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TMI Blog2024 (10) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... who is aggrieved by the order may institute an appeal, and nothing in the provision restricts the phrase to only the applicant creditor and the corporate debtor - The appellant who claims to be a Financial Creditor, has expressed reasonable apprehensions about the prejudice it would face if there were roundtripping of the funds, and the prioritization of the debts of the second respondent, an operational creditor. The appellant had moved an application before the NCLAT seeking impleadment as a respondent and the objections of the appellant were specifically recorded and addressed in the Impugned Judgement. Therefore, there is no doubt that the appellant falls within the ambit of the phrase any person aggrieved and has the locus standi to institute the present Civil Appeal before this Court. Whether the NCLAT erred in invoking its inherent powers under Rule 11 of the NCLAT Rules 2016 in the presence of a prescribed procedure for withdrawal of CIRP and settlement of claims between parties? - HELD THAT:- The inherent powers cannot be used to subvert legal provisions, which exhaustively provide for a procedure. To permit the NCLAT to circumvent this detailed procedure by invoking its i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legal Background ....................................................................................... 23 i. Legal context and fundamental principles ............................................ 23 a. General principles underlying the IBC .................................................... 23 b. Nature of the proceedings after admission of the application ................ 27 ii. Legal framework for withdrawal and settlement of claims .................. 31 a. Evolution of the legal framework ............................................................ 31 b. Insights from the evolution of the legal framework ................................. 44 iii. Scope of Inherent Powers under Rule 11 ........................................ 49 E. Application to the instant case .................................................................. 51 i. Locus of the appellant before this Court .............................................. 52 ii. Approach of the NCLAT in the Impugned Judgement ......................... 54 iii. Decisions of this Court cited in the Impugned Judgement ............. 57 F. Conclusion ..................................................................................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Delaware Court 6. On account of an alleged default under the Credit Agreement, the appellant enforced the security in respect of the loan and took a series of steps that resulted in the removal of all pre-existing directors of Byju s Alpha Inc., including Riju Raveendran and the appointment of a new sole director. The appellant contends that despite these measures, defaults persisted in payment of the principal outstanding amount and the interest accrued under the Credit Agreement. 7. Accordingly, the appellant, acting as the Administrative Agent of the lenders, issued a notice of demand dated 6 December 2023 to the Corporate Debtor, invoking the guarantee deed and demanding that the Corporate Debtor pay the requisite amount. However, it is the case of the appellant, that the Corporate Debtor too defaulted in its capacity as the guarantor under the Credit Agreement. 8. It is contended that a series of wire transfers were carried out in April and July 2022 by Byju s Alpha Inc., allegedly at the behest of the Corporate Debtor, fraudulently transferring approximately USD 533 million to a hedge fund based in the United States. A motion for preliminary injunctive relief to prote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2024, the Delaware Court imposed financial penalties of USD 10,000 per day on Riju Raveendran, which is payable until the contempt is purged by him . iii. Insolvency proceedings against the first respondent 11. On 23 September 2023, the second respondent moved a petition under Section 9 of the IBC, in respect of an operational debt of approximately Rs 158 crore payable by the Corporate Debtor under the Team Sponsor Agreement.10 The NCLT admitted the petition on 16 July 2024 and initiated CIRP. 11 A moratorium under Section 14 of IBC was imposed and an Interim Resolution Professional,12 was appointed. 12. Separately, the appellant also filed a petition under Section 7 of the IBC against the Corporate Debtor on 22 January 2024.13 On 16 July 2024, the NCLT disposed of the Section 7 petition, in view of the order passed on the same day admitting the Section 9 petition filed by the second respondent.14 The appellant was granted liberty to file their claims before the IRP appointed pursuant to the Section 9 Order. Significantly, the NCLT also granted liberty to the appellant to seek a revival of its Section 7 petition, depending on the subsequent developments at the appellate level, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs 83 crore would be paid thereafter, on or before 9 September 2024.18 16. The payment was purportedly made pursuant to a settlement offer extended by Riju Raveendran, in his personal capacity, to the second respondent by an email dated July 30, 2024. He proposed to clear the operational debt of Rs 158 crore in three tranches on 30 July 2024,19 2 August 2024 and 9 August 2024, respectively. The second respondent agreed to take steps for withdrawal of the petition upon receipt of full payment of the operational debt. Relevant excerpts of the email are as follows: 1. We undertake to pay INR. 50 crores upfront today i.e. 30 June 2024, by way of RTGS from the account of its promoter, Mr. Riju Ravindran. We shall forward the UTR details of the same shortly. 