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2021 (8) TMI 1281 - AT - Insolvency and BankruptcySeeking withdrawal of application u/s 12A of the IBC - CoC has not complied the provisions of IBC as well as Regulation as regards time limitation or not - receiving of outstanding amount constituting monetary committee inline of IBC and CIRP Regulation or not - backup plan is provided in case of failure to meet short fall within the time line agreed by the parties or not - it is also alleged that Settlement proposal contends a lot of uncertainty and depends on future events - HELD THAT - The legislation has provided a procedure for withdrawal of Application under Section 7, 9 or 10 of the IBC. In this case, the CoC has been constituted, therefore, the Application for withdrawal approved by the 99.9% voting shares of the CoC and the Application has been filed through the RP as provided under Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (Regulations). There is a provision in the settlement deed that in case the settlement fails, the lenders may file Application for revival of CIRP or may file Application for initiation of contempt proceedings against the promoters of the Company. None of the conditions of settlement is against the provisions of IBC and Regulation and CoC has taken a commercial decision by voting shares of 99.9%. In such a situation, it is not appropriate to dismiss the Application on the ground that the CoC has not taken steps in time bound manner as provided in IBC and Regulations. The Application under Section 12A is allowed and the Application filed by STCI Finance Ltd. under Section 7 of the IBC is withdrawn - Application allowed.
Issues:
1. Dismissal of Application under Section 12A of the IBC by the Adjudicating Authority. 2. Compliance with provisions of IBC and CIRP Regulations by the CoC. 3. Validity of settlement terms and conditions. 4. Commercial decision-making by the CoC. 5. Legality of the impugned order. Analysis: The judgment by the National Company Law Appellate Tribunal, New Delhi involved the dismissal of an Application under Section 12A of the IBC by the Adjudicating Authority. The Appeals were filed by the Appellant, who were Promoters and Shareholders of the Corporate Debtor, and the Financial Creditor, STCI Finance Ltd. The Adjudicating Authority had dismissed the Application I.A. No. 264 of 2021 in CP (IB) No. 4147/MC/C-II/2019 under Section 12A of the IBC, which was challenged in the Appeals. The key issue revolved around the compliance of the CoC with the provisions of the IBC and CIRP Regulations. The CoC had approved a settlement proposal with 99.91% votes in favor, leading to the withdrawal of the Application under Section 7 of the IBC. The Adjudicating Authority had raised concerns regarding the timelines, conditions, and uncertainties in the settlement proposal. The Appellants argued that the CoC's decision was a commercial one aimed at ensuring debt repayments and the continuity of the Corporate Debtor's business, aligning with the objectives of the IBC. They contended that the settlement terms did not violate any laws and provided for remedies in case of default. The Adjudicating Authority's dismissal was criticized for being based on irrelevant considerations and hyper-technical observations. Upon thorough consideration, the Appellate Tribunal found the dismissal of the Application under Section 12A unjustified. The Tribunal noted that the CoC had followed the prescribed procedures, and the settlement terms did not contravene the IBC or Regulations. With 99.9% voting shares in favor of the settlement, the Tribunal upheld the commercial wisdom of the CoC and allowed the Application under Section 12A, withdrawing the Application under Section 7 of the IBC. Conclusively, the Tribunal set aside the impugned order, releasing the Corporate Debtor from insolvency proceedings and allowing it to operate independently. The terms of the settlement were deemed binding on all parties, with the Corporate Debtor bearing the IRP/RP's fees and CIRP costs. The Appeals were allowed, and no costs were awarded. This detailed analysis showcases the legal intricacies surrounding the dismissal of the Application under Section 12A of the IBC, emphasizing compliance, commercial decisions, and the validity of settlement terms in insolvency proceedings.
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