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TMI Blog2024 (12) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... Withdrawal of CIRP u/s 12A of the Insolvency and Bankruptcy Code (IBC) - exercise of inherent jurisdiction permitting withdrawal of CIRP proceedings against the CD - HELD THAT:- With regard to withdrawal under Section 12A of the IBC, the law has been settled by Hon ble Supreme Court in Glass Trust Company LLC v. BYJU Raveendran [ 2024 (10) TMI 1185 - SUPREME COURT (LB) ]. The Hon ble Supreme Court in the said judgment has noticed the procedure for withdrawal of the CIRP as provided in Section 12A and Regulation 30A of the CIRP Regulations - In the present case, Section 7 Application has been filed by Respondent Nos.6 to 9 and unless an Application is filed by the Applicant, who has initiated Section 7 Application, compliance of Section 12A read with Section 30A, cannot be made. The present is not a case where CIRP can be withdrawn under Section 12A read with Regulation 30A. There can be no quarrel to the proposition that in a case where Adjudicating Authority comes to the conclusion that ingredients of Section 65 are attracted, i.e. Application has been filed with fraudulent or/ with malicious intent for the purpose other than the resolution of the Corporate Debtor, the Adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cheques. The Appellant No.2 is one of such nominees. (ii) In October 2016, an amount of Rs.1.96 crores was deposited in the Corporate Debtor and transferred by Respondent No.6 to 12 into a Trust of which Respondent No.6 to 12 were also Directors. On 28.03.2017, another amount of Rs.35 lakhs was deposited in the account of the CD, which was transferred on 31.03.2017 by Respondent No.6 to 12 into the Trust. The erstwhile Directors resigned from the Company in April 2017. (iii) On 21.04.2017, a Share Purchase Agreement was executed, wherein the erstwhile Directors sold their equity in favour of Accord Mediplus Pvt. Ltd. Respondent Nos.6 to 12 also resigned from the Trust on 01.09.2017. (iv) Respondent Nos.6 to 9, erstwhile Directors of the Company filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the IBC ) on 26.03.2019, claiming a debt of Rs.2.60 crores against the CD. (v) Respondent Nos.6 to 9 have also invoked arbitration proceedings by filing an Application under Section 17 of the Arbitration and Conciliation Act, 1996, which Application was dismissed by the Arbitrator. (vi) On 08.10.2021, the Adjudicating Authority admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact after reply was filed by Janseva Sahakari Bank, which clarified that the amount was transferred by Respondent Nos.6 to 9 in the CD, which was immediately transferred to the Trust controlled by them and from Trust, the amount was transferred for clearing the debt obligation of the Trust. The fact pertaining to circular transaction/ fraudulent transfer, came to the fore by the reply affidavit of Janseva Sahakari Bank filed in IA No.1770 of 2022. It is submitted that Respondent Nos.6 to 9 have initiated Section 7 proceedings malafidely and fraudulently for purposes other than resolution of the CD. It is submitted that initiation of CIRP being fraudulent and malicious, the Adjudicating Authority ought to have permitted withdrawal of CIRP, exercising its inherent power. It is submitted that the Financial Creditors, who are Financial Institutions holding 92.17% vote shares have already settled their debt and other Financial Creditors are already receiving repayment. The Financial Creditors have also filed a pursis before the Adjudicating Authority expressing their consent for settlement. However, the Applicants being Respondent Nos.6 to 9, who have malafidely and fraudulently initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Appellant has no locus standi to file IA No.2241 of 2024 for seeking withdrawal. It is submitted that an Appeal was filed against the order admitting Section 7 Application, which came to be numbered as Company Appeal (AT) (Ins.) No.881 of 2021, which was dismissed by this Appellate Tribunal on 25.11.2022 and 10.01.2023. Challenging the order of this Appellate Tribunal, an Appeal (Diary No.4846 of 2023) was filed before the Hon ble Supreme Court, which too was dismissed on 20.02.2023. It is submitted that the Appellant had filed various IAs with similar, if not identical prayers, as prayed in IA No.2241 of 2024, IA Nos.1238 of 2022 and IA No.2106 of 2022. The Appellants have filed Application for setting aside the claims of answering Respondents and staying the CIRP and direct the RP to take action on the alleged fraudulent actions of the Respondents. Despite there being no stay on admission order and on the basis of some oral stay, the Appellants are repeatedly stating that CIRP has been stayed. Nothing has transpired post the passing of the admission order that would merit an Application under Section 65 for invoking the inherent powers of the NCLT. All the grounds and fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of prayer clauses 7.3 and 7.4 above; 7.6. Any other and further reliefs as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the present case. 9. In the Application IA No.2241 of 2024 in paragraph 1.1, the Appellant has made following pleadings : 1.1 The Applicants are suspended directors of the Corporate Debtor - Sant Dnyaneshwar Hospital Pvt. Ltd. ( Hospital ) - currently in the Corporate Insolvency Resolution Process ( CIRP ). The Hospital is registered as a small enterprise under the Micro, Small and Medium Enterprises Development Act, 2006. By virtue of transactions between 17.02.2016 to 21.04.2017, the Applicants had taken over the Hospital from its erstwhile shareholders and directors being the Respondent Nos. 6 to 9, by way of the transaction for sale of shares of the Hospital from the Respondent Nos. 6 to 9 to the Applicants. It is the case of the Applicants that the initiation of CIRP by Respondent Nos.6 to 9 claiming to be creditors of the Hospital was fraudulent and I.A. No.1238 of 2022 is pending to that effect. 