2019 (5) TMI 1584 - Tri - Insolvency and Bankruptcy

Withdrawal of petition - whether an Applicant who has filed a petition u/s 10 is entitled to withdraw its own petition u/s 12A of the Code, especially when the said applicant has furnished the impugned Petition(CP 1362/2018) and now offering a onetime settlement as a Director in the suspended management of the Debtor Company? HELD THAT - Section 12A is inserted w.e.f. 06.06.2018 which prescribes that the Adjudicating Authority may allow the withdrawal of application admitted either u/s 7 or u/s 9 or u/s 10, on an application made by the Applicant with the approval of 90% voting share of the CoC. The first reaction during the course of hearing of this Bench was that how it is justifiable on the part of an applicant who has moved a Petition u/s 10 to declare itself insolvent (as happened in this case) at one point of time and thereafter at a later stage suo-moto seeking permission for withdrawal of the said Petition? It has also been questioned that in this manner the procedure laid down in the provisions of the IBC may be wrongly utilized? How a person can be allowed to play with the precious time of a Court by moving a Petition with the prayer to commence CIRP and at the fag end of the process seeking permission of withdrawal of the said Petition? But, the answer is simple and single that the Code has now subscribed such procedure through which withdrawal is possible in respect of a petition filed u/s 10 of the Code. The condition subscribed is that on an Application made by the Applicant withdrawal can be allowed, if approved by 90% voting share of the CoC. On this point, the Applicant has clarified that as a Director of the Debtor Company the said Application u/s 10 was signed by him and now he is the signatory of this withdrawal application, hence qualified. Provisions of section 10 are unambiguous where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating CIRP with the AA. The term corporate applicant is defined u/s 5 of Definitions of IBC , means a member of the corporate debtor company who is authorized to make an application for CIRP under the constitutional document of the Corporate Debtor or a person who has the control and supervision over the financial affairs of the Corporate Debtor - In the present case an admitted position is that Mr. Satyanarayan Malu is the person who has control and supervision over the financial affairs of the Corporate Debtor. It has also been clarified that he is one of the directors in the Board of the Corporate Debtor as well as duly authorized to act on behalf of the company. At the time when the Petition u/s 10 was filed, he was the signatory and now also signed this withdrawal application. This Application is submitted on 21.08.2018 by the Resolution Professional for approval of the Resolution Plan as prescribed u/s. 31(1) of The Insolvency Code - no adjudication under the provisions of The Code is now required because this Resolution Plan has become redundant.

Summary

Issues Involved:
1. Withdrawal of Company Petition under Section 12A of IBC.
2. Withdrawal of Resolution Plan by the Resolution Applicant.
3. Offering of One Time Settlement (OTS) by ex-director of the Corporate Debtor.

Issue-Wise Detailed Analysis:

1. Withdrawal of Company Petition under Section 12A of IBC:
The primary issue was whether the applicant who filed a petition under Section 10 of the Insolvency and Bankruptcy Code (IBC) could withdraw the same under Section 12A. The applicant, a member of the suspended Board of Directors of SBM Paper Mills, sought to withdraw the petition and offered a One Time Settlement (OTS) to the sole financial creditor, Allahabad Bank. The Tribunal noted that Section 12A allows withdrawal of applications with the approval of 90% voting share of the Committee of Creditors (CoC). The applicant had made an improved OTS offer of ?17 crores, which was later increased to ?18 crores, and deposited ?1 crore as upfront payment. The Tribunal found that the withdrawal was beneficial for all stakeholders, as it ensured 100% recovery of dues without a haircut. The Tribunal allowed the withdrawal application, subject to a litigation cost of ?5,00,000 to be paid to MCA/NCLT.

2. Withdrawal of Resolution Plan by the Resolution Applicant:
The second issue was whether the Resolution Applicant, M/s. Khandesh Roller Flour Mills Pvt. Ltd., could withdraw its Resolution Plan, which had already been approved by the CoC. The Tribunal noted that allowing such a withdrawal could lead to liquidation, which was not in the best interest of the stakeholders. The Tribunal emphasized that such attempts should be discouraged and partially forfeited the earnest money deposit of ?50 lakhs, retaining ?25 lakhs for CIRP costs and related expenses. The Tribunal denied the complete return of the earnest money to the Resolution Applicant.

3. Offering of One Time Settlement (OTS) by ex-director of the Corporate Debtor:
The third issue was whether the ex-director of the Corporate Debtor, who was qualified under Section 29A of the IBC, could offer an OTS to the financial creditor. The Tribunal noted that the applicant was not a "wilful defaulter" and had the control and supervision over the financial affairs of the Corporate Debtor. The CoC and Allahabad Bank found the OTS offer more economically advantageous compared to the Resolution Plan. The Tribunal concluded that the OTS proposal was in the best interest of the Corporate Debtor and all stakeholders, ensuring 100% recovery of the debt.

Conclusion:
The Tribunal allowed the withdrawal of the Company Petition under Section 12A of the IBC, subject to a litigation cost. The withdrawal of the Resolution Plan was partially allowed with a forfeiture of half the earnest money deposit. The OTS offer by the ex-director was found to be beneficial for all stakeholders, ensuring full recovery of the debt. The Tribunal emphasized the importance of a practical and purposive interpretation of the IBC provisions to achieve equitable results.