2019 (5) TMI 1826 - Tri - Insolvency and Bankruptcy

Permission for withdrawal of application - settlement of the outstanding Debt - HELD THAT - Under section 12A an Adjudicating Authority can allow the withdrawal of Application admitted u/s. 7 on an Application made by the Applicant with the approval of 90% voting share of the Committee of Creditors. Since in this case only one Financial Creditor i.e. the Petitioner himself, is on record hence entitled to move this Application for withdrawal of his own Application moved against the Corporate Debtor. As well as the provisions of Section 12A read with Regulation 38 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016, the Application for withdrawal of the Insolvency Proceedings is hereby allowed - Petition filed under section 7 of the IBC by the Petitioner stood withdrawn without proceeding for Insolvency, as prayed for, therefore, to be consigned to records.

Summary

Issues:
1. Validity of Consent Terms for settlement of outstanding debt.
2. Discharge of Corporate Debtor in view of settlement.
3. Withdrawal of Insolvency Petition u/s. 12A of IBC.
4. Guidelines from recent Supreme Court decision on settlement of claims before constitution of Committee of Creditors.

Analysis:

1. The application was submitted by a suspended director of the Corporate Debtor seeking validation of Consent Terms dated April 11, 2019, for settlement of outstanding debt. The terms included declaration of validity, discharge of the Corporate Debtor, and disposal of the petition based on the settlement agreement.

2. A petition under Section 7 of the IBC was filed by a Financial Creditor for an outstanding loan amount against the Corporate Debtor, which was admitted, and an Interim Resolution Professional was appointed. A Consent Term was executed for settlement, including the payment of a Manager Cheque and reimbursement of fees, leading to the withdrawal of the claim against the security held by the Financial Creditor.

3. The Interim Resolution Professional confirmed the settlement terms, stating that no creditor had lodged any claim. As per Section 12A, the Adjudicating Authority can allow withdrawal with the approval of 90% voting share of the Committee of Creditors. Since only one Financial Creditor was involved, the Petitioner was entitled to withdraw the Insolvency Petition.

4. Referring to a recent Supreme Court decision, the Tribunal highlighted the necessity of consulting the Committee of Creditors before settling claims in a collective proceeding. However, in the absence of a constituted committee, the NCLT can allow or disallow withdrawal or settlement applications after considering all relevant factors. Following these guidelines and provisions of Section 12A, the Tribunal allowed the withdrawal of the Insolvency Proceedings, effectively consigning the petition to records.