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TMI Blog2021 (12) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... eeking a pre Committee of Creditors constitution withdrawal as per Regulation 30A(1)(a). Suffice it for this Tribunal to make a pertinent mention as the 1st Respondent/Resolution Professional, by constituting the Committee of Creditors after the submission of Form A, the 1st Respondent had acted not in tune with the intention of the Amendment dated 25.07.2019 brought in the CIRP Regulations, 2016. This Tribunal keeping in mind a pivotal fact that the Appellant/Assignee of JSBL , is an Applicant for the purpose of CIRP Regulations and also considering the fact that the person to whom debt has been legally assigned or transferred is also a Financial Creditor as per Section 5(7) of the I B Code, 2016, there is no impediment in Law for it to reap the benefit of amendment to Regulation 30A(1) of CIRP Regulations - this Tribunal interferes with the impugned order passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Mumbai) and set aside the same. Appeal allowed - decided in favor of appellant. - COMPANY APPEAL (AT)(INSOLVENCY) NO.05/2021 - - - Dated:- 30-11-2021 - (Justice M. Venugopal) Member (Judicial) , (Mr. V.P. Singh) Member (Techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functioning of the Committee of Creditors . BACKGROUND FACTS 3. According to the Appellant, an Application was filed (under Section 7 of IBC Code, 2016) against the Corporate Debtor (Oaisis Alcohol Ltd) by the Janata Sahakari Bank Ltd/Original Financial Creditor/Assignor in CP(IB) No.3049/MB/C.IV//2019 before the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) for initiation of CIRP and on 04.08.2020, the said petition was admitted against the Corporate Debtor, thereby declaring the moratorium as per Section 14 of the I B Code, 2016 besides appointing the 1st Respondent as an Interim Resolution Professional . 4. Furthermore, the Original Financial Creditor had executed an Assignment Agreement to and in favour of the Appellant on 21.8.2020, thereby unconditionally and irrevocably assigned the loan together with underlying security interest with respect to the Corporate Debtor , in favour of the Appellant. Indeed, the Original Financial Creditor on the very same day of the execution of the execution of the Assignment Agreement on 21.8.2020 had intimated the Interim Resolution Professional about the assignment of debt to the Appellant and furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ievance of the Appellant is that the 1st Respondent had assumed the role of an Adjudicating Authority applied his judicial mind and dismissed it prayer to place the information available with him before the Adjudicating Authority , as regards the withdrawal. APPELLANT S CONTENTIONS 10. According to the Learned Senior Counsel for the Appellant, in the instant Appeal the Appellant is praying for a direction to be passed to the 1st Respondent/Resolution Professional to act in accordance with the Regulation 30(A)(1)(a) and 30(A)(3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulation, 2016) and to set aside the illegal constitution of Committee of Creditors by him. 11. The Learned Counsel for the Appellant submits that in the light of the Regulation 28 of CIRP Regulations, 2016 dealing with the transfer of debt to a Creditor, the Appellant/Assignee was required only to intimate only to the Interim Resolution Professional regarding such assignment and in the absence of a provision mandating a substitution application to be filed, the Resolution Professional should not have set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t subsequent to the assignment of debt from Janatha Sahakari Bank Ltd on 25.8.2020 had requested the RP to intimate the estimate of CIRP cost incurred, but no explanation was furnished by the 1st Respondent for non-intimation of the said cost. Continuing further the 1st Respondent/RP had not disclosed the fact either to it or to the Adjudicating Authority that the appellant s predecessor had deposited a sum of ₹ 3 lakh as CIRP cost in respect of initiation of withdrawal by the appellant for the reasons best known to him. 18. The Learned Counsel for the appellant comes out with an argument that Assignment places the Assignee in the same position as that of the Assignor and that the 1st Respondent/RP, knowing full well that JSBL was a secured financial creditor of the Corporate Debtor had failed to apply the Law of Assignment and branded the Appellant as an unsecured creditor at the time of re-constitution of the Committee of Creditors thereby acting on his own whims and fancy. 