NCLT Bangaluru (06.06.2022) in Shri. V S Varun, Vs. M/s. South Indian Bank [I.A. No. 63 of 2022 in CP (IB) No.366/BB/2019] held that;
The Promoter submitted the letter dated 07.12.2021 along with the revival plan of the corporate debtor. The Bank also submitted its letter dated 07.12.2021 intimating their withdrawal of claim on account of settlement.
Even during the Liquidation period, if any person, not barred U/s.29A of the Code satisfy the demands of the Committee of Creditors, such person may move before the Adjudicating Authority for withdrawal of the proceedings.
If the CoC resolve with more than 90% voting share to accept the settlement proposal of the Petitioner and to allow for drawal of the CP, neither the NCLT nor the Hon'ble NCLAT shall interfere with the same unless the decision of the CoC is wholly capricious, arbitrary, irrational and de hors the provisions of the Statue or the Rules.
Excerpts of the order;
# 1. This Application has been filed by Shri V.S.Varun, Liquidator of M/s. Aradhya Wire and Ropes Private Limited (hereinafter the 'Applicant/ Liquidator) under section 12A of the Insolvency Bankruptcy Code, 2016, by inter-alia seeking to permit the withdrawal of Application filed under section 10 of the IBC, 2016.
# 2. Brief facts of the application, which are relevant to the issue in question, as are as follows:
(1) The main Company Petition bearing C.P. (IB) No. 366/BB/2019, was filed by M/s. Aradhya Wire and Ropes Private Limited under section 10 of the Insolvency Bankruptcy Code, 2016 r/w. Rule 7 of the Insolvency Bankruptcy Code, 2016 (Application to Adjudicating Authority) Rules, 2016 seeking initiation of Corporate Insolvency Resolution Process (CIRP) on the ground that it committed default of Rs. 25,28,84,373/- (Rupees Twenty Five Crores Twenty Eight Lakhs Eighty Four Thousand Three Hundred and Seventy Three Only).
(2) It is stated that this Hon'ble Tribunal vide its order dated 12.02.2020, admitted the application filed by the Corporate Debtor/ Corporate Applicant by initiating Corporate Insolvency Resolution Process and appointed the Applicant herein, Shri V S Varun as Interim Resolution Professional to carry out the CIRP as mentioned under the Insolvency Bankruptcy Code, 2016 and Regulations thereunder.
(3). It is further stated that the Interim Resolution Professional is appointed as Resolution Professional in the first meeting of CoC on 13.03.2020 and the this Hon'ble Tribunal vide its order dated 15.06.2020 confirmed the Resolution Professional.
(4) It is submitted that the South Indian Bank, being the only member of COC, noted that value of tangible assets available with the company is around Rs.25 lakhs as against the liability of Rs. 39,60,72,980 (Rupees Thirty-Nine Crores Sixty Lakhs Seventy Two Thousand Nine Hundred and Eighty Only). The Committee thought it fit to liquidate and accordingly passed the resolution dated 15.10.2020 for liquidation of the corporate debtor.
(5) Subsequently, an application bearing No.433/2020 was filed before this Hon'ble Tribunal seeking for liquidation and accordingly, this Hon'ble Tribunal vide its order dated 16.11.2020 approved the liquidation of the corporate debtor and appointed Applicant herein as a Liquidator.
(6) The Liquidator herein, in pursuance of the Insolvency Bankruptcy Board of India (Liquidation Process). Regulations, 2016 and in accordance with order dated 16.11.2020 made public announcement and called upon the stakeholders to submit their claims. In response to the said announcement, the financial creditor, M/s. South Indian Bank submitted its claim. The said claim was admitted by the Liquidator and necessary reports were filed. The Liquidator herein also filed Preliminary Report, progress report etc., before this Hon'ble Tribunal.
(7) It is submitted that the only realizable asset available with the Corporate Debtor was Plant and Machinery which was valued around Rs.25 Lakhs. The financial assets were not in a position to be recovered. The situation was also such that if the Liquidator proceeds with the auction of the said asset in accordance with Schedule I of Insolvency Bankruptcy Board of India (Liquidation Process) Regulations, 2016, the value of the asset would come down and the Liquidator would be constrained to sell the same at a scrap price. At that point in time the successful Resolution Applicant of the one of the group companies expressed its intention to take over the entire plant & Machinery at Liquidation Value. The said offer was advantageous to the Corporate Debtor. An application in this regard under Regulation 33(2) (d) Insolvency Bankruptcy Board of India (Liquidation Process) Regulations, 2016 was filed before this Hon'ble Tribunal seeking to permit the private sale of the assets of the corporate debtor. The Hon'ble Tribunal vide its order dated 04.03.2021 permitted private sale of assets. The copy of the vide order dated 04.03.2021 is attached as Annexure – D of the application.
(8) However, when the sale was scheduled to be completed, second wave of Covid-19 spread across the country and consequently lockdowns were imposed across the states. The prospective buyer who was supposed to conclude the sale by April-May 2021 did not visit the plant on account of Covid Pandemic. However, in the month of October, 2021 the prospective buyer who intended to purchase the Plant and Machinery has made an advance payment of Rs.50 Lakhs, still there is balance payment of Rs.8 Lakhs towards GST which is yet to be paid. The buyer has sought time to make payment post which, the sale would be concluded.
