2024 (8) TMI 795 - AT - Insolvency and Bankruptcy

Permission to withdraw application filed u/s 9 of the Insolvency and Bankruptcy Code, 2016 - Appellant challenging the order contends that the Adjudicating Authority committed error in not granting liberty to the Appellant to file a fresh Application - HELD THAT - The present is a case where the Adjudicating Authority due to reasons recorded in the judgment has refused permission to grant leave to file a fresh Application under Section 9. More so, while in the IBC proceedings, it cannot be held as a matter of right that the Applicant is entitled to withdraw the Application filed under Section 9 at any stage and pray for liberty to file afresh. IBC is a process in which timeline has importance and from the facts of the present case, it is clear that an objection was raised by the Corporate Debtor and an IA was filed, making allegations against the Appellant, that the Appellant placed on record false evidence pertaining to Demand Notice - the Adjudicating Authority permitted the Appellant to file pursish for withdrawal. Thus, no error has been committed by the Adjudicating Authority in permitting withdrawal of the Application, while denying liberty to file fresh Application, once again - the imposition of cost of Rs.50,000/- was not necessary - appeal dismissed.

Summary

Issues Involved:
1. Withdrawal of Section 9 Application under IBC.
2. Imposition of costs for withdrawal.
3. Denial of liberty to file a fresh application.
4. Applicability of Order 23 Rule 1 of CPC.
5. Allegations of false evidence by the Corporate Debtor.

Detailed Analysis:

1. Withdrawal of Section 9 Application under IBC:

The Appellant filed two Section 9 Applications under the Insolvency and Bankruptcy Code, 2016 (IBC), claiming an operational debt amounting to Rs.3,51,72,942/- due from the Corporate Debtor. The Applications were registered as CP(IB)/65(AHM)2023 and CP(IB)/66(AHM)2023. The Appellant sought permission to withdraw these applications, which was allowed by the Adjudicating Authority subject to a cost of Rs.50,000/-. The Appellant contended that the Adjudicating Authority committed an error by not granting liberty to file fresh applications.

2. Imposition of Costs for Withdrawal:

The Adjudicating Authority allowed the withdrawal of the applications but imposed a cost of Rs.50,000/- to be paid to the Respondent towards legal costs. The Appellant argued that the imposition of costs was unnecessary and challenged this part of the order.

3. Denial of Liberty to File a Fresh Application:

The Adjudicating Authority refused to grant liberty to the Appellant to file fresh applications. The Authority noted that the Appellant did not provide any reason for withdrawal or for seeking liberty to file fresh applications. The Authority emphasized that the withdrawal was sought at a belated stage and that the pleadings were complete, thus dragging the Respondent into unnecessary litigation and consuming the Tribunal's time.

4. Applicability of Order 23 Rule 1 of CPC:

The Appellant argued that the principles underlying Order 23 Rule 1 of the Code of Civil Procedure (CPC) should apply, which allows withdrawal of a suit with liberty to institute a fresh suit under certain conditions. The Tribunal examined various judgments, including those of the Supreme Court and High Courts, to determine whether the Adjudicating Authority was obliged to grant liberty to file fresh applications. The Tribunal concluded that permission to file a fresh suit is not automatic or mandatory and can only be granted when the Court is satisfied that there are sufficient grounds for doing so.

5. Allegations of False Evidence by the Corporate Debtor:

The Corporate Debtor filed an IA No.409 of 2024, alleging that the Appellant had placed false evidence on record pertaining to the Demand Notice. This allegation was a significant factor in the Adjudicating Authority's decision to deny liberty to file fresh applications. The Tribunal noted that the IBC proceedings emphasize timelines and that allowing the Appellant to file fresh applications would undermine this principle.

Conclusion:

The Tribunal upheld the Adjudicating Authority's decision to permit withdrawal of the applications while denying liberty to file fresh applications. However, the Tribunal found that the imposition of a Rs.50,000/- cost was unnecessary and deleted this part of the order. The Tribunal emphasized that the principles under Order 23 Rule 1 of CPC do not automatically entitle a party to file fresh applications upon withdrawal and that the Adjudicating Authority had acted within its discretion. The appeals were dismissed, but the Appellant was allowed to pursue other legal remedies available under the law.