2021 (10) TMI 479 - SCH - Insolvency and Bankruptcy

Seeking withdrawal of company petition - seeking to set aside the initiation of Corporate Insolvency Resolution Process (CIRP) based on the settlement between the parties arrived before the constitution of Committee of Creditors (CoC) - HELD THAT - This Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. 2019 (1) TMI 1508 - SUPREME COURT has held that at any stage, before a Committee of Creditors is constituted, a party can approach National Company Law Tribunal (NCLT) directly and that the Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, allow or disallow an application for withdrawal or settlement. In the instant case, the applicant-respondent no.1 had made an application before the NCLT, Mumbai Bench, under Rule 11 of the NCLT Rules for withdrawal of company petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) on the ground that the matter has been settled between the Corporate debtor and the applicant-respondent no.1 - the applicant-respondent no.1 was justified in filing the application under Rule 11 of the NCLT Rules for withdrawal of the company petition on the ground that the matter has been settled between the parties. The order of the NCLT dated 06.08.2021 is hereby set aside and the company petition, for which withdrawal application was filed under Rule 11 of the NCLT Rules, is ordered to be withdrawn - Appeal allowed.

Summary

Issues:
1. Application for withdrawal of company petition and setting aside the initiation of Corporate Insolvency Resolution Process (CIRP) based on settlement before the constitution of Committee of Creditors (CoC).

Analysis:
The Supreme Court heard an appeal stemming from a judgment by the National Company Law Tribunal (NCLT) rejecting an application under Rule 11 of the NCLT Rules for withdrawal of a company petition filed under the Insolvency and Bankruptcy Code, 2016 (IBC). The respondent sought withdrawal based on a settlement with the corporate debtor before the formation of the Committee of Creditors (CoC). The Court noted that as per the decision in Swiss Ribbons Private Limited and Anr. v. Union of India and Others, a party can approach the NCLT directly before the CoC is constituted, and the Tribunal may allow or disallow withdrawal or settlement applications under Rule 11 of the NCLT Rules. The Court emphasized the importance of consulting the CoC before individual corporate debtors settle claims in collective proceedings.

The Court found that since the CoC had not been formed in the present case, the respondent was justified in filing the withdrawal application under Rule 11 of the NCLT Rules due to the settlement between the parties. Considering the facts and circumstances, the Court allowed the appeal, setting aside the NCLT's order and granting withdrawal of the company petition. The Court ruled in favor of the respondent, ordering the withdrawal of the petition and stating that no costs were to be incurred.