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2021 (2) TMI 944 - Tri - Insolvency and BankruptcySeeking for withdrawal of the Company Petition - whether the IRP is duty bound to file the Form-FA before the Adjudicating Authority within 3 days of receiving the settlement agreement? - whether the adjudicated authority can allow the withdrawal of CIRP in view of pending claims of other creditors and whether IRP has followed the letter and spirit of law as enunciated under Section 12A of the Code read with Regulation 30A (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. HELD THAT - It is an undisputed fact that the Corporate Debtor settled the dues of the original Operational Creditor soon after initiation of admission of CIRP on 23.10.219 against Corporate Debtor. The IRP upon receipt of Form FA immediately within 3 days filed an application to withdraw the CIRP against the Corporate Debtor - It is a trite law that Section 12A of the Code read with Regulation 30A (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, mandates the IRP that upon the receipt of Form FA, has to file an application for withdrawal with adjudicating authority within 3 days of receipt of the same. It is clear that once a code gets triggered by admission of CIRP against the Corporate Debtor, it is necessary that the body which is to oversee the resolution process must be consulted before any individual Corporate Debtor is allowed to settle his claims. This being a collective action is a proceeding in rem. The moot question now remains to be answered is whether the Adjudicating Authority can allow a withdrawal of CIRP against Corporate Debtor before constitution of COC - it is irrelevant whether the last date for receiving claims is still open or lapsed as per the public notice, upon receiving Form FA, it is bounded duty of IRP to file the application for withdrawal within 3 days under Section 12A of the Code read with Regulation 30A (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. It is an undisputed fact that the IRP has filed the application within 3 days and has acted in letter and spirit of law. This Adjudicating Authority is not vested with any powers under the Insolvency and Bankruptcy Code to direct settlement of parties while allowing withdrawal of CIRP against Corporate Debtor - further there are no misconduct of the IRP in filing application for withdrawal, within 3 days of receiving Form FA. The Cost of ₹ 10 lakhs on the Corporate Debtor is set aside - application allowed.
Issues Involved:
1. Whether the IRP can withhold an Application to the Adjudicating Authority after the Application in Form FA is submitted by the Creditor for withdrawal of the Company Petition. 2. Whether the IRP is prohibited from making an Application under Section 12A of the Insolvency and Bankruptcy Code read with Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, after the issue of the public advertisement under Section 13 of the Code read with Regulation 6 of the Regulations in Form A and before the last date for submission of the claims. 3. If such an Application is made, would it amount to misconduct on the part of the IRP. 4. Whether Adjudicating Authority has power to direct settlement of outstanding claims of other creditors who are not before it nor notices have been issued to them. Issue-wise Detailed Analysis: Issue 1: Whether the IRP can withhold an Application to the Adjudicating Authority after the Application in Form FA is submitted by the Creditor for withdrawal of the Company Petition. The Tribunal referred to the decision of the Hon’ble NCLAT in the case of Mr. K. C. Sanjeev v. Mr. Easwara Pillai Kesavan Nair, which clarified that the IRP is duty-bound to place the Application for withdrawal within three days of its receipt. The Tribunal emphasized that the IRP must act promptly upon receiving Form FA, in compliance with Section 12A of the Insolvency and Bankruptcy Code, 2016, and Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Tribunal concluded that the IRP cannot withhold such an application. Issue 2: Whether the IRP is prohibited from making an Application under Section 12A of the Insolvency and Bankruptcy Code read with Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, after the issue of the public advertisement under Section 13 of the Code read with Regulation 6 of the Regulations in Form A and before the last date for submission of the claims. The Tribunal examined the timeline of events and found that the IRP had adhered to the prescribed timeline by filing the application for withdrawal within three days of receiving Form FA, even though the last date for receiving claims had not yet passed. The Tribunal cited the Supreme Court’s judgment in Swiss Ribbons Pvt. Ltd. vs. Union of India, which allows a party to approach the NCLT directly for withdrawal before the constitution of the Committee of Creditors (CoC). The Tribunal concluded that the IRP is not prohibited from making such an application within the stipulated period. Issue 3: If such an Application is made, would it amount to misconduct on the part of the IRP. The Tribunal found no misconduct on the part of the IRP, as the IRP had acted in accordance with the law by filing the application for withdrawal within the mandated three-day period after receiving Form FA. The Tribunal set aside the cost of ?10 lakhs imposed on the Corporate Debtor by the Hon’ble Technical Member, stating that the IRP had followed the letter and spirit of the law. Issue 4: Whether Adjudicating Authority has power to direct settlement of outstanding claims of other creditors who are not before it nor notices have been issued to them. The Tribunal held that it is not vested with any powers under the Insolvency and Bankruptcy Code to direct the settlement of claims of other creditors while allowing the withdrawal of CIRP against the Corporate Debtor. The Tribunal emphasized that the rights and claims of other creditors are not prejudiced or altered by the withdrawal of CIRP. The Tribunal agreed with the decision of the Hon’ble Judicial Member and allowed the withdrawal of the Company Petition, thereby releasing the Corporate Debtor from the rigour of CIRP and allowing the board of directors to function independently. Conclusion: The Tribunal concluded that the IRP acted within the bounds of the law by filing the application for withdrawal within three days of receiving Form FA. The Tribunal allowed the withdrawal of the Company Petition, releasing the Corporate Debtor from CIRP, and set aside the cost imposed on the Corporate Debtor. The Tribunal emphasized that the Adjudicating Authority does not have the power to direct the settlement of claims of other creditors while allowing the withdrawal of CIRP.
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