2019 (4) TMI 594 - Tri - Insolvency and Bankruptcy

Withdrawal of IB petition - proposal of settlement at the post-admission of the present IB Petition - Adjudicating authority power and jurisdiction to permit the petitioner to withdraw this IB Petition at post admission stage even without seeking consent of the CoC and its members - HELD THAT - The present application for settlement was filed on 04.02.2019 before this Adjudicating Authority, which is prior to the constitution of the CoC. That apart, it is pertinent to note here that there is sole member in the CoC i.e. IOB, who may or may not give its consent for such withdrawal of the IB Petition. While the provisions of Section 12-A of the Code stipulates that settlement can be made with 90% voting of the members of the CoC, which is not practically possible in the present case, being sole member who can accept or reject the proposal by 100% voting only. The interest of the Financial Creditor, being a sole member of the CoC, can adequately be taken care of while making such observation that the present settlement in no manner shall affect the rights and the claim of the sole Financial Creditor or any other creditor to agitate the same before a competent Court of Law including this Adjudicating Authority under the relevant provisions of the Code. The Operational Creditor has moved the present application, by settling its dues for an amount of ₹ 35,00,000/- (Rupees Thirty Five Lakhs only) as full and final settlement which happen much prior to the constitution of the CoC. Hence, this Adjudicating Authority can accept it in the interest of justice by following case of SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. 2019 (1) TMI 1508 - SUPREME COURT OF INDIA No impediment for accepting the proposal of settlement at the post-admission of the present IB Petition. Hence, it is hereby accepted. Notwithstanding the above, it is expedient to issue necessary direction to the Petitioner-Operational Creditor as well as to the Corporate Debtor company to bear the expenses and cost of the CIRP, which has been incurred by the present IRP, towards payment of his professional fees and other expenses incurred.

Summary

Issues:
Application for withdrawal of IB Petition and recalling of Corporate Insolvency Resolution Process (CIRP) before the constitution of Committee of Creditors (CoC) under Sections 60(5) & 12-A of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Withdrawal of IB Petition and Recalling of CIRP:
The application was filed seeking withdrawal of the IB Petition and recalling of the CIRP before the constitution of the CoC. The petitioner relied on the judgment of the Hon'ble Supreme Court in Swiss Ribbons v. Union of India, emphasizing the need for consultation with the overseeing body before allowing a corporate debtor to settle its claim. The petitioner contended that the Adjudicating Authority had the power to permit withdrawal post-admission without CoC consent, citing the judgment of the Hon'ble NCLAT in Ashish Garodia v. Impact Event Management.

2. Settlement and CoC Consent:
The petitioner settled the matter before the constitution of the CoC and expressed willingness to pay the CIRP costs as per the NCLAT judgment. The petitioner assured that the settlement would not affect the rights of other financial creditors to file fresh IB petitions. The IRP opposed the application, mentioning the proposed CoC meeting and the involvement of the sole member, Indian Overseas Bank (IOB), with a higher claim than the petitioner.

3. Decision and Rationale:
The Adjudicating Authority considered the timing of the application, which was before CoC constitution, and the practical impossibility of 90% CoC consent due to the sole member situation. It was noted that the settlement amount was agreed upon before CoC formation, aligning with the principles in the Swiss Ribbons and NCLAT judgments. The proposal for settlement was accepted in the interest of justice, with a direction for the petitioner and the Corporate Debtor to bear CIRP expenses.

4. Costs and Payment Obligations:
The order mandated the petitioner and the Corporate Debtor to pay the IRP a specified fee along with actual expenses incurred for CIRP initiation within two weeks. Failure to make the payment would allow the IRP to proceed with the CIRP. The settlement was subject to the timely payment of costs, and non-compliance would lead to CIRP continuation as per the Code provisions.

5. Conclusion:
The Interlocutory Application for withdrawal of IB Petition and recalling of CIRP was allowed and disposed of with specific payment obligations outlined for the petitioner and the Corporate Debtor. The decision was made in line with the legal precedents cited and the interests of all parties involved, ensuring compliance with the Insolvency and Bankruptcy Code.