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Judgment
Preamble:
The Appellant has preferred the present ‘Appeal’, as an ‘aggrieved person’ being dissatisfied with the order dated 19.03.2021 in IA/232/CHE/2021 in IBA/81/2020 passed by the ‘Adjudicating Authority’ ‘National Company Law Tribunal, Division Bench-II, Chennai.
Earlier, the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench-II, Chennai) while passing the ‘Impugned Order’ in IA/232/CHE/2021 in IBA/81/2020 on 19.03.2021(filed by the 2nd Respondent/Resolution Professional under Section 12A of the Insolvency and Bankruptcy Code, read with Section 60(5) of the Code read with Regulation 30(a) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons Regulations, 2016) had among other things observed the following:
“The Operational Creditor has submitted Form FA under Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Applicant received Form FA dated 10.03.2021 from the Operational Creditor for withdrawal of the Company Petition, in pursuant to the Regulation 30A(2) sub section (a), the Applicant had also received a Cheque for Rs.13,36,590/- towards the estimated expenses including the fee of the IRP caused for issuance of the paper advertisement and fees aid to IBBI and MCA for filing necessary forms for making requisite intimation as to the appointment of IRP.
In pursuant to Regulation 30A sub section (3), the instant Application was filed within 3 days of receipt of the application from the Operational Creditor. Hence, by exercising powers conferred on this Adjudicating Authority under Section 12A of IBC, 2016 r/w Regulation 30A (1)(a), before constitution of the Committee by the Applicant through IRP. Under Section 12A of IBC,2016 read with Regulation 30 A (6) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, we hereby allow this application by permitting the Applicant to withdraw main Petition i.e. IBA/81/2020. Accordingly, IBA/81/2020 is dismissed.” and ultimately released the ‘Corporate Debtor’ from the rigours of law of the I&B Code and ordered the operation of the ‘Corporate Debtor’ by its own ‘Board of Management’ and further allowed the application.
Appellant’s Contentions:
Challenging the validity, correctness and legality of the ‘Impugned Order’ dated 19.03.2021 in IA/232/CHE/2021 in IBA/81/2020 passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench-II, Chennai), the Learned Counsel for the Appellant submits that the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench-II, Chennai) had failed to hear the application of the Appellant/Financial Creditor before permitting the withdrawal application of the ‘Operational Creditor’ in IBA/81/2020.
The Learned Counsel for the Appellant/Bank submits that the ‘Adjudicating Authority’ had failed to appreciate that the ‘CIRP’ was initiated pursuant to its order dated 05.03.2021 in IBA/81/2020 (filed by the 1st Respondent/Operational Creditor under Section 9 of the I & B Code, 2016 against the ‘Corporate Debtor’) and permitting withdrawal after initiation of ‘Corporate Insolvency Resolution Process’ without considering the ‘concerns’ of other interested parties, will affect the interest of parties who are also part of the ‘Insolvency Resolution Process’.
The Learned Counsel for the Appellant/Bank points out that after the initiation of ‘CIRP’, a withdrawal application can be ‘approved’ only with the consent of all the parties involved, in terms of the provisions of the Code, or in any event, after hearing all the concerned parties.
The Learned Counsel for the Appellant advances an argument that while the ‘Impugned Order’ expressly records that the claim of the Appellant/Bank was received, but it failed to appreciate that such ‘creditors’ are necessary parties, whose rights are directly impacted and they have a right to be heard, at the time of the consideration of the application.
The Learned Counsel for the Appellant points out that the ‘Appellant’ filed MA/10/2021 in IBA/45/2020 before the ‘Adjudicating Authority’ and brought to its notice that the ‘Financial Creditors’ interests, other ‘Operational Creditors’, workmen and other stakeholders were involved in the ‘CIRP’, and in short the ‘Adjudicating Authority’ had failed to appreciate that the settlement between the ‘Operational Creditor’ and the ‘Corporate Debtor’ and the recovery of the dues of the ‘Operational Creditor’ is not the soul intention of the I & B Code, 2016.
The Learned Counsel for the Appellant urges that an omission to hear the Appellant/Bank, the ‘Impugned Order’ dated 19.03.2021 is contrary to the decision of the Hon’ble Supreme Court in Swiss Ribbons (P) Ltd. v. Union of India and Anr., reported in 2019 (4) SCC Page 17 wherein at paragraph 52 it is observed as under:
“It is clear that once the Code gets triggered by admission of a Creditors 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 the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the concerned parties and considering all relevant factors on the facts of each case.”
The Learned Counsel for the Appellant refers to the Judgment dated 06.12.2019 of this ‘Tribunal’ in Jai Kishan Gupta v. Green Edge Buildtech Llp and 2 ors. (vide Company Appeal (AT)(INS)969-970 of 2019) whereby and whereunder at paragraph 13 had observed as under:
“The question, however, remains that the Hon’ble Supreme Court has in the above para – 82 left discretion with the Adjudicating Authority to allow or disallow an Application for withdrawal or settlement. The last sentence of the paragraph states that “this will be decided after hearing of the parties concerned and considering all relevant factors on the facts of each case.” Thus, Adjudicating Authority has to consider all relevant factors on facts of each case and to take a decision. Para – 83 of the Judgment in the matter of “Swiss Ribbons” has dealt with a decision being taken by CoC under Section 12A and left the door open that if CoC arbitrarily rejects a just settlement and/or withdrawal claim the NCLT, and thereafter NCLAT can set aside such decisions under Section 60 of the Code.”
