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2024 (1) TMI 1165 - AT - Insolvency and BankruptcySeeking withdrawal of CIRP - dismissal merely on the ground of commercial wisdom of the CoC without looking into spirit of the Code which is meant for revival of the Corporate Debtor and not for recovery mechanism for the bankers - Section 12A r/w Regulation 30 A for CIRP Regulation 2016 - HELD THAT - In view of provisions laid down under Section 12A of IBC it is crystal clear that once CoC is constituted there is a mandatory requirement of 90% of the voting shares of the CoC in favour of the resolution for withdrawal of the CIRP of the Corporate Debtor and if the voting of the CoC is below 90% then the application of withdrawal cannot be allowed and hence it need to be dismissed. In the present case the Respondent No. 1 with 19.94% voting did not support 12A Application filed by the Corporate Debtor hence the Adjudicating Authority rightly gave its verdict. Section 12A of the Code is very clear that any withdrawal of CIRP by the Appellant need to have minimum voting support of 90% of the CoC and in the present case never met this threshold. Thus the Adjudicating Authority could not direct for settlement to the HDFC in contravention of the Code. On taking into consideration the various judgments where it has been held by the Hon ble Supreme Court of India that commercial wisdom is non judiciable and there is extremely limited scope for judicial intervention. There are no merit in the appeal - appeal dismissed.
Issues Involved:
1. Whether the Adjudicating Authority committed any error in accepting the CIRP application of the Operational Creditor. 2. Whether the dismissal of the application for withdrawal of CIRP under Section 12A of the Code was justified. Summary: Issue 1: Acceptance of CIRP Application The Appellant, Mr. Narendra Jindal, challenged the Impugned Order dated 08.04.2022, which admitted the application filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process (CIRP) against M/s Sharda Ma Enterprises Private Limited (Corporate Debtor). The Appellant argued that the Corporate Debtor faced financial difficulties due to government policies and international market conditions, leading to defaults. Despite attempts to settle the dues, the Corporate Debtor failed to comply with the terms of the settlement agreements. The Adjudicating Authority found a clear debt of more than Rs. 1 Crore payable to the Operational Creditor and initiated the CIRP. The tribunal upheld the Adjudicating Authority's decision, noting the Appellant's repeated failures to meet payment commitments. Issue 2: Dismissal of Withdrawal Application under Section 12A The Appellant also challenged the dismissal of the application for withdrawal of CIRP under Section 12A of the Code. The Appellant argued that a fresh settlement was reached with the Operational Creditor, and the majority of the Committee of Creditors (CoC) supported the withdrawal. However, HDFC Bank, holding 19.94% of the voting share, opposed the withdrawal, leading to the resolution's failure to meet the 90% voting threshold required under Section 12A. The tribunal emphasized that the commercial wisdom of the CoC is paramount and non-judiciable. The tribunal found no error in the Adjudicating Authority's decision, noting that the settlement proposal did not secure the necessary approval from the CoC, particularly from HDFC Bank, which found the proposed settlement commercially unviable. Conclusion: Both appeals were dismissed, with the tribunal affirming the Adjudicating Authority's decisions on initiating the CIRP and rejecting the withdrawal application under Section 12A. The tribunal highlighted the importance of the commercial wisdom of the CoC and the statutory requirements under the Insolvency & Bankruptcy Code.
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