. The case was listed for further proceedings on a specified date.

This detailed analysis highlights the Tribunal's decision regarding the withdrawal of the Petition under IBC 2016, the authority to reject the Corporate Resolution Process application, the nature of the Petition post-admission, and the maintainability of the withdrawal application, providing a comprehensive understanding of the judgment.