2. We further undertake to pay INR. 25 crores on 02 August 2024 through RTGS. 3. The total dues are approximately INR. 158 crores. 4. The balance amount of INR. 83 crores to complete the figures of INR. 158 crores shall be paid on or before 09 August 2024. 5. We shall also hand over post-dated cheques to the tune of INR. 83 crores drawn in favour of Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid in violation of any order passed by any court or tribunal, including orders passed by the Delaware Bankruptcy Court. 4. I have not received any portion of the USD 533 million that are the subject matter of the proceedings before the Delaware Bankruptcy Court and, accordingly, no part of those funds have been, or will be, used to pay the BCCI. In fact, the funds forming part of the Settlement Amount are being paid out of my personal funds, as explained in paragraph 8 below. 5. To clarify, under the terms of the Credit Agreement dated 24 November 2021 (the Credit Agreement ), a group of lenders represented by GLAS Trust LLC (GLAS) disbursed an amount of USD 1.2 billion to Byju's Alpha, Inc. (a step-down subsidiary of Think Learn Pvt. Ltd. (TLPL)). Under the Credit Agreement, monies disbursed thereunder could not be brought into India. Therefore, none of the monies disbursed under the Credit Agreement (of which the USD 533 million forms a part) has ever been brought into India. Indeed, the allegation that I have received any sum of monies disbursed under the Credit Agreement has never been made by GI.AS in any proceeding whatsoever, including the proceeding under Section 7 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is constituted. The first respondent should have, thus, approached the NCLT as mandated by Rule 30A instead of invoking the inherent powers of the NCLAT under Rule 11; (ii) NCLAT should not exercise its discretionary power under Rule 11 of the NCLAT Rules because the directors of the Corporate Debtor and its allied entities are fugitives, living abroad; have defaulted on government dues; Enforcement Directorate proceedings are pending, look out notices have been issued; and there has been a significant drop in the valuation of the Corporate Debtor; and (iii) the interests of all creditors must be considered while accepting a settlement, including the appellant who has a substantial interest with regard to the Corporate Debtor. 21. On 2 August 2024, the NCLAT delivered the Impugned Judgement. After recording the factual background and submissions of the parties before it, the NCLAT outlined its reasoning and analysis in paras 44 to 50 of the Impugned Judgement. The NCLAT held the affidavit and undertaking filed by Riju Raveendran made it clear that the money was generated by Riju Raveendran from his own sources; income tax had been paid on the sales of shares from which the amount w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy proceedings against the Corporate Debtor, which is his older brother s crumbling business enterprise in India . On 8 August 2024, the Delaware Court passed an order rejecting the motion. 25. The appellant instituted the present Civil Appeal before this Court, challenging the Impugned Judgement of the NCLAT. By an Order dated 14 August 2024, this Court issued notice on the appeal and directed that there would be a stay on the operation of the Impugned Judgment. The second respondent was directed to maintain the amount of Rs 158 crores, which has been realized in pursuance of the settlement, in a separate escrow account, to abide by further directions of this Court. 26. In view of the above directions of this Court granting an interim stay on the Impugned Judgement, the CIRP proceedings resumed. On 19 August 2024, the IRP addressed a letter to the appellant noting that the CIRP had revived, verified the claim submitted by the appellant and admitted the appellant as a financial creditor. Accordingly, the IRP constituted the CoC, which consisted of four financial creditors, including the appellant. 27. Subsequently, by a letter dated 1 September 2024, the IRP sought to reconstitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s; the orders of the US Court restraining the brothers from transferring or dissipating the amount; the contempt proceedings against Mr Riju Raveendran; the ongoing investigation by the Enforcement Directorate against the first respondent and the Corporate Debtor; attempts by the Corporate Debtor to dissipate assets were not adequately dealt with in the Impugned Judgement; d. There are clear indications that the Corporate Debtor cannot service its outstanding debts to its financial creditors. There has been a 99% drop in the valuation of the Corporate Debtor, defaults in paying employees salaries, the exit of key managerial persons, failure to file financial statements, and oppression and mismanagement petitions by the shareholders against the