19. The Learned Counsel for the Appellant proceeds to take a stance that the Interim Resolution Professional being a Facilitator of the Rsolution has only administrative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfers the debt due to such creditor to any either person during the insolvency resolution process period, both parties shall provide the interim resolution professional or the resolution professional, as the case may be, the terms of such assignment or transfer and the identity of the assignee or transferee. (2) The resolution professional shall notify each participant and the Adjudicating Authority of any resultant change in the committee within two days of such change 3.2 As such, you are requested to kindly send me the details of the terms of assignment or transfer of the debt by JSBL, to CFMARP and the identity of the assignee or transferee at the earliest in compliance with the provisions of the said Regulation 28(1). The said compliance is still pending at your end. 24. The Learned Counsel for the Appellant contends that the Appellant is the Assignee and as such there is no question of filing a claim and further that the 1st Respondent/RP in his reply dated 26.08.2020 at para 3.6 to 6 had observed the following:- 3.6. Your attention is invited to the definition of applicant as contained in Regulation 2(1)(a) of the said Regulations which define the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anata Sahakari Bank Limited) hereby withdraw the application bearing CP(IB)No.3049/MB.IV/2019 filed by my predecessor/The Assignor before the Adjudicating Authority under Section 7 of the Insolvency and Bankruptcy Code, 2016. 26. As a matter of fact the reply dated 27.8.2020 of 1st Respondent/RP addressed to the President of Appellant/applicant at para 4.3 reads as under: Pursuant to the provisions of the Code and the said Regulations, by issuing the Public Announcement, claims with proof were invited from the Creditors of the Corporate Debtor. The last date for submission of claims was 19 August, 2020 and the said claims were required to be verified within 7 (seven) days i.e. by 25th August, 2020. The Learned Counsel for the Appellant refers to the Order of this Tribunal in Comp. App. (AT)(Ins) No.259/2019 dated 7.8.2019 (Three Members Bench) in the matter of Sukhbeer Singh Vs DC Agarwal (RP) whereby and whereunder at para 2, it is observed as follows: 2. Now it is stated that the proposal given by the Appellant/ Promoters has not been placed before the Committee of Creditors by the Resolution Professional on technical ground that the Promoters cannot file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the matter and direct the Interim Resolution Professional to constitute the Committee of Creditors to render Application filed under Rule 11 as infructuous. If the Adjudicating Authority (National Company Law Tribunal) is of the view that the Application under Rule 11 is fit to be rejected and only after rejecting the same, it could have directed the Interim Resolution Professional to constitute the Committee of Creditors . 1ST AND 3RD RESPONDENTS CONTENTIONS 28. The Learned Counsel for the 1st and 3rd Respondent appearing for the Resolution Professional submits that the Appellant on 26.08.2020 had addressed a letter to the 1st Respondent stating that they are in the process of filing necessary application before the National Company Law Tribunal, Mumbai Bench for getting it substituted in place of the Assignor in the said order dated 4.8.2020 in CP (IB) No.3049/MB.IV/2019 and in any event as per Regulation 28, it was emphasised both the assignor and assignee are required to provide it, the terms of the assignment or transfer and the identity of the assignee or transferee which was now provided to you and hence the said Regulation 28 stood completed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30A(1)(b) of CIRP Regulations r/w Section 12A of IBC, 2016. 31. The Learned Counsel for the 1st and 3rd Respondent submits that when Form Fa was submitted, no COC was constituted and during the process of consideration of the same, the COC was formed (on 27.08.2020). 32. The Learned Counsel for 1st and 3rd Respondent brings to the notice of this Tribunal that the present Appeal filed on earlier occasion, an application for substitution and that the same Corporate Debtor went on CIRP and further that the Regulation 30A does not talk of settlement. The Learned Counsel for 1st and 3rd Respondent proceeds to point out that 1st Respondent/Resolution Professional in adherence to the time line, in accordance with the provisions of the I B Code, 2016 had filed a Report certifying the constitution of the Committee of Creditors of the Corporate Debtor on 27.08.2020 before the Adjudicating Authority and on 28.8.2020 the 1st Respondent was served with a copy of the application filed by the Appellant, in which the Adjudicating Authority had passed the impugned order. 