Imp. Rulings - Section 12A Application during Liquidation Process
Index;
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] [Liquidation period]
Supreme Court (03.06.2022) in Vallal Rck v. M/s. Siva Industries And Holdings Limited And Ors [Civil Appeal Nos. 1811-1812 of 2022] [Commercial wisdom of CoC]
NCLT Mumbai-5 (06.08.2021) in Dinesh Gupta Vs. Rolta India Limited [M.A. No. 1196/2021 In C.P. No.1069/I&BP/NCLT/MAH/2020] [Proceeding-in-rem]
NCLAT (28.11.2019) in Shweta Vishwanath Shirke & Ors. Vs. The Committee of Creditors & Anr. (Company Appeal (AT) (Insolvency) No. 601 of 2019) [Section-29A not applicable]
NCLAT (28.08.2019) in Andhra Bank vs Sterling Biotech Ltd. [Company Appeal (AT) (Insolvency) No. 612 of 2019] [Section-29A not applicable]
Supreme Court (14.12.2018) in Brilliant Alloys Private Limited Vs. Mr. S. Rajagopal & Ors. [Petition(s) for Special Leave to Appeal (C) No(s). 31557/2018] [Regulation - After EOI, not mandatory]
NCLAT(09.08.2018) in V. Navaneetha Krishnan vs. Central Bank of India & Anr. [Company Appeal (AT) (Insolvency) Nos. 288 & 289 of 2018] [Liquidation process]
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1. 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.
[ Link - Synopsis ]
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2. Supreme Court (03.06.2022) in Vallal Rck v. M/s. Siva Industries And Holdings Limited And Ors [Civil Appeal Nos. 1811-1812 of 2022] held that;
When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC.
The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the statute or the Rules.
It could thus be seen that this Court has found that if the CoC arbitrarily rejects a just settlement and/or withdrawal claim, the learned NCLT and thereafter the learned NCLAT can always set aside such decision under the provisions of the IBC.
[ Link - Synopsis ]
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3. NCLT Mumbai-5 (06.08.2021) in Dinesh Gupta Vs. Rolta India Limited [M.A. No. 1196/2021 In C.P. No.1069/I&BP/NCLT/MAH/2020] held that;
. . when a petition under is admitted/triggered it becomes a proceeding in rem and even the creditor who has triggered the process would also lose control of the proceedings as Corporate Insolvency Resolution Process is required to be considered through the mechanism provided under the IB Code.
Decisions of the Hon’ble Supreme Court and the Hon’ble NCLAT clearly demonstrate that even in the event the original creditor and corporate debtor settle their disputes prior to constitution of the COC, this Hon’ble Tribunal still has sufficient jurisdiction to reject an application under Section 12A of the IBC if the facts and circumstances of the case before it warrant such rejection.
It is settled law that a judicial authority ought not to pass orders which would aid and/or further multiplicity of proceedings. In the present case, considering that over 75 nos. of Petitions under Sections 7 and 9 of the IBC are already pending against the Corporate Debtors, allowing the present withdrawal will evidently result in multiplicity of proceedings which ought to be avoided by this Tribunal.
Hon’ble Supreme Court in “Swiss Ribbons Pvt. Ltd. vs. Union of India” held that “at any stage where the Committee of Creditors is not yet constituted, a party can approach NCLT directly, the Tribunal may in exercise of the inherent powers under Rule 11 of NCLT Rules may allow or disallow an application for withdrawal of CIRP. The claim and rights of other creditors as it stands is not prejudiced/altered by the withdrawal of CIRP of Corporate Debtor.”
The Bench has no doubt in its mind that considering that CIRP proceedings are in rem, the substantial claims of Financial Creditors cannot be disregarded or ignored in view of the purported settlement of certain employees of the Corporate Debtor.
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4. NCLAT (28.11.2019) in Shweta Vishwanath Shirke & Ors. Vs. The Committee of Creditors & Anr. (Company Appeal (AT) (Insolvency) No. 601 of 2019) held that;
# 12. From Section 12A and the decision of the Hon’ble Supreme Court in ‘Swiss Ribbons Pvt. Ltd. & Anr.’ (Supra), it is clear that the Promoters/Shareholders are entitled to settle the matter in terms of Section 12A and in such case, it is always open to an applicant to withdraw the application under Section 9 of the ‘I&B Code’ on the basis of which the ‘Corporate Insolvency Resolution Process’ was initiated.
# 13. In view of the aforesaid provisions of law, we hold that Section 29A is not applicable for entertaining/considering an application under Section 12A as the Applicants are not entitled to file application under Section 29A as ‘resolution applicant’.
# 14. In the present case, the ‘Corporate Insolvency Resolution Process’ was initiated pursuant to an application under Section 7 filed by the ‘Andhra Bank’ (Appellant herein). The application under Section 12A having been approved by the ‘Committee of Creditors’ more than 90% of the voting share, it was not open to the Adjudicating Authority to reject the same and that too on a ground of ineligibility under Section 29A, which is not applicable.
[ Link - Synopsis ]
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5. NCLAT(2019.08.28) in Andhra Bank vs Sterling Biotech Ltd. [Company Appeal (AT) (Insolvency) No. 612 of 2019] held that;
“As the application under Section 12A having been approved by the ‘Committee of Creditors’ more than 90% of the voting share, it was not open to the Adjudicating Authority to reject the same and that too on a ground of ineligibility under Section 29A, which is not applicable.
[ Link - Synopsis ]
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6. Supreme Court (14.12.2018) in Brilliant Alloys Private Limited Vs. Mr. S. Rajagopal & Ors. [Petition(s) for Special Leave to Appeal (C) No(s). 31557/2018] held that;
The only reason why the withdrawal was not allowed, though agreed to by the Corporate Debtor as well as the Financial Creditor -State Bank of India and the Operational Creditor-Respondent No.3, is because Regulation 30A states that withdrawal cannot be permitted after issue of invitation for expression of interest.
According to us, this Regulation has to be read along with the main provision Section 12A which contains no such stipulation.
Accordingly, this stipulation can only be construed as directory depending on the facts of each case.
[ Link - Synopsis ]
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7. NCLAT(2018.08.09) in V. Navaneetha Krishnan vs. Central Bank of India & Anr. [Company Appeal (AT) (Insolvency) Nos. 288 & 289 of 2018] held that;
Even during the liquidation period if any person, not barred under Section 29A, satisfy the demand of ‘Committee of Creditors’ then such person may move before the Adjudicating Authority by giving offer which may be considered by the ‘Committee of Creditors’, and if by 90% voting share of the ‘committee of creditors’, accept the offer and decide for withdrawal of the application under Section 7 of the I&B Code.............the order of liquidation passed by the Adjudicating Authority will not come in the way of Adjudicating Authority to pass appropriate order.
[ Link - Synopsis ]
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