10. Further in paragraph 1.3, it was pleaded that Respondent Nos.2 to 5 Financial Creditors/ Financial Institutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally decided, one way or the other is trying to drag the matter. Such a prayer may not be entertained in a proceeding in which time is essence. Accordingly the appeal stands dismissed due to non- prosecution. This order was passed in present of learned counsel for the Respondent. 12. The Restoration Application (AT) No.15 of 2022 was filed by the Appellants to restore Company Appeal (AT) (Ins.) No.881 of 2021, which was dismissed by this Tribunal on 10.01.2023. Aggrieved by both the aforesaid order, the Appellant filed Civil Appeal (Diary No.4846 of 2023) before the Hon ble Supreme Court, which Appeal was also dismissed by the Hon ble Supreme Court vide order dated 20.02.2023. The order dated 08.10.2021 having been questioned and challenged by the Appellant by means of Appeal under Section 61 of the IBC and further the Appeal under Section 62 of the IBC before the Hon ble Supreme Court and both the Appeals before this Tribunal as well has Hon ble Supreme Court having been dismissed, we are of the view that Adjudicating Authority did not commit any error in rejecting the prayer of the Appellant in IA No.2241 of 2024 for recall of the order dated 08.10.2021. The Adjudicating Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant within three days of receipt. Regulations 30A (4) and (5) deal with the situation where the CoC has already been constituted. They provide that the CoC shall consider the application within seven days of receipt, and subsequently, if the application is approved by the CoC with a ninety-percent 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. 14. In the present case, Section 7 Application has been filed by Respondent Nos.6 to 9 and unless an Application is filed by the Applicant, who has initiated Section 7 Application, compliance of Section 12A read with Section 30A, cannot be made. We, thus, are of the view that present is not a case where CIRP can be withdrawn under Section 12A read with Regulation 30A. 15. The submission which has been pressed by learned Counsel for the Appellant is that Adjudicating Authority has ample jurisdiction under inherent power to permit withdrawal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries vs. Hirakud Industries Works Ltd. Company Appeal (AT) (Insolvency) No.42 of 2022, where this Tribunal after noticing that the case was one which attracted Section 65 of the IBC, held that initiation of CIRP was done fraudulently by the CD, working in collusion with Financial Creditor and the Court took the view that admission under Section 7 was liable to be set-aside. Applying Section 65, the admission of Section 7 Application was set aside. In paragraph 97 of the judgment, following was laid down: 97. Section 65 of the IBC prescribes a stringent punishment, which may be a penalty extending up to Rs. one crore for fraudulent and malicious initiation of the CIRP. In such a background, we are of the clear view that the initiation of CIRP was done fraudulently by the corporate debtor working in collusion with financial creditor Nandakini and therefore such fraudulent initiation of CIRP started with the admission order under section 7 is liable to be set aside. Therefore, taking recourse to section 65 of the IBC, we set aside the admission order of the section 7 application as its basis, the section 7 application, and loan therein which is claimed to be due and in default are f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Respondent No.7 herein) as person not eligible to be a Resolution Applicant u/s 29A of the Code, (v) stay of CIRP, and (vi) to refrain from considering/ allowing/ discussing/ evaluating/ approving any Resolution Application from the Respondent No.7 herein. (b) IA No.1770/2022, inter alia, seeking: (i) direction that the Janseva Bank to provide copies of the cheques and instruments for transfer of Rs.2.31 Crore from the account of the Company/ Corporate Debtor in the year 2016-17, (ii) direction that the Committee of Creditors of the Corporate Debtor not to consider and approve any Resolution Plan till the disposal of the application, (iii) declaration that the RP as ineligible to be appointed/ continue as RP, (iv)direction for IBBI to register a complaint against the RP for not disclosing her ineligibility to be appointed as RP and submitting false forms with the Hon'ble Tribunal for her appointment as RP; (v) direction for IBBI to appoint any person to conduct an investigation u/s 218 of the Code; and (vi) direction for IBBI to constitute a disciplinary committee to consider the reports of the investigating authority. 19. It is further relevant to notice that during submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cious intent . Thus, the Appellant has flagged the issue within the meaning of Section 65 of the Code, as early as on 11.05.2022, which Application is still pending before the Adjudicating Authority. 21. We have already observed that Adjudicating Authority has rightly refused to grant the prayer made for recall of the order dated 08.10.2021 in IA No.2241 of 2024. We further notice that present is a case, where withdrawal of CIRP cannot be made under 12A read with Regulation 30A of the CIRP Regulations. Learned Counsel for the Appellant has also contended that present is a case where Financial Creditors, who have vote share of 92.17% have already filed a compromise pursis before the Adjudicating Authority. The learned Counsel appearing for Respondent Nos.2, 4 and 5 has also submitted before us that they are agreeable to the arrangement letter dated 18.05.2024 sent by Respondent No.2 to the Appellant, which has also been brought on the record as Annexure A-27, where they have also given their consent for termination/ withdrawal of the CIRP of the Corporate Debtor. 22. While considering the exercise of inherent power by the Adjudicating Authority, we have already noticed the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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