The OCs filed a petition under section 9 of IBC before the NCLT, stating a total outstanding amount of Rs.1,31,00,825/- against the CD. 03.03.2021, the OCs and the CD entered into a settlement wherein the CD was required to pay an amount of Rs.95.72 lakhs. It is stated that thereafter the Appellant has settled the claim of Operational Creditor and the Operational Creditor has filed Application for withdrawal copy of which is at Page 348 and even the IRP has filed Application before the Adjudicating Authority copy of which is at page 368. Salil Thakore, Advocate agrees with the Learned Counsel for the Appellant that there has been a settlement and accordingly Application under section 12A of IBC has ben filed. Subsequent to the above order of NCLT dated 13.04.2021, the IRP constituted the CoC on 15.04.2021.
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.”
Section 12A of IBC which was inserted w.e.f.
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.” Regulation 30A of IBBI Regulations was introduced after insertion of section 12A in IBC. 10 (2) The application under sub-regulation (1) shall be made in Form-F A of the Schedule accompanied by a bank guarantee- (a) towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of sub-regulation (1); or (b) towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) of sub-regulation (1).
(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, in the bank account of the corporate debtor, failing which the bank guarantee received under sub-regulation (2) shall be 11 invoked, without prejudice to any other action permissible against the applicant under the Code. The suspended directors of the CD despite the moratorium having commenced with effect from 01.03.2021 have not only made transactions of deposit but also withdrawal from the account of the CD.
Shri Shyam Divan, learned senior counsel appearing for the appellant referring to statutory provisions like 13 section 12A of IBC, Regulation 30A of IBBI Regulations and also to Rule 11 of the NCLT Rules, 2016 submitted that such provisions clearly permit settlement between the creditor and the debtor and withdrawal of proceedings prior to the constitution of CoC.
He has placed reliance on a number of orders/judgments passed by this Court exercising 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. The next submission relates to the objection taken by the IRP that the suspended Director had transferred huge amounts from the account of the CD during the period of moratorium i.e. Lastly, it was submitted by Shri Divan, that the NCLT had no jurisdiction to declare or hold that Regulation 30A 16 of IBBI Regulations was not binding on it; NCLT committed a grave error of law in ignoring the said provision. (2) Swiss Ribbons Private Limited & Anr. and others ; (5) Indian Overseas Bank v. The settlement had been arrived at within two days of the admission order.
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The payment as per the settlement had been made within the next five days i.e. We could have also done the 19 same which would have been an easy way out but considering the order passed by the NCLT rejecting the application for withdrawal and further the IRP and three other OCs having filed intervention applications, we are embarking upon to decide the issues raised and as to what should be the course adopted by NCLT in dealing with withdrawal matters before the constitution of CoC. The intervenors have vehemently contended that after 01.03.2021, once the NCLT has admitted the petition and had issued restraint order, section 14 of IBC had come into play; the transactions made in the accounts of the CD would be unlawful and illegal as such payment of the settlement amount from the funds of the CD transferred to the account of the suspended Director after 01.03.2021 ought to be rejected and no discretion should be exercised permitting withdrawal of the proceedings.
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.
As already recorded above, we have held that firstly, the NCLT itself was not satisfied that moratorium had been violated and even if it had been violated, at best it would amount to a 23 wrongful trading/transaction and the same, if established, could always be recovered by the IRP or the RP in appropriate proceedings for CIRP by other OCs under section 66 of IBC. Lastly, the intervenors have relied upon Ram Saran Das (supra) and Titaghur Paper Mills (supra) for the proposition that the appeal deserves to be dismissed as the appellant did not avail the alternative remedy. Even Regulation 30A, as it existed earlier, did not contemplate of consideration of an application for withdrawal filed before constitution of CoC. 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). It was after the observations made by this Court in the case of Swiss Ribbons (supra), as noted above and also considering the aspect that large number of orders were being passed by this Court invoking Article 142 of the Constitution that IBBI Regulations which were framed by the Insolvency and Bankruptcy Board of India exercising powers conferred under sections 5, 7, 9, 14, 15, 18, 21, 24, 25, 29, 30, 196, 208 read with section 240 substituted section 30A vide notification dated 25.07.2019.
Therefore, the application under section 12A for withdrawal cannot be said to be kept pending for 28 constitution of CoC, even where such application was filed before constitution of CoC. 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 29 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.
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This Court in its order in paragraphs 29 and 30 gave reasons as to why the applications for withdrawal cannot be stifled before the constitution of CoC by third parties. Singh (supra) issued directions in paragraph 32 to the NCLT to take up the settlement application and decide the same in the light of observations made therein.
NCLT has recorded its displeasure and annoyance at a couple of places referring to the conduct of the CD and its counsel before the NCLAT, and maybe for this reason, the NCLT passed the impugned order ignoring the observation in the NCLAT order dated 26.03.2021 which had specifically expressed that the Adjudicating Authority (NCLT) would pass orders on the withdrawal application without standing on technicalities. 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 33 nor it is apparent from the impugned order of the NCLT. Further, the Application
Case Title: ABHISHEK SINGH Vs. HUHTAMAKI PPL LTD. (2023 INSC 308)
Case Number: C.A. No.-002241-002241 / 2023
