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TMI Blog2019 (5) TMI 1584X X X X Extracts X X X X X X X X Extracts X X X X ..... uo-moto seeking permission for withdrawal of the said Petition? It has also been questioned that in this manner the procedure laid down in the provisions of the IBC may be wrongly utilized? How a person can be allowed to play with the precious time of a Court by moving a Petition with the prayer to commence CIRP and at the fag end of the process seeking permission of withdrawal of the said Petition? But, the answer is simple and single that the Code has now subscribed such procedure through which withdrawal is possible in respect of a petition filed u/s 10 of the Code. The condition subscribed is that on an Application made by the Applicant withdrawal can be allowed, if approved by 90% voting share of the CoC. On this point, the Applicant has clarified that as a Director of the Debtor Company the said Application u/s 10 was signed by him and now he is the signatory of this withdrawal application, hence qualified. Provisions of section 10 are unambiguous where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating CIRP with the AA. The term corporate applicant is defined u/s 5 of Definitions of IBC , means a member of the cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this Hon'ble Tribunal be pleased to pass an order/directions to the Respondents to cancel and terminate the bank guarantee of ₹ 95,00,000/- dated August 24, 2018 and refund the original guarantee to the bank guarantor/ issuing such guarantee". 2. These applications were heard on last few occasions and thereafter on combined and consolidated reading of these applications it was felt necessary to formulate crucial as well as essential questions of law so that the controversies raised can be judicially addressed and properly decided, as reproduced below: (i) Whether an Applicant who has filed an Application/Petition u/s 10 of the IBC is entitled to withdraw its own petition u/s 12A of IBC 2016? (ii) Whether a Resolution Applicant who has submitted a Resolution Plan which was approved with majority vote by CoC can be allowed to withdraw the said Resolution Plan which is under consideration for approval before the NCLT? (iii) Whether ex-director of the Corporate Debtor, which is under Insolvency can offer One Time Settlement (OTS) with the Financial Creditor/Creditors if qualified u/s 29A of the Insolvency Code 2016? 3. Aforelisted questions have been communicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revealed that an Earnest Money of ₹50 lakhs was deposited by the Resolution Applicant. Further on demand also furnished a Bank Guarantee of ₹95 lakhs to show its bona fides. VI) It is interesting to note that on one hand the Resolution Professional has submitted the said Resolution Plan for approval by the Adjudicating Authority, side-by-side, the Applicant of this Miscellaneous Application, Mr. Satyanarayan Malu, was carrying a parallel negotiation with Allahabad bank. VII) It is informed in this Application that on 28th may 2018 this applicant, Mr. Malu, had made a OTS proposal to Allahabad bank. Two settle the account of the corporate debtor SBM paper Mills, this applicant had offered 14 crores of rupees. The said OTS offer was improved and vide a letter dated 23 June 2080 improved one-time settlement offer of ₹17 crores was communicated to Allahabad bank. VIII) One of the main contention of this Applicant before the COC was that the offer he had made was a better proposal than the Resolution Plan under consideration. It was alleged that in spite of the fact that the said Plan had offered significantly lesser amount than what had been proposed by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... publication which shall be applied to CIRP commencing on or after the said date. Simultaneously introduced Regulation 30A to provide a procedure for the implementation of withdrawal u/s 12A of the Code. So, the argument of Ld. AR is that CIRP Regulations (i.e. Regulation 30A) are required to be applied to CIRP proceedings which shall commence after 3rd July 2018. As far as this Company Petition (CP1362 of 2017) is concerned, the same was admitted on 17th October 2017 vide order passed u/s 10 of the Code, hence, the procedure laid down in Regulation 30A are not applicable in respect of withdrawal application filed u/s 12A of IBC, pleaded by the Ld. Counsel. 4.2 Next argument is that an application u/s 10(1) is to be filed by a Corporate Debtor who has committed default to be treated as a "Corporate Applicant" authorized to file an application for initiating Corporate Insolvency Resolution Process (CIRP) to be declared by the Adjudicating Authority. It is therefore, pleaded that the Corporate Applicant who has submitted Application u/s 10 is authorized to file withdrawal application u/s 12A, which prescribed that the Adjudicating Authority can allow a withdrawal application either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Financial Creditor and others, therefore, withdrawal is beneficial for all stakeholders. If withdrawal is permitted, the stakeholders shall get 100% of their dues without haircut. 5. During the course of hearing Ld. Representative from the side of the RP and Allahabad Bank remained present. The stand of the RP is that in a situation when the period had expired hence, the RP is not having any control over the insolvency proceedings. Moreover, according to Ld. RP his job is now over because a resolution plan has already been submitted before the Adjudicating Authority for adjudication u/s 31(1) of the Code. That Resolution Plan was submitted through Miscellaneous Application No. 827/2018 dated 21.08.2018. My attention is drawn that the plan was submitted by the resolution applicant M/s. Khandesh Roller Floor Mills Ltd. Ld. AR of RP has clarified that now it has come to his notice that the said Resolution Applicant has moved an application seeking permission for withdrawal of the approved resolution plan. At this juncture, it is commented that the granting of permission for withdrawal is subjudice before this Bench but in any case totality of the circumstances are to be weig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted from an author of a judgement to first identify which principle of Interpretation of statute, he is going to follow in his decision. An opening observation is that the Laws governing financial transactions must not be static due to one of the fundamental reason that the economic condition of the society keeps on fluctuating depending upon the government policies and market conditions. The consequence is that each financial year is peculiar in nature hence advisable to be governed by special provisions of Law applicable to that year. Therefore, while interpreting