1st Respondent Submissions:
Per contra, it is the contention of the Learned Counsel for the 1st Respondent that the ‘instant Appeal’ has become an ‘infructuous’ one because of the fact that IBA/45/2020 filed by the present Appellant/State Bank of India (Financial Creditor) (under Section 7 of the I&B Code, 2016) against the ‘Corporate Debtor’ (M/s.Kiran Global Chem Limited, Pondicherry – 611 002) was admitted by the ‘Adjudicating Authority’ as per order dated 27.04.2021. Indeed, the ‘Corporate Debtor’ was admitted into ‘CIRP’. Further, as against the said ‘admission order’ dated 27.04.2021, Company Appeal (AT)(INS) 97 of 2021 is filed by the Appellant (Mr.Manmohan Singh Jain), Shareholder and Suspended – Director of Kiran Global Chems Limited – Corporate Debtor), wherein the M/s.State Bank of India is arrayed as Respondent No.1). Viewed in that perspective, the present Company Appeal (AT)(CH)(INS) No.39 of 2021 on the file of this ‘Tribunal’ is liable to be dismissed.
The other submission projected on the side of the 1st Respondent is that the ‘application for withdrawal’ was allowed by the ‘Adjudicating Authority’, prior to the ‘Constitution of the Committee of Creditors’ in respect of ‘Corporate Debtor’ and therefore, no consent was obtained. Therefore, there is no infirmity in the ‘Impugned Order’ dated 19.03.2021 passed by the ‘Adjudicating Authority’.
The Learned Counsel for the Respondent points out that the withdrawal of IBA/81/2020 filed by the 1st Respondent, during the pendency of IBA/45/2020 cannot be characterised as an abuse of process of the I & B Code. Moreover, the I & B Code 2016 permits the withdrawal of CIRP with the consent of the Applicant/Creditor, before the constitution of the ‘Committee of Creditors’ and further that the pendency of application (IBA/45/2020) projected by the Appellant/Bank was not a relevant factor for withdrawal of IBA/81/2020 filed by the 1st Respondent.
The Learned Counsel for the 1st Respondent emphatically takes a stand that the withdrawal of ‘CIRP Proceedings’ against the ‘Corporate Debtor’ was incompliance with the I & B Code and Regulations made thereunder.
Gist of Status Report of Respondent No.2 (Resolution Professional):
It is the version of the 2nd Respondent/Resolution Professional that the ‘Operational Creditor’ had intimated the Applicant/Resolution Professional about the arrival of settlement with the ‘Corporate Debtor’ on 09.03.2021 and that was advised to comply with the I & B Code and file the requisite form FA. In fact, the 2nd Respondent had submitted an application in Form FA under Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (Regulations) read with Section 12A of the Code (as amended) for withdrawal of ‘CIRP’ on 10.03.2021. The ‘Adjudicating Authority’ was pleased to dismiss the Section 9 application filed by the 1st Respondent and resultantly, withdrew the ‘CIRP’ order passed by it. Added further, subsequent to the passing of the ‘Impugned Order’ dated 19.03.2021 in IA/232/CHE/2021 in IBA/81/2020 by the ‘Adjudicating Authority’ an order initiating ‘CIRP’ (under Section 7 of the Code) was passed on 27.04.2021, by the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench-II, Chennai) based on the application filed by the present Appellant/State Bank of India in IBA/45/2020 and that the 2nd Respondent was appointed as its ‘interim Resolution Professional’.
This ‘Tribunal’ has heard the respective contentions advanced by the Learned Counsels appearing for the parties and noticed the same.
Assessment:
At the outset, it is pertinently pointed out that the Applicant/Interim Resolution Professional had preferred an application IA/232(CHE)/2021 in IBA/81/2020 as a result of settlement arrived at between the ‘Operational Creditor’ and the ‘Corporate Debtor’. In reality, the ‘Operational Creditor’ had filed Form FA under Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016.
It is brought to the fore that the Applicant/Interim Resolution Professional received the aforesaid Form FA from the ‘Operational Creditor’ on 10.03.2021 for withdrawal of the main Company Petition, pursuant to Regulation 30A(2) sub section (a). The Applicant was in receipt of a cheque for Rs.13,36,590/- in respect of the estimated expenses, etc. To put it precisely, IA/232(CHE)/2021 in IBA/81/2020 was filed pursuant to the ingredients of Regulation 30A(3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons).
In view of the upshot, this ‘Tribunal’ keeping in mind, the facts and circumstances of the present case in a holistic manner and going through the ‘Impugned Order’ dated 19.03.2021 in IA/232/CHE/2021 in IBA/81/2020 passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench-II, Chennai) to the effect that the ‘Adjudicating Authority had exercised its power as per Section 12A of the Code together with Regulation 30A(1)(a) of the I & B Code prior to the constitution of the ‘Committee of Creditors’ by the Applicant (through the Interim Resolution Professional) and passed an order in IA/232/CHE/2021 in IBA/81/2020 by allowing the applicant to withdraw the IBA/81/2020 and as a logical corollary the IBA/81/2020 came to be dismissed’, comes to a resultant conclusion that the exercise of judicial discretion by the ‘Adjudicating Authority’ in allowing the application and finally dismissing the main IBA/81/2020 are free from legal flaws. Looking at from any angle, the ‘instant Appeal’ sans merits.
IA/241/2021 (For Impleading):
The IA/241/2021 filed by the Applicants/Proposed Respondents No.3 and 4 seeking permission of this ‘Tribunal’ to get themselves impleaded in the instant Company Appeal (AT)(CH)(INS) No.39 of 2021 as Respondents No.3 and 4, to avoid plurality/multiplicity of litigation is not entertained.
Disposition:
In fine, the ‘instant Company Appeal’ (AT)(CH)(INS) No.39 of 2021 is dismissed. No cost. IA/88/2021, IA/89/2021 and IA/90/2021 are closed.