(9) Subsequently, an application bearing I.A. No.64/2022 was filed before this Hon'ble Tribunal seeking for extension of liquidation period from 15.01.2022 to 16.04.2022 and accordingly, thus the liquidation period was extended on 03.03.2022. was rec
(10) The erstwhile promoter of the corporate debtor approached the Liquidator and also expressed his intention to revive the company. The promoter informed the Liquidator that he had settled with the South Indian bank and that the Bank had also issued the no dues certificate to him. Meanwhile a letter was received from the Employees Union of the corporate debtor expressing their anguish over unemployment on account of Covid-19 Pandemic and requested support to revive the Company. The relevant portion of the letter is extracted hereunder
"On behalf of all ex-employees of M/s.Aradhya Wire and Ropes Private Limited., Davanagere, we humbly request you to support the revival of the company as we have been working in this company since beginning and after the company closed, we are not getting any other job as we do not have any experience other than wire drawing and steel wire rope stranding and closing. We are mostly living in local area of Avaragere, Davanagere which is 1km from the factory. Kindly support the 200 people who were dependent on the factory"
The said letter dt. 07.10.2021 also had the signatures of 33 ex employees expressing their support for the revival. The copy of the said letter dated 07.10.2021 is attached as Annexure – E.of the application.
(11) Subsequently, stakeholder consultation committee meeting was convened on 15.10.2021 to review the Liquidation Process of Corporate Debtor. The Legal Manager of South Indian Bank (sole financial creditor/stakeholder) informed the Liquidator that the Loan account of the Company/Corporate Debtor has been settled and that they consent for withdrawal of Liquidation Process before this Hon'ble Tribunal and accordingly authorises Liquidator to file necessary application for withdrawal. The copy of the Minutes of stakeholder Consultation Committee Meeting dated 15.10.2021 is attached as Annexure - F of the application.
(12)The Promoter submitted the letter dated 07.12.2021 along with the revival plan of the corporate debtor. The Bank also submitted its letter dated 07.12.2021 intimating their withdrawal of claim on account of settlement. The copy of the letter dated 07.12.2021 along with revival plan and the Bank Letter for withdrawal is attached as Annexure - G & H of the application.
# 3. Heard the learned counsel for the Petitioner and South Indian Bank. We have carefully perused the pleadings of the party and extant provisions of the Code, and the Rules made thereunder
# 4. The issue for consideration is that whether a C.P. filed for initiation of CIRP against a Corporate Debtor, can be withdrawn during the process of Liquidation?
# 5. Section 12A of the IBC, 2016 reads as under:
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.
# 6. Regulation 30A of the IBBI, CIRP Regulations 2016 reads as under:
30 A. Withdrawal of application
(1) An application for withdrawal under section 12A may be made to the Adjudicating Authority:
(a) before the constitution of the committee, by the applicant through the interim resolution professional; (b) after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be: Provided that where the application is made under clause
(b) after the issue of invitation for expression of interest under regulation 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation.
(2) The application under sub-regulation (1) shall be made in Form FA 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).
(3) Where 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 sub-regulation (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 sub-regulation (3) or (5).
(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 invoked, without prejudice to any other action permissible against the applicant under the Code.
# 7. The above referred provisions pertaining to the withdrawal of the Applications filed under Section 7, 9 or 10 of the IBC, 2016 provides for filing an Application by the Applicant in the C.P. In the instant case, the C.P: was filed U/s.10 of the IBC, 2016, by the Corporate Applicant i.e. M/s. Aradhya Wire and Ropes Private Limited itself. On admission of the C.P. the Corporate Debtor was initially taken over by the RP and after passing of the orders of the Liquidation by the Liquidator. The instant Application has been filed by the Liquidator on receipt of the Application from one of the Promoter of the Corporate Debtor. The Hon'ble NCLAT in Shweta Vishwanath Shirke & Ors. Vs. The Committee of Creditors & Anr. bearing CA (AT) (Insolvecny) No. 601 of 2019 dated 28.08.2019 held that the Promoters/Shareholders are entitled to settle the matter in terms of the Section 12A and in such case, it is always open to Applicant to withdraw the Application. Hence, we are of the view that the instant Application filed by the Liquidator U/s.12A of the IBC, 2016 is maintainable.
# 8. The Hon'ble NCLAT in V.Navaneetha Krishnan Vs. Central Bank of India, Coimbatore & Anr. bearing CA(AT)(Insolvency) Nos. 288 and 289 of 2018 dated 09.08.2018 held that even during the Liquidation period, if any person, not barred U/s.12A of the Code satisfy the demands of the Committee of Creditors, such person may move before the Adjudicating Authority for withdrawal of the proceedings.
# 9. The Hon'ble Supreme Court of India in Vallal RCK vs. M/s. Siva Industries and Holdings Limited and Others in Civil Appeal Nos. 1811-1812 of 2022 has categorically held that if the CoC resolve with more than 90% voting share to accept the settlement proposal of the Petitioner and to allow for drawal of the CP, neither the NCLT nor the Hon'ble NCLAT shall interfere with the same unless the decision of the CoC is wholly capricious, arbitrary, irrational and de hors the provisions of the Statue or the Rules.
# 10. In the circumstances and in view of the settled position of law, the instant I.A. is allowed and accordingly the Petitioner-Corporate Applicant is released from all the rigours of the CIRP. The Liquidator shall handover the Corporate Applicant to the suspended Board of Directors forthwith. He is released from all his duties as the Liquidator.
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# 11. Accordingly, I.A No. 63 of 2022 is disposed of.
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