promoters, all of which indicate that insolvency proceedings are inevitable; e. Setting aside the CIRP merely because one of the creditors has recovered its dues by way of a settlement agreement, runs contrary to the settled position that the IBC cannot be used as a recovery mechanism. Upon initiation of insolvency, third-party rights are created in all creditors of the corporate debtor; and f. Riju Raveendran failed to provide the details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pported the arguments of the first respondent in support of the Impugned Judgement and also advanced the following submissions: a. The IBC aims to prevent the economic death of entities, which involves encouraging settlement between the parties. NCLAT passed the Impugned Judgement after hearing all concerned parties. Thus, there was no infirmity in invoking inherent powers under Rule 11 of the NCLAT Rules 2016; b. Regulation 30A was a statutory response to the decision of this Court in Swiss Ribbons (P) Ltd. v. Union of India22 and the intent is to encourage settlement. The provision is directory as no consequence of noncompliance is stipulated. It does not contemplate adjudication about the factum of settlement, the mode/method of settlement or any specific legal ground by the NCLT; c. Regulation 30A, even if applicable can have no application when the settlement is made using personal funds and not the funds of the corporate debtor; and d. The payment to BCCI does not prejudice other creditors or stakeholders of the Corporate Debtor as it is not made from the possible insolvency estate that would be created if the Corporate Debtor goes through CIRP. 33. We also had an opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, the proposed legislation. 2. The objective of the Insolvency and Bankruptcy Code, 2015 is to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund, and matters connected therewith or incidental thereto. An effective legal framework for timely resolution of insolvency and bankruptcy would support development of credit markets and encourage entrepreneurship. It would also improve Ease of Doing Business, and facilitate more investments leading to higher economic growth and development. [ ] 5. The Code seeks to achieve the above objectives. 36. The long title of the IBC provides that it is an Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as follows: 41. First and foremost, the IBC perceives good corporate governance, respect for and adherence to the rule of law as central to the resolution of corporate insolvencies. Second, the IBC perceives corporate insolvency not as an isolated problem faced by individual business entities but places it in the context of a framework which is founded on public interest in facilitating economic growth by balancing diverse stakeholder interests. Third, the IBC attributes a primacy to the business decisions taken by creditors acting as a collective body, on the premise that the timely resolution of corporate insolvency is necessary to ensure the growth of credit markets and encourage investment. Fourth, in its diverse provisions, the IBC ensures that the interests of corporate enterprises are not conflated with the interests of their promoters; the economic value of corporate structures is broader in content than the partisan interests of their managements. These salutary objectives of the IBC can be achieved if the integrity of the resolution process is placed at the forefront. Primarily, the IBC is a legislation aimed at reorganisation and resolution of insolvencies. Liquidatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kes an application to the NCLT for initiating insolvency proceedings, including CIRP. This is distinct from the insolvency commencement date which is defined in Section 5(12) of the IBC as the date of admission of an application for initiating CIRP by the NCLT under Sections 7, 9 or 10, as the case may be. 41. Once the application is admitted, the CIRP commences and the NCLT inter alia declares a moratorium; issues a public pronouncement of the initiation of CIRP and a call for submission of claims; and appoints an IRP.28 Once an IRP is appointed, the affairs of the corporate debtor are managed by the IRP,29 who inter alia receives and collates all the claims submitted by the creditors pursuant to the public announcement of the CIRP.30 After the collation of claims received and the determination of the financial position of the corporate debtor, the IRP shall constitute a CoC, which consists of all the financial creditors of the corporate debtor.31 The CoC appoints a Resolution Professional32 and the CIRP process continues, as prescribed. 42. From this scheme of Chapter II of the IBC, it appears that the admission of an application is a significant event that alters the nature of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be followed thereafter is the resolution process under IB Code. Therefore, the trigger point is not the filing of the application under Section 7 of IB Code but admission of the same on determining default. 26. [ ] On admission, third-party right is created in all the creditors of the corporate debtors and will have erga omnes effect. The mere filing of the petition and its pendency before admission, therefore, cannot be construed as the triggering of a proceeding in rem. Hence, the admission of the petition for consideration of the corporate insolvency resolution process is the relevant stage which would decide the status and the nature of the pendency of the proceedings and the mere filing cannot be taken as the triggering of the insolvency process. 