2020 (1) TMI 1266 - Tri - Insolvency and Bankruptcy

Permission for withdrawal of Petition under Section 12A of the IBC, 2016 - CIRP process - It is argued by the Interveners that the Application filed under Section 12A seeking withdrawal should not be allowed because the order passed by this Tribunal admitting the Petition against the Corporate Debtor is in rem and not an order in personam. It is urged that the Petitioner should only be allowed to withdraw this Application once the Corporate Debtor may have settled with all the other Creditors. HELD THAT - The Corporate Insolvency Resolution Process against the Corporate Debtor was initiated as on 30.08.2019 and the moratorium had also started, rendering all the other petitions filed by rest of Creditors as infructuous. Hence, in this case based on the facts circumstances if the Application under section 12A of the Code for withdrawal is allowed, it would cause heavy prejudice to the rest of the Creditors. Appeal for withdrawal of application is dismissed.

Summary

Issues:
1. Application for withdrawal under Section 12A of the Insolvency and Bankruptcy Code, 2016.
2. Moratorium initiation and appointment of Interim Resolution Professional.
3. Objections by Intervenors against the withdrawal application.
4. Legal implications of admitting a petition against the Corporate Debtor.
5. Prejudice to other Creditors if withdrawal application is allowed.

Analysis:
1. The judgment revolves around a Miscellaneous Application filed by a company seeking permission to withdraw a petition under Section 12A of the Insolvency and Bankruptcy Code, 2016, due to a settlement agreement.

2. The Tribunal noted an oversight in the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, where despite admission of a petition under section 9, no moratorium was imposed, and no Interim Resolution Professional (IRP) was appointed, leading to the inability to form a Committee of Creditors (CoC).

3. Various Intervention Applications were filed by creditors objecting to the withdrawal application, arguing that allowing withdrawal would be prejudicial as the proceedings were in rem, and settlement should involve all creditors, not just the Petitioner.

4. The Corporate Debtor's counsel relied on the Swiss Ribbons Pvt. Ltd. case, emphasizing that proceedings under the Code are in rem, and settlement should involve consultation with the overseeing body before individual settlement is permitted, especially in the absence of a formed CoC.

5. Citing the Alchemist Asset Reconstruction Company Ltd. case, the Tribunal reiterated that once a petition is admitted, the moratorium is automatically initiated, preventing the institution or continuation of proceedings against the Corporate Debtor, thereby rejecting the withdrawal application to prevent prejudice to other creditors.

6. Ultimately, the Tribunal dismissed the Miscellaneous Application for withdrawal under Section 12A, emphasizing that allowing withdrawal would heavily prejudice other creditors as the CIRP had commenced, and the moratorium was in effect, making other creditor petitions redundant due to the settlement sought by the Petitioner.