2019 (2) TMI 2007 - AT - Insolvency and Bankruptcy

Permission for withdrawal of application - grievance of the Punjab National Bank is that Mr. Krishna Kumar Mintri the shareholder while settled the claim with the sole financial creditor and other claimants agreed to make payment of fees and resolution cost of the Resolution Professional as verified and approved by the Committee of Creditors (Punjab National Bank) - HELD THAT - The issue relating to application of Section 12A and Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016 framed by the IBBI fell for consideration before the Hon ble Supreme Court in BRILLIANT ALLOYS PRIVATE LIMITED VERSUS MR. S. RAJAGOPAL ORS. 2019 (3) TMI 1016 - SC ORDER it is clear that Regulation 30A cannot override the substantive provision of Section 12A. The Regulation has to be read alongwith the provision in Section 12A which contains no such stipulation. No discrimination can be made for withdrawal of an application under Section 7 or Section 9 on the ground that the application was filed before a cutoff date or filed after a cutoff date. Such cutoff date has no nexus with the objective which is to be achieved. The Adjudicating Authority having failed to notice the aforesaid provisions issued long order discussing regulations and provisions of the Code. The Adjudicating Authority should have allowed application of withdrawal filed by the Applicant - Punjab National Bank the Committee of Creditors having approved the Settlement with 100% voting share. So far as Resolution Applicant is concerned they do not have any right to plead merely because they have filed resolution plan till its approval or rejection by the Adjudicating Authority - the application filed by Punjab National Bank for withdrawal of the application under Section 7 is allowed - petition dismissed.

Summary

Issues:
1. Application under Section 12A for withdrawal of insolvency application.
2. Interpretation of Regulation 30A in relation to Section 12A.
3. Authority to approve withdrawal of application under Section 7.
4. Rights of Resolution Applicant.
5. Payment of fees and resolution costs to Resolution Professional.

Issue 1: Application under Section 12A for withdrawal of insolvency application

The Punjab National Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against a company. Subsequently, the bank sought withdrawal of the application under Section 12A after settling the claims with the debtor and other creditors. However, the National Company Law Tribunal rejected the withdrawal application citing that Section 12A was not applicable since the Section 7 application was filed earlier.

Issue 2: Interpretation of Regulation 30A in relation to Section 12A

The Tribunal referred to a Supreme Court case where it was clarified that Regulation 30A cannot override the substantive provision of Section 12A. The Court emphasized that the Regulation must be read along with Section 12A, which does not contain any stipulation against withdrawal after the issuance of an invitation for expression of interest. The Court allowed the settlement and annulled the proceedings, highlighting that the Regulation should be construed as directory based on the facts of each case.

Issue 3: Authority to approve withdrawal of application under Section 7

The Tribunal held that the Adjudicating Authority should have allowed the withdrawal application filed by the Punjab National Bank, especially since the Committee of Creditors had approved the settlement with 100% voting share. It emphasized that no discrimination should be made based on the filing date of the application under Section 7 or Section 9, as the cutoff date has no relevance to the objective of the Code.

Issue 4: Rights of Resolution Applicant

The Tribunal clarified that a Resolution Applicant does not have the right to plead merely because they have submitted a resolution plan until its approval or rejection by the Adjudicating Authority. It referenced a Supreme Court case to support this stance, emphasizing that the Resolution Applicant's rights are contingent on the approval of their plan.

Issue 5: Payment of fees and resolution costs to Resolution Professional

Regarding the payment of fees and resolution costs to the Resolution Professional, the Tribunal directed the Corporate Debtor to pay the approved amount as per the Committee of Creditors' agreement. The Punjab National Bank was tasked with verifying and approving the bills submitted by the Resolution Professional within two weeks, following which the Corporate Debtor was required to make the payment within three weeks.

In conclusion, the Tribunal allowed the appeal, set aside the impugned order, permitted the withdrawal of the application under Section 7, and dismissed the Company Petition as the parties had settled the claim. The Corporate Debtor was restored to its previous position, and all orders related to the insolvency proceedings were declared illegal and set aside.