44. In summary, the scheme of the IBC under Chapter II gives rise to two significant principles: a. Once the petition is admitted, the proceedings are no longer the preserve of the applicant creditor and the debtor. They now become in rem and all creditors of the corporate debtor become stakeholders in the process; and b. Once the petition is admitted, the management of the affairs of the corporate debtor is vested in the IRP and ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application. 48. The above position was followed by the same Bench of this Court in Uttara Foods Feeds (P) Ltd. v. Mona Pharmachem,38 while allowing another settlement between the parties under Article 142. However, on this occasion, the bench also observed that instead of all such orders coming to this Court to utilize its powers under Article 142, the relevant rules may be amended to account for cases where an agreement has been reached after admission of the application. This Court observed as follows: 2. this Bench had observed that in view of Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, the National Company Law Appellate Tribunal prima facie could not avail of the inherent powers recognised by Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 to allow a compromise to take effect after admission of the insolvency petition. We are of the view that instead of all such orders coming to the Supreme Court as only the Supreme Court may utilise its powers under Article 142 of the Constitution of India, the relevant Rules be amended by the competent authority so as to include such inherent powers. This will obviate un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost admission if the CoC approves of such action by a voting share of ninety per cent. It was specifically discussed that rule 11 of the National Company Law Tribunal Rules, 2016 may not be adopted for this aspect of CIRP at this stage (as observed by the Hon ble Supreme Court in the case of Uttara Foods and Feeds Private Limited v. Mona Pharmacem) and even otherwise, as the issue can be specifically addressed by amending rule 8 of the CIRP Rules. 51. Accepting the recommendation of the ILC, the legislature introduced Section 12A in the IBC by the Insolvency and Bankruptcy (Second Amendment) Act, 2018 with effect from 6 June 2018.41. It reads as follows: 12A. Withdrawal of application admitted under section 7, 9 or 10. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be specified. ( emphasis supplied ) 52. The provision provides for the withdrawal of an application under Sections 7, 9 and 10 after it has been admitted, with the approval of ninety-percent voting share of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the IRP or the RP in the prescribed form, before the invitation for expression of interest under Regulation 30A. It did not provide the procedure for withdrawal after the invitation of expression of interest had been issued. Regulation 30A(2) provided that the application for withdrawal shall be accompanied by a bank guarantee towards the specified estimated costs. Regulation 30A(3) mandated that the CoC must consider the application within seven days of its constitution or the receipt of the application, whichever is later. Finally, Regulation 30A(4) provided that once the CoC approved the application with ninety percent voting share, the RP shall submit the application to the NCLT on behalf of the applicant, within three days of the approval. Finally, under Regulation 30A(5), the NCLT could approve the application submitted by an order. 55. Notably, akin to Section 12A, Regulation 30A in its original form, was silent about withdrawal in cases where the application had been admitted, but the CoC had not been formed. Similarly, Regulation 30A(1) only spoke of withdrawal before the invitation of expression of interest had been issued and there was no provision which provided for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, that under Section 60 of the Code, the Committee of Creditors do not have the last word on the subject. If the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, NCLT, and thereafter, NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12-A also passes constitutional muster. ( emphasis supplied ) 58. From the above observations of this Court in Swiss Ribbons (supra), the following positions of law may be deduced: a. Once the petition instituted by a creditor is admitted, the proceedings before the NCLT become a collective proceeding or a proceeding in rem. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application for withdrawal is under clause (a) of sub-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 subregulation (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 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 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, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercent voting share, the RP must submit the application with the approval to the NCLT within three days of the approval. Finally, regulation 30A(6) provides that on the receipt of the application under both mechanisms (before the CoC and after), the NCLT may pass an order approving the application submitted by the RP or IRP, as the case may be. b. Insights from the evolution of the legal framework 63. In essence, after a series of deliberations by the legislature, the executive and nudges by this Court, the framework created by Rule 8 of the NCLT Rules and Section 12A of the IBC read with Rule 30A of the CIRP Regulations lays down an exhaustive procedure for the withdrawal of an application filed by creditors under Sections 7, 9, or 10 of the IBC. Withdrawal may be sought at four stages, all of which have a procedure prescribed under the existing framework. These may be summarized as follows: i. Before the application under Sections 7, 9 or 10 is admitted by the NCLT: Such cases are squarely covered by Rule 8 of the NCLT Rules, which requires that the applicant approach the NCLT directly. The NCLT may then pass an order permitting the withdrawal of the application. At this stage, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an attempt to reduce reliance on discretionary powers. As detailed above, the IBC and the allied rules and regulations, in their original form did not provide any procedure for the settlement/withdrawal of claims after admission of the application by the creditor. This Court was compelled to invoke Article 142 in decisions such as Lokhandwala Kataria Construction (supra) and Uttara Foods Feeds (P) Ltd. (supra). To reduce reliance on Article 142, Section 12A and Regulation 30A were introduced to provide a detailed procedure for such cases. In fact, the ILC report which led to the inclusion of Section 12A specifically discussed and rejected the proposition that Rule 11 can instead be used for this purpose. Next, this Court in Swiss Ribbons (supra) held that since there was no prescribed framework to allow settlement/withdrawal of claims after admission of the application but before the CoC was constituted, Rule 11 of the NCLT Rules may be invoked. In response to this, to reduce reliance on the inherent powers under Rule 11 and provide certainty, necessary amendments were made to Regulation 30A. There is now a detailed procedure to deal with withdrawal or settlement at both stages po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant creditor agreeing to a settlement as the underlying reason to permit withdrawal even after initiation of the CIRP. It was never fathomed by the ILC that withdrawal of claims would remain a unilateral process, even though the application is admitted and CIRP has been initiated. Similarly, this Court in Swiss Ribbons (supra), in response to which Regulation 30A was amended, specifically observed that in cases where withdrawal is sought after initiation of CIRP, but before the CoC is constituted, the NCLT must decide on the application after hearing all the parties concerned and considering all relevant factors on the facts of each case. Therefore, the NCLT does conduct an adjudicatory exercise when the application for withdrawal is placed before it, and the procedure is not a mere technicality. iii. Scope of Inherent Powers under Rule 11 67. Section 151 of the Code of Civil Procedure47 reads as follows: 151. Saving of inherent powers of Court. Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the Court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court. 68. Rule 11 of the NCLT Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abuse of the process of the Court . 71. The need to be circumspect while invoking inherent powers , when there is an exhaustive legal framework is amplified in the context of a legislation like the IBC. In Ebix Singapore (P) Ltd. vs. Educomp Solutions Ltd. (CoC),49 a twojudge bench of this Court, speaking through one of us (DY Chandrachud, J), affirmed this position and observed as follows: Any claim seeking an exercise of the adjudicating authority s residuary powers under Section 60(5)(c) IBC, NCLT s inherent powers under Rule 11 of the NCLT Rules or even the powers of this Court under Article 142 of the Constitution must be closely scrutinized for broader compliance with the insolvency framework and its underlying objective. The adjudicating mechanisms which have been specifically created by the statute, have a narrowly defined role in the process and must be circumspect in granting reliefs that may run counter to the timeliness and predictability that is central to the IBC. Any judicial creation of a procedural or substantive remedy that is not envisaged by the statute would not only violate the principle of separation of powers, but also run the risk of altering the delicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id locus requirement to institute an appeal challenging an order of the NCLT, before the NCLAT or an order of the NCLAT, before this Court. Any person who is aggrieved by the order may institute an appeal, and nothing in the provision restricts the phrase to only the applicant creditor and the corporate debtor. As noted above, once the CIRP is initiated, the proceedings are no longer restricted to the individual applicant creditor and the corporate debtor but rather become collective proceedings (in rem), where all creditors, such as the appellant, are necessary stakeholders. The appellant is not an unrelated party to the CIRP, but is in fact, an entity whose claims had been verified by the IRP vide letter 19 August 2024. The appellant who claims to be a Financial Creditor, has expressed reasonable apprehensions about the prejudice it would face if there were roundtripping of the funds, and the prioritization of the debts of the second respondent, an operational creditor. 