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TMI Blog2023 (3) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been arrived at within two days of the admission order. The payment as per the settlement had been made within the next five days i.e. in a weeks time from the date of admission. The application for withdrawal was filed on the 10th day. The NCLT ought to have immediately taken the decision on the application. Once the parties had settled the dispute even before the CoC had been constituted, the application ought to have been allowed then and there rather than await the other creditors to jump into the fray and allow the IRP to proceed further. Alternative Remedy - HELD THAT:- Plea of alternative remedy is a self-imposed restriction by the superior Courts and is never an absolute bar unless barred by the statute. Further, in the present case, this Court had entertained the SLP in 2021 itself and had granted an order of status quo on 20.04.2021. Substantial time has passed since then. As such we are not inclined to entertain the said objection relating to availability of alternative remedy of filing the appeal before the NCLT. Violation of the Moratorium - HELD THAT:- The intervenors have vehemently contended that after 01.03.2021, once the NCLT has admitted the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e substituted Regulation 30A of IBC as it stands today clearly provided for withdrawal applications being entertained before constitution of CoC. It does not in any way conflicts or is in violation of section 12A of IBC. There is no inconsistency in the two provisions. It only furthers the cause introduced vide section 12A of IBC. Thus, NCLT fell in error in taking a contrary view. Regulation 30A of IBBI Regulations provide a complete mechanism for dealing with the applications filed under such provision. The issue raised by the IRP regarding its claim for expenses is well taken care of under the said provision. Various safeguards have been provided in Regulation 30A of IBBI Regulations to be fulfilled by the OC which apparently have been fulfilled as there is no complaint in that regard either by the IRP nor it is apparent from the impugned order of the NCLT. Thus, the objection raised by the IRP does not merit any consideration in this appeal. The impugned order of the NCLT cannot be sustained. The application filed under Regulation 30A of IBBI Regulations deserves to be allowed - Appeal allowed. - CIVIL APPEAL NO (s). OF 2023 (Arising out of SLP (Civil) No.6452 of 2021) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apparently on the ground that section 9 of IBC petition was not maintainable as there was a pre-existing dispute. On 26.03.2021, the appeal was withdrawn before the NCLAT with liberty to apply for revival of the appeal in case the settlement failed. The NCLAT while allowing the withdrawal of the appeal granted stay of formation of CoC. The said order dated 26.03.2021 is reproduced below: Mr. Vikram Nankani, Advocate appears for the Appellant. He submits that Respondent No.1 Operational Creditor filed CP (IB) No.503/9/NCLT/AHM/2019 before Adjudicating Authority (NCLT Ahmedabad Bench, Court No.1). The Application was filed under section 9 of Insolvency and Bankruptcy Code, 2016 (IBC in short) against the Respondent No.2 M/s.Manpasand Beverages Ltd. the Corporate Debtor. Appellant is the Director of the Suspended Board of the Corporate Debtor. Respondent No.3 is Interim Resolution Professional. 2. Learned counsel for the Appellant submits that the Application was admitted by the Impugned Order and Appeal is filed. It is stated that thereafter the Appellant has settled the claim of Operational Creditor and the Operational Creditor has filed Application for withdrawal copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary opposition is by the IRP by way of an intervention application. The OC is not opposing the appeal in as much as it had already received the full amount as per the settlement dated 03.03.2021. Further, three other applications for intervention/impleadment have been filed by creditors of the CD, who allegedly had raised their claims before the IRP. 11. Before proceeding any further, the relevant statutory provisions may be noticed. 12. Rule 11 of The National Company Law Tribunal Rules, 2016 In short the NCLT Rules confer inherent powers on the NCLT to pass appropriate orders for meeting the ends of justice or to prevent abuse of the process of the Tribunal. The said rule is reproduced hereunder: 11. Inherent powers- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal. 13. Section 12A of IBC which was inserted w.e.f. 06.06.2018 permits withdrawal of applications admitted under sections 7, 9 or 10 of IBC, with the approval of 90 percent voting share of the CoC in such manner as may be spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-regulation (1), the interim resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt. (4) Where an application for withdrawal is under clause (b) of sub-regulation (1), the committee shall consider the application, within seven days of its receipt. (5) Where the application referred to in sub-regulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with the approval of the committee, to the Adjudicating Authority on behalf of the applicant, within three days of such approval. (6) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (3) or (5). (7) Where the application is approved under sub-regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercising powers under Article 142 of the Constitution allowing withdrawal of such petitions where settlement had been arrived at and also certain orders passed by NCLAT permitting withdrawal before constitution of CoC. Reliance was also placed upon a judgment of this Court in the case of Swiss Ribbons (P) Ltd. V. Union of India (2019) 4 SCC 17 dated 25.01.2019 whereafter the Central Government vide Notification dated 25th July, 2019 inserted Regulation 30A in IBBI Regulations which permitted withdrawal of petitions before constitution of CoC. 18. Further submission advanced by Mr.Divan is to the effect that NCLT was swayed by the fact that there were several other creditors who had raised their claims against the