2022 (3) TMI 1217 - Tri - Insolvency and Bankruptcy

Seeking withdrawal of petition - settlement arrived at between the parties prior to the constitution of Committee of Creditors of the Corporate Debtor - HELD THAT - In the present case it is not disputed that CoC has not been constituted so far. The Hon'ble Apex 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. It is true that the procedure for preferring an application under Section 12A of the IBC is contained in Regulation 30A of the Corporate Insolvency Resolution Process Regulations, 2016. In the interest of justice, the Rule 11 of NCLT Rules, 2016 can be invoked in the instant case for withdrawal of petition - application allowed.

Summary

Issues:
1. Application for withdrawal of Corporate Insolvency Resolution Process (CIRP) under Rule 11 of NCLT Rules, 2016.
2. Clarification sought under Section 60(5) of Insolvency and Bankruptcy Code, 2016 regarding maintaining status quo by Interim Resolution Professional.

Analysis:

Issue 1: Application for withdrawal of CIRP under Rule 11 of NCLT Rules, 2016
The Operational Creditor filed an application seeking permission to withdraw the CIRP against the Corporate Debtor based on a settlement reached between the parties before the constitution of the Committee of Creditors. The applicant contended that the settlement rendered continuation of the insolvency proceedings unnecessary. The applicant deposited a partial amount in compliance with the order and relied on legal precedents to support the withdrawal under Rule 11 of NCLT Rules, 2016. The respondent, Interim Resolution Professional (IRP), raised objections alleging concealment of settlement details, incorrect filing, and financial obligations towards CIRP costs. The IRP highlighted concerns of fraudulent activities by the Corporate Debtor and pending claims from various statutory authorities. The Tribunal, after considering submissions, cited the Supreme Court's decision in Swiss Ribbons Pvt. Ltd. case, allowing withdrawal applications before the constitution of the Committee of Creditors. The Tribunal directed the applicant to pay additional fees to the IRP and allowed the withdrawal of the CIRP under Rule 11 of NCLT Rules, 2016.

Issue 2: Clarification sought under Section 60(5) of IBC, 2016
The Operational Creditor filed a separate application seeking clarification regarding the extent of maintaining status quo by the IRP until the next hearing following the admission order. As the main withdrawal application was allowed and disposed of, this clarification application was deemed infructuous and disposed of accordingly.

In conclusion, the Tribunal permitted the withdrawal of the CIRP under Rule 11 of NCLT Rules, 2016, after considering the settlement between the parties and the absence of the constituted Committee of Creditors. The Tribunal also addressed the related clarification application under Section 60(5) of IBC, 2016, which was disposed of due to the primary withdrawal application being allowed.