legal provisions laid down in connection with the business transactions or even imposition of taxes, it is healthier to frame, as also interpret a law, which is capable of understanding the market conditions, indeed not having a straight graph. Hence a strict rule of interpretation is sometimes avoided. In my humble opinion, a Law is mandated for the benefit of the society and not vice-versa. The provisions of IBC, 2016 are such provisions which are directly going to affect the day-to-day functioning of the corporate organizations. Some of the Rules and Regulations under this Code are also directly influencing the trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 12A is inserted w.e.f. 06.06.2018 which prescribes that the Adjudicating Authority may allow the withdrawal of application admitted either u/s 7 or u/s 9 or u/s 10, on an application made by the Applicant with the approval of 90% voting share of the CoC. The first reaction during the course of hearing of this Bench was that how it is justifiable on the part of an applicant who has moved a Petition u/s 10 to declare itself insolvent (as happened in this case) at one point of time and thereafter at a later stage suo-moto seeking permission for withdrawal of the said Petition? It has also been questioned that in this manner the procedure laid down in the provisions of the IBC may be wrongly utilized? How a person can be allowed to play with the precious time of a Court by moving a Petition with the prayer to commence CIRP and at the fag end of the process seeking permission of withdrawal of the said Petition? But, the answer is simple and single that the Code has now subscribed such procedure through which withdrawal is possible in respect of a petition filed u/s 10 of the Code. The condition subscribed is that "on an Application made by the Applicant" withdrawal can be allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vitation for expression of interest under Regulation 36A. So, a query has been raised that in a situation when EoI had already been invited then how this application for withdrawal can be entertained? It is vehemently pleaded that when the CIRP has commenced as per the order of this Bench dated 17.10.2017 the said Regulation was not in the statute Book. Moreover, Section 12A was introduced w.e.f. 06.06.17 and even at that time Regulation 30A was not in the statute Book being introduced w.e.f. 03.07.2018. It is worth to add one more important feature about the introduction of this Regulation is that the Notification No. IBBI/2018-19/GN/REG031 introduced by The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2018, it was made clear that the Regulations shall come into force on their publication in the Official Gazette and shall apply to CIRP commencing on or after the said date i.e. 03.07.2018. Because of the reason that the Statute itself has clarified about the date from which this Regulation should be applicable i.e. on or after 03.07.2018, no uncertainty was left in the statute Book about its enforceabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Resolution Applicant (MA No. 1142/2018) seeking permission for withdrawal of the Resolution Plan. To my knowledge, this has happened for the first time in the two and half years (Approx.) that a Resolution Applicant is withdrawing a Resolution Plan which is approved by the CoC with majority vote. In the following paragraph I shall deal with the relevant provisions, if any, available to deal with the situation when a Resolution Applicant is seeking permission for withdrawal of an approved Resolution Plan pending for an order u/s 31(1). But before that, at the moment this situation is to be tackled keeping in mind that if the sole Resolution Plan be allowed to be withdrawn then there shall be no option left but to declare 'Liquidation' of the Corporate Debtor. One of the important provision is unambiguous that in case all attempts have failed to invite Resolution Applicant but no one come forward showing interest in the revival of the Debtor Company, the option available to CoC is to vote for Liquidation. Refer Section 33(1) of the Code prescribing 'Initiation of Liquidation' that where Adjudicating Authority does not receive a Resolution Plan U/s 30(6) of the Code or reject a Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaration of "moratorium". I, therefore, take a conscious decision to impose a cost of litigation on the Corporate Debtor of ₹ 5,00,000/- (Rupees Five Lakhs only) to be paid to MCA/NCLT within 15 days on receipt of this order. Compliance is to be reported to the Registrar, NCLT with evidence. 11. Subject to the fine imposed (supra) this withdrawal application is hereby allowed by invoking the jurisdiction prescribed u/s 12A of the IBC. b. MA 1142/2018 dated 03.10.2018 submitted by M/s. Khandesh Roller Flour Mills Pvt. Ltd. for withdrawal of Resolution Plan. 12. Having granted permission for withdrawal of main Petition (CP 1362/2017) supra, this Miscellaneous Application has become otiose. Once the main Petition does not survive on account of withdrawal, the natural outcome is that there is no requirement of financial restructuring of the impugned Corporate Debtor as suggested in the Resolution Plan under consideration for an order u/s 31(1) of the Code. Due to the withdrawal of the main Petition, the approval of the Resolution Plan or withdrawal of the Resolution Plan, either way not going to have any impact on the issue of insolvency. Although a lengthy argument rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te" unquote. 12.2. Be that as held by Hon'ble Courts, I am of the view that under the peculiar situation as discussed hereinabove at length, this Resolution Plan has although become futile, however, such attempt on the part of a Resolution Applicant is to be discouraged. It is a common practice, as also adopted by Hon'ble Courts, that in case of breach of commitment an earnest money can be forfeited. Therefore, the Prayer of return of entire earnest money deposited of ₹50 Lakhs is not acceptable in toto and the Resolution Professional is directed that out of ₹50 Lakhs, a sum of ₹25 Lakhs to be retained as a deterrence to be utilized towards CIRP cost and other related expenses yet to be ratified by this Tribunal. Only ₹25 Lakhs is directed to be refunded to the Resolution Applicant. Ordered accordingly. MA 827/2018 - Approval of Resolution Plan. 13. This Application is submitted on 21.08.2018 by the Resolution Professional for approval of the Resolution Plan as prescribed u/s. 31(1) of The Insolvency Code. In the light of the circumstances as narrated in foregoing paragraphs as also considering the peculiar situation of this case it is hereby h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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