CD and as such without hearing such creditors, permission of withdrawal would not be proper. This, according to the learned senior counsel, was an error committed by the NCLT inasmuch as these third party claims could not have been taken into consideration nor they should have weighed with the NCLT in forming its opinion. Once the CoC had not been constituted the claims of other creditors would not come into play to defeat the settlement arrived at between the OC and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) Dena Bank (Now Bank of Baroda) v. Shivakumar Reddy Anr. (2021) 10 SCC 330 (4) MSTC Limited v. Adhunik Metalliks Ltd. and others (2019) SCC Online NCLAT 146 ; (5) Indian Overseas Bank v. Mr. Dinkar T. Venkatsubramaniam, Resolution Professional for Amtek Auto Limited (2017) SCC Online NCLAT 584 ; (6) Manoj K. Daga v. ISGEC Heavy Engineering Limited and others (2020) SCC Online NCLAT 869 ; (7) Narayanamma and anr. v. Govindappa and Ors. (2019) 19 SCC 42 (8) Ram Saran Das v. CTO Calcutta Anr. AIR 1962 SC 1362 (9) Titaghur Paper Mills Co. Ltd. v. State of Orissa (1983) 2 SCC 433 23. The facts as stated above are not disputed. The application had been filed prior to the constitution of the CoC. The settlement had been arrived at within two days of the admission order. The payment as per the settlement had been made within the next five days i.e. in a weeks time from the date of admission. The application for withdrawal was filed on the 10th day. The NCLT ought to have immediately taken the decision on the application. Once the parties had settled the dispute even before the CoC had been constituted, the application ought to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be recovered under section 66 of IBC by the IRP or the RP subject to establishing that the said transactions would be hit by the said provision. Multiple claims of OCs 27. With respect to the said objection, it only needs to be mentioned that other creditors would have their own right to avail such legal remedies as may be available to them under law with respect to their claims. The rights of the creditors for their respective claims do not get whittled down or adversely affected if the settlement with the OC in the present case is accepted and the proceedings allowed to be withdrawn. Claims for expenses for IRP 28. Any amount spent by the IRP legally admissible to him could always be recovered in the same proceedings and the NCLT or the Adjudicating Authority would be well within its power to get the same cleared under Clause 7 of Regulation 30A of IBBI Regulations. Judgments relied upon: 29. In the facts and circumstances of the present case and for the discussion made above none of the judgments relied upon by the intervenors are of any help to the intervenors. Briefly the same are discussed hereinafter. 30. The interveners have relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings before constitution of CoC. Even Regulation 30A, as it existed earlier, did not contemplate of consideration of an application for withdrawal filed before constitution of CoC. This issue was flagged by this Court in the case of Swiss Ribbons (supra) in paragraph 82 thereof which is reproduced hereunder: 82. It is clear that once the Code gets triggered by admission of a creditor s petition under Sections 7 to 9, the proceeding that is before the adjudicating authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a Committee of Creditors is constituted (as per the timelines that are specified, a Committee of Creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the Committee of Creditors is not yet constituted, a party can approach NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led under section 12A of IBC. The substituted Regulation 30A of IBC as it stands today clearly provided for withdrawal applications being entertained before constitution of CoC. It does not in any way conflicts or is in violation of section 12A of IBC. There is no inconsistency in the two provisions. It only furthers the cause introduced vide section 12A of IBC. Thus, NCLT fell in error in taking a contrary view. 36. In Kamal K. Singh (supra), relying upon paragraph 82 of the report in the case of Swiss Ribbons (supra), the Supreme Court, which was dealing with a similar situation where the settlement had been arrived before constitution of CoC allowed the proceedings to be withdrawn and held that the applications filed under Rule 11 of the NCLT Rules would be maintainable and the OCs therein was justified in moving such application. 37. In the case of Ashok G. Rajani (supra), the settlement had been arrived at between the parties on 08.08.2021, after the NCLT had admitted the application under section 7 of IBC vide order dated 03.08.2021. On appeal, the NCLAT vide order dated 18.08.2021 stayed the formation of CoC but declined to exercise its powers under Rule 11 of the NCLA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing on technicalities. 40. Both the parties have relied upon paragraph 82 of the judgment in the case of Swiss Ribbons (supra). According to the appellant, the NCLT ought to have exercised its inherent powers under Rule 11 of the NCLT Rules whereas for the intervenors it is submitted that this Court had observed that power under Rule 11 would be exercised after hearing all concerned parties. It may be noted that at the time when the application for withdrawal of the proceedings was filed the CoC was not constituted as such there could not have been any other concerned parties except the OC, CD and IRP. It was only because of the delay caused by the NCLT in disposing of the applications under section 12A of IBC and Regulation 30A of IBBI Regulations that large number of creditors filed their claims. The inherent powers are to be invoked in order to meet the ends of justice which, in our opinion, the NCLT failed to invoke. 41. Regulation 30A of IBBI Regulations provide a complete mechanism for dealing with the applications filed under such provision. The issue raised by the IRP regarding its claim for expenses is well taken care of under the said provision. Various safegua ..... X X X X Extracts X X X X X X X X Extracts X X X X
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