2021 (5) TMI 1015 - Tri - Insolvency and Bankruptcy

Seeking withdrawal of the Corporate Insolvency Resolution Process - section 12A of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - I B Code and CIRP Regulations provide for various activities to be completed in a time bound manner and model time lines is provided as stated above inspite of the same, the CoC had time and again directed the RP to postpone the issue of EOI and FORM G, other activities of CIRP as stated earlier. By exercising their Commercial Wisdom, they cannot be permitted to not comply with the Provisions of the I B Code as well as Regulations framed thereunder. Neither RP, CoC has filed any IA for seeking permission of this AA in this regard thereby CoC in this case has taken Law in to its hands and not complied with applicable provisions of I B Code and CIRP Regulations. Further after receipt of NCLT approval for the present withdrawal application, within 60 days they would receive their outstanding amount, constituting Monitoring Committee etc is not in line the I B Code and CIRP Regulations further there is no backup plan is provided in case of failure to meet the shortfall within the time line agreed by the parties etc, and the settlement proposal contains lot of uncertainty, future events therefore the AA is of the confirmed view that the present application filed under Section 12 A of I B Code read with Regulation 30 A of IBBI (CIRP) Regulations, 2016 deserves no favourable consideration therefore this application is dismissed. Application dismissed.

Summary

Issues Involved:
1. Application for Withdrawal of Corporate Insolvency Resolution Process (CIRP) under Section 12A of the Insolvency and Bankruptcy Code, 2016.
2. Compliance with procedural requirements and timelines under the Insolvency and Bankruptcy Code (IBC) and CIRP Regulations.
3. Settlement Proposal by the promoters and its implications.
4. Role and decisions of the Committee of Creditors (CoC) and the Resolution Professional (RP).
5. Legal and procedural validity of the actions taken by the CoC and RP.

Issue-wise Detailed Analysis:

1. Application for Withdrawal of CIRP under Section 12A of the IBC:
The application was filed under Section 12A of the Insolvency and Bankruptcy Code, 2016, seeking the withdrawal of the Corporate Insolvency Resolution Process (CIRP) of Parinee Developers Private Limited by the Resolution Professional (RP). Section 12A allows the withdrawal of an application admitted under sections 7, 9, or 10 of the IBC, provided the application is approved by ninety percent of the voting share of the Committee of Creditors (CoC).

2. Compliance with Procedural Requirements and Timelines:
The Tribunal noted that the CoC had repeatedly postponed the issue of Expression of Interest (EOI) and Form G without obtaining approval from the Adjudicating Authority (AA). The IBC and CIRP Regulations stipulate a model timeline for various activities, such as forming an opinion on preferential transactions, filing applications for relief, and publishing Form G. Despite these requirements, the CoC postponed these activities under the pretext of settlement talks, which was not in compliance with the provisions of the IBC and CIRP Regulations.

3. Settlement Proposal by the Promoters:
The promoters submitted a settlement proposal on 08.12.2020, outlining a plan for the revival of operations and full payment to the lenders, including principal, interest, and all expenses. The settlement was contingent on the withdrawal of the Section 7 Petition by the NCLT. The proposal included upfront deposits made by the promoters to various lenders, such as STCI Finance Limited, Central Bank of India (CBI), Punjab National Bank (PNB), and State Bank of India (SBI). However, the Tribunal observed that the settlement proposal involved selling assets of the Corporate Debtor under moratorium, which is prohibited during the CIRP.

4. Role and Decisions of the CoC and RP:
The CoC had decided multiple times to postpone the issue of EOI and Form G, and the RP followed these directions. The Tribunal observed that the CoC, by exercising its commercial wisdom, cannot disregard the provisions of the IBC and CIRP Regulations. The RP was directed to follow the CoC's decisions but failed to seek formal approval from the AA for these postponements, which was seen as taking the law into their own hands.

5. Legal and Procedural Validity:
The Tribunal found that the actions of the CoC and RP were not in line with the IBC and CIRP Regulations. The settlement proposal contained uncertainties and future events without a backup plan for shortfalls. The Tribunal emphasized that compliance with the IBC and CIRP Regulations is mandatory and cannot be overlooked by the CoC's commercial decisions.

Conclusion:
The application for withdrawal under Section 12A of the IBC was dismissed by the Tribunal. The Tribunal directed that the CIRP in CP No. 4147/2019 would continue, and the RP was instructed to complete the process as per the timelines provided in the IBC and CIRP Regulations, 2016.