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TMI Blog2022 (6) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as the "NCLT"), thereby rejecting the application filed by the Resolution Professional ("RP" for short) under Section 12A of the Insolvency and Bankruptcy Code, 2016 ("IBC" for short) read with Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the "2016 Regulations"), for withdrawal of the application filed under Section 7 of the IBC in view of the Settlement Plan submitted by the appellant. The appellant has also challenged the order passed by the learned NCLAT of the even date vide which the appeal filed by the present appellant against the order passed by the learned NCLT directing initiation of liquidation proceedings in respect of M/s Siva Industries and Holdings Limitedrespondent No.1 herein (hereinafter referred to as the "Corporate Debtor"), was dismissed. 2. A short question that falls for consideration in the present appeal is as to whether the adjudicating authority (NCLT) or the appellate authority (NCLAT) can sit in an appeal over the commercial wisdom of the Committee of Creditors (hereinafter referred to as the "CoC") or not. 3. The facts in br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, the RP filed an application being MA/43/CHE/2021 in IBA/453/2019 before the learned NCLT seeking withdrawal of CIRP initiated against the Corporate Debtor in view of the approval of the said Settlement Plan by CoC. 6. The learned NCLT, vide its order dated 12th August 2021, while holding that the said Settlement Plan was not a settlement simpliciter under Section 12A of the IBC but a "Business Restructuring Plan", rejected the application for withdrawal of CIRP and approval of the Settlement Plan. Vide another order of even date, the learned NCLT initiated liquidation process of the Corporate Debtor in IA/837/IB/2020 as well. Being aggrieved thereby, the appellant preferred two appeals before the learned NCLAT. Vide the common impugned judgment dated 28th January 2022, the same came to be dismissed. Hence, the present appeals. 7. Notice was issued by this Court in the present appeals on 11th March 2022. While issuing notice, this Court also granted stay of the impugned judgment. Insofar as the respondent No.1 is concerned, no one appeared. Shri Abhishek Swaroop, learned counsel appearing on behalf of the respondent No.2 also does not wish to contest the matter. As such, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for initiation of CIRP admitted by Adjudicating Authority. It was recommended that such an exit should be allowed provided the CoC approves such action by 90% voting share. 13. It will be relevant to refer to Clause (vii) of the key recommendations in the Report of the said Committee dated 26th March 2018, which reads thus: "(vii) in order to cater to exceptional circumstances warranting withdrawal of an application for CIRP postadmission, it has been recommended to allow such exit provided the CoC approves such action by ninety per cent of voting share;" 14. It will also be relevant to refer to paragraph (29) of the Report of the said Committee, which reads thus: "29. WITHDRAWAL OF CIRP PROCEEDINGS PURSUANT TO SETTLEMENT 29.1 Under rule 8 of the CIRP Rules, the NCLT may permit withdrawal of the application on a request by the applicant before its admission. However, there is no provision in the Code or the CIRP Rules in relation to permissibility of withdrawal post admission of a CIRP application. It was observed by the Committee that there have been instances where on account of settlement between the applicant creditor and the corporate debtor, judicial permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs who are not part of the negotiation process must also be met in any negotiated solution. The said Committee states that once the CIRP is initiated, it is no longer a proceeding only between the applicant creditor and the corporate debtor but is envisaged to be a proceeding involving all creditors of the debtor. The intent of the IBC is to discourage individual actions for enforcement and settlement to the exclusion of the general benefit of all creditors. The Report would further reveal that a settlement may be reached amongst all creditors and the debtor, for the purpose of a withdrawal to be granted, and not only the applicant creditor and the debtor. The said Committee therefore recommended that the relevant rules may be amended to provide for withdrawal post admission if the CoC approves of such action by a voting share of ninety per cent. 16. It could thus be seen that Section 12A of the IBC was brought in the statute book on the basis of the said Committee's Report. It could be noticed that though by the Amendment Act No. 26 of 2018, the voting share of 75% of CoC for approval of the Resolution Plan was brought down to 66%, Section 12A of the IBC which was brought in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in three days of such approval. (6) The Adjudicating Authority may, by order, approve the application submitted under subregulation (3) or (5). (7) Where the application is approved under subregulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of subregulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under subregulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code." 18. A perusal of the said Regulation would reveal that where an application for withdrawal under Section 12A of the IBC is made after the constitution of the Committee, the same has to be made through the interim resolution professional or the resolution professional, as the case may be. The application has to be made in FormFA. It further provides that when an application is made after the issue of invitation for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has consistently held that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the IBC. It has been held that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. A reference in this respect could be made to the judgments of this Court in the cases of K. Sashidhar v. Indian Overseas Bank and Others (2019) 12 SCC 150, Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta and Others (2020) 8 SCC 531, Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others (2020) 11 SCC 467, Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another (2021) 10 SCC 401, and Jaypee Kensington Boulevard Apartments Welfare Association and Others v. NBCC (India) Limited and Others (2022) 1 SCC 401. 22. No doubt that the aforesaid observations have been made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court made in the case of Arun Kumar Jagatramka v. Jindal Steel and Power Limited and Another (2021) 7 SCC 474 : "95. ....However, we do take this opportunity to offer a note of caution for NCLT and NCLAT, functioning as the adjudicatory authority and appellate authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. As we have noted earlier in the judgment, the IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India. As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principles of the IBC....." 28. In the result, we pass the following order: (i) The appeals are allowed; (ii) The impugned judgment dated 28th January 2022 delivered by the learned NCLAT in Company Appeal (AT)(CH)(Insolvency) Nos. 211 and 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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