The Supreme Court Bench comprising Justices Indira Banerjee and J.K. Maheshwari was hearing an Appeal on Thursday and held that before the constitution of the CoC, there is no bar to withdraw an application by the applicant, admitted under Section 7 of the IBC.
The present Appeal filed under Section 62 of the Insolvency and Bankruptcy Code, 2016 is against an interim order dated 18th August 2021 passed by the NCLAT, whereby the NCLAT issued a notice of the Appeal, but did not restrain the Interim Resolution Professional from proceeding with CIRP of the Corporate Debtor. The NCLAT, however, restrained the IRP from constituting a CoC till the next date of hearing. In the meanwhile, the Appellant and the Respondents were given the opportunity to settle their disputes before the NCLT in terms of Section 12A of the IBC read with Rule 11 of the National Company Law Tribunal Rules, 2016.
Facts:
On 3rd August 2021, the NCLT, Mumbai Bench, rejected the request of the parties for further deferment of orders for arriving at a settlement and admitted and allowed the application under Section 7 of the IBC preferred by Respondent Nos. 1 to 3 against Corporate Debtor.
Being aggrieved by the order dated 3rd August 2021 passed by the NCLT, Mumbai Bench, admitting and allowing an application for initiating CIRP against the Corporate Debtor, the Appellant who is Director of the Corporate Debtor filed an appeal in the NCLAT, New Delhi.
On 8th August 2021, the parties had amicably settled their disputes and entered into a formal settlement, On 10th August 2021, the NCLAT considering the settlement arrived at between the parties, granted an interim stay of publication under Section 13 of the IBC and further gave liberty to the parties to adopt procedure under Section 12A of IBC. On 12th August 2021, the parties with the consent of the IRP filed an application under Section 12A of the IBC before the NCLT, Mumbai. However, the same has not been listed to date.
On 18th August 2021, the NCLAT stayed in the formation of CoC but declined to exercise its power under Rule 11 of the NCLAT Rules to take on record the settlement and dispose of the matter. Further, the NCLAT permitted the IRP to issue publication and also hand over all assets and proceed with the CIRP even though the matter had been settled between the parties. Being dissatisfied with the order dated 18th August 2021 of the NCLAT, the Appellant has preferred the present Civil Appeal.
Court's Analysis:
Supreme Court bench noted that Section 12A of the IBC enables the Adjudicating Authority to allow the withdrawal of an application admitted under Section 7 or Section 9 or Section 10, on an application made by the applicant with the approval of 90% voting shares of the Committee of Creditors in such a manner as may be specified.
The Apex Court noted that Section 12A of the IBC clearly permits the withdrawal of an application under Section 7 of the IBC that has been admitted on an application made by the applicant. The question of approval of the Committee of Creditors by the requisite percentage of votes can only arise after the Committee of Creditors is constituted. The Supreme Court bench observed that before the constitution of the CoC, there is no bar to withdrawing an application by the applicant, admitted under Section 7 of the IBC.
The Supreme Court noted that the Application for settlement under Section 12A of the IBC was pending before the Adjudicating Authority (NCLT). The NCLAT has stayed the constitution of the Committee of Creditors. The order impugned was only an interim order which does not call for interference. In an Appeal under Section 62 of the IBC, there is no question of law which requires a determination by the Supreme Court.
The Appeal was, accordingly, dismissed.
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