33. The Learned Counsel for the 1st Respondent and 3rd Respondent submits that in the instant case, the Insolvency c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under Section 12A of I B Code r/w Rule 11 of NCLT Rules, 2016 in every case but directs the proposal to be placed before the COC whenever required. 39. It is the version of the Learned Counsel for 2nd Respondent that earlier another Financial Creditor had project CP (IB)2619/I BP/MB/2018 under Section 7 of the I B Code against the same Corporate Debtor which was admitted on 06.03.2019 and the said petition was withdrawn on 01.04.2019 vide MA No.1144/2019 in CP(IB)3619/MB/2018 on the file of Adjudicating Authority (National Company Law Tribunal, Mumbai) WITHDRAWAL OF APPLICATION: 40. It transpires that Rule 8 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules 2016 provide that the Adjudicating Authority may permit withdrawal of the application made under Rules 4,6 or 7, as the case may be, on a request made by the applicant before its admission. Further, (Second Amendment) Act, 2018 to the I B Code, 2016, the Adjudicating Authority may allow withdrawal application under Sections 7, 9 and 10 even after admission, of course, based on an application filed by the Applicant with approval of 90% voting shares of the Committee of Creditors. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same date. The Appellant on 25.08.2020 had intimated 1st Respondent about the email and requested the 1st Respondent to provide the CIRP cost to enable it to file withdrawal application in Form FA under Regulation 30A(1)(a). The 1st Respondent had completed the task of verification of claims on 25.08.2020 but the last date for verification was on 26.08.2020, since it is 7 days from the submission of claim as per Rule 13 of CIRP Rules, 2016. 44. The grievance of the Appellant is that the 1st Respondent rushed CIRP process despite having knowledge of the Assignment Deed through email dated 21.08.2020 sent by the JSBL, (Financial Creditor/Assignor). 45. The 1st Respondent had replied on 26.08.2020 to the intimation provided by the Appellant on 25.08.2020 requiring the Appellant to file a substitution application but the Appellant, because of the fact that there is no provision for substitution under the IBC 2016, in compliance to Rule 28 of CIRP Rules, 2016, furnished Form FA, withdrawal application under Regulation 30A(1)(a) of the CIRP Rules, 2016, a copy of the Assignment Deed and a DD for ₹ 3 lakhs towards the CIRP cost to the 1st Respondent on the same day. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fessional). We make it clear that at any stage where the committee of creditors is not yet constituted, a party can approach the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the concerned parties and considering all relevant factors on the facts of each case. 53. The main thrust against the provision of Section 12A is the fact that ninety per cent of the committee of creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed upshot and this Tribunal keeping in mind a pivotal fact that the Appellant/Assignee of JSBL , is an Applicant for the purpose of CIRP Regulations and also considering the fact that the person to whom debt has been legally assigned or transferred is also a Financial Creditor as per Section 5(7) of the I B Code, 2016, there is no impediment in Law for it to reap the benefit of amendment to Regulation 30A(1) of CIRP Regulations and further that, based on the facts and circumstances of the instant case, comes to consequent conclusion that the contrary views arrived at by the Adjudicating Authority in the impugned order in IA No.1198/2020 in CP(IB) No.3049/MB.IV/2019 are clearly unsustainable in the eye of law. Viewed in that perspective this Tribunal interferes with the impugned order passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Mumbai) and set aside the same. Resultantly the Appeal succeeds. CONCLUSION 53. In fine the Company Appeal (AT)(Ins) No.05/2021 is allowed. No costs. 54. The impugned order in IA No.1198/2020 in CP(IB) No.3049/MB.IV/2019 passed by the Adjudicating Authority (National Company Law Tribunal, M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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