2019 (5) TMI 1823 - Tri - Insolvency and Bankruptcy

Withdrawal of the application under Section 12A of the Code - It is stated that the application was not accompanied by bank guarantee towards estimated costs incurred for the purposes of Clause (c) and Clause (d) of Regulation 31 till the date of application as per the mandatory provisions of the Regulations and that the corporate debtor has undertaken to pay outstanding CIRP expenses through post-dated cheques - HELD THAT - The relevant Regulation 30 A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (Regulations) provide that the application for withdrawal under Section 12A shall be submitted before issue of invitation for expression of interest under Regulation 30 A - The Hon'ble Supreme Court in Brilliant Alloys Pvt. Ltd. Vs. Mr. S. Rajagopal Ors., 2019 (3) TMI 1016 - SC ORDER has stated that Regulation 30A (1) is not mandatory but is directory for the simple reason that on the facts of the given case, application for withdrawal may be allowed in exceptional cases even after issue of invitation for expression of interest under Regulation 30A. In the present case, the minutes of the 6th meeting of the COC held on 31.03.2019 state that the RP informed COC that the Corporate Debtor has already made very serious and earnest efforts and cleared significant part of the debt even without any support from its own debtors who are not clearing the debts under the garb of ongoing CIRP and that after a lot of deliberation, understanding was reached with reference to the dues of four financial creditors being plot buyers including the applicant Shri Sandeep Bidani. Thereafter, the resolution for withdrawal of the CIRP Process under Section 12-A of the Code was approved by the COC with 100% voting share. As regards compliance of Regulation 30A (2) for providing bank guarantee towards estimated costs incurred for purposes of clause (c) and (d) of Regulation 31, it is noted that the no objection of the RP for payment through postdated cheques has been filed as Annexure A-2 of the application. The application for withdrawal under Section 12A being approved by the COC with 100% voting share, we approve the application for withdrawal of the petition - Application disposed off.

Summary

Issues Involved:
1. Initiation of insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Application for withdrawal under Section 12A of the Code.
3. Compliance with Regulation 30A regarding withdrawal application submission.
4. Approval of withdrawal application by the Committee of Creditors (COC).
5. Compliance with bank guarantee requirements under Regulation 31.

Analysis:

1. The judgment pertains to the initiation of insolvency resolution process against a corporate debtor by a financial creditor, leading to the appointment of an Interim Resolution Professional (IRP) and subsequent confirmation as the Resolution Professional (RP) by the Committee of Creditors (COC). The timeline of events, including the extension of the Corporate Insolvency Resolution Process (CIRP), is detailed, highlighting the procedural aspects followed in accordance with the Code.

2. The application under Section 12A of the Code for withdrawal of the insolvency resolution process is examined. The applicant, a financial creditor, submitted the withdrawal application without a bank guarantee for estimated costs as required by Regulation 31. However, the Corporate Debtor agreed to pay outstanding CIRP expenses through post-dated cheques. The COC approved the withdrawal application with a significant voting share, prompting the Resolution Professional to move the application before the Tribunal for consideration.

3. The Tribunal considered the submission regarding the withdrawal application and reviewed the relevant Regulation 30A of the Insolvency and Bankruptcy Board of India Regulations. Referring to a Supreme Court order, it was established that while Regulation 30A is not mandatory, withdrawal applications can be allowed even after the invitation for expression of interest under exceptional circumstances. In this case, the COC's approval and the Corporate Debtor's efforts in debt clearance were crucial factors in permitting the withdrawal application.

4. The judgment emphasizes the COC's unanimous decision with a 100% voting share to withdraw the Corporate Insolvency Resolution Process under Section 12A of the Code. The resolution was based on the Corporate Debtor's efforts in debt settlement and the agreement reached with financial creditors, including the applicant. The Tribunal, in line with the COC's decision and the Supreme Court precedent, approved the withdrawal application despite the timing of the withdrawal request.

5. Lastly, the judgment addresses the compliance aspect related to the bank guarantee requirement under Regulation 31. It notes that the RP's no objection for payment through post-dated cheques was filed, indicating a form of compliance with the financial obligations. Based on the comprehensive review of the facts, the Tribunal approved the withdrawal application and disposed of the case, consigning it to the records as per the final order.

This detailed analysis of the judgment provides insights into the procedural, regulatory, and decision-making aspects involved in the insolvency resolution process and the subsequent withdrawal application under the Insolvency and Bankruptcy Code.