76. In any event, the appellant had moved an application before the NCLAT seeking impleadment as a respondent and the objections of the appellant were specifically recorded and addressed in the Impugned Judgement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deviations, the NCLAT still proceeded with approving the settlement and setting aside the CIRP by invoking its inherent power under Rule 11 of the NCLAT Rules. 80. We are of the view that recourse to Rule 11 of the NCLAT Rules was not warranted in the present circumstances. As noted above, inherent powers cannot be used to subvert legal provisions, which exhaustively provide for a procedure. To permit the NCLAT to circumvent this detailed procedure by invoking its inherent powers under Rule 11 would run contrary to the carefully crafted procedure for withdrawal. In the Impugned Judgement, the NCLAT does not provide any reasons for deviating from this procedure or the urgency to approve the settlement without following the procedure. The correct course of action by the NCLAT would have been to stay the constitution of the CoC and direct the parties to follow the course of action in Section 12A read with Regulation 30A of the CIRP Regulations 2016. This legal framework for such withdrawal was formulated after giving due consideration to the appropriate procedure for withdrawal and balancing it with the objectives of the IBC. 81. Even if the procedural infirmity is kept aside, once th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is important to understand the context in which this Court upheld the invocation of Rule 11 of the NCLAT Rules and whether these decisions considered the prescribed procedure under Section 12A and the amended Regulation 30A. We are of the considered view that these judgements do not advance the case of the respondents. 83. In Kamal Singh (supra), a two-judge bench of this Court passed a brief order setting aside an order of the NCLT, which dismissed an application filed under Rule 11 of the NCLT Rules 2016 for withdrawal of CIRP based on a settlement arrived at before the constitution of the CoC. This Court relied on the observations in para 82 of Swiss Ribbons (supra) referred to above, wherein this Court stated that at the stage when the CoC has not been constituted, the NCLT may exercise its inherent powers under Rule 11 to allow or disallow an application for withdrawal or settlement. It may be noted that there is no reference in this order to the prescribed procedure under Section 12A read with Regulation 30A, although the proceedings took place well after their insertion. As noted above, in response to the decision of this Court in Swiss Ribbons (supra), there was a change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication under 12A be decided directly (i.e. including for compliance with the requirement of a ninety-percent voting share of the CoC). This Court set aside the order of the NCLT on the ground that Regulation 30A provides a complete mechanism for dealing with the applications filed under such a provision, and it is not necessary to get the approval of a ninety percent voting share of the CoC if the application for withdrawal is moved before the constitution of the CoC. On the other hand, in the present case, there was no application filed through the IRP before the NCLT under Regulation 30A at all. Therefore, this decision is not applicable to the present case. F. Conclusion 86. For the above reasons, we allow the present appeal and set aside the impugned judgment of the NCLAT dated 2 August 2024 in the above terms. At this stage, it would not be appropriate for this Court to adjudicate on the objections of the appellant to the settlement agreement on merits. The issues raised are the subject matter of several litigations in different fora, including the Delaware Court and investigation by various authorities, including the Enforcement Directorate, which are pending. 87. During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be, shall stand suspended and be exercised by the interim resolution professional; (c) the officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to such documents and records of the corporate debtor as may be required by the interim resolution professional; (d) the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate debtor available with them to the interim resolution professional. (2) The interim resolution professional vested with the management of the corporate debtor, shall- (a) act and execute in the name and on behalf of the corporate debtor all deeds, receipts, and other documents, if any; (b)take such actions, in the manner and subject to such restrictions, as may be specified by the Board; (c)have the authority to access the electronic records of corporate debtor from information utility having financial information of the corporate debtor; (d)have the authority to access the books of account, records and other relevant documents of corporate de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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