2019 (12) TMI 1536 - Tri - Insolvency and Bankruptcy

Tribunal Upholds Creditor's Objection to CIRP Withdrawal, Emphasizes CoC Consultation

The Tribunal ordered the continuation of the Corporate Insolvency Resolution Process (CIRP) against a company despite settlement attempts, emphasizing the ... Seeking direction of this Tribunal to declare the CIRP proceedings in the matter - improper/defective filing of Form FA by the IRP - HELD THAT:- The recent Order of National Company Law Appellate Tribunal in HARPREET SINGH AHLUWALIA VERSUS EATIGO INDIA PVT. LTD. AND ORS. [2019 (11) TMI 1663 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] clearly establishes that this Tribunal cannot ignore the claims of the Financial Creditor M/s. State Bank of India, which is amounting to ₹ 15,60,65,148.34 plus the 0.44 crore towards Bank Guarantee in the instant case while considering the withdrawal of the Form FA filed by the Interim Resolution Professional. The CIR process initiated is not required to be interfered - the Interim Resolution Professional is allowed to continue with the CIR process as mandated by the IBC, 2016. List on 6.12.2019 for the statement of the IRP. Issues Involved:1. Initiation and progress of the Corporate Insolvency Resolution Process (CIRP).2. Application for withdrawal of CIRP under Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016.3. Objections by the Financial Creditor to the withdrawal application.4. Constitution of the Committee of Creditors (CoC).5. Legal precedents and interpretation of Section 12A and related regulations.Detailed Analysis:1. Initiation and Progress of the CIRP:The Corporate Insolvency Resolution Process (CIRP) was initiated against M/s. Solar Off Set Printers Pvt Ltd by the Operational Creditor M/s. Siddhi Vinayaka Enterprises, as per the Tribunal's order dated 23.10.2019. Shri Easwara Pillai Kesavan Nair was appointed as the Interim Resolution Professional (IRP), who took over the management control of the Corporate Debtor on 28.10.2019. Public notices were published, and claims from Financial and Operational Creditors were received.2. Application for Withdrawal of CIRP under Section 12A:The IRP filed an application (MA/17/KOB/2019) for withdrawal of the CIRP under Section 12A of IBC, 2016, citing that the matter was settled between the parties. The Operational Creditor submitted Form FA for withdrawal. The Tribunal advised following the process laid down under Section 12A and Regulation 30A of the CIRP Regulations.3. Objections by the Financial Creditor:The Financial Creditor, State Bank of India (SBI), objected to the withdrawal, citing that the Corporate Debtor defaulted on an amount of Rs. 15.60,65,148.34. SBI argued that any preferential settlement and withdrawal would be detrimental to the interests of other creditors and that 90% voting share of the CoC is required for withdrawal as per Section 12A of IBC, 2016. The Financial Creditor requested the Tribunal to continue the CIRP and not to accept the withdrawal application.4. Constitution of the Committee of Creditors:The IRP constituted the CoC and reported that the Financial Creditors, including SBI, had a voting share percentage of 53%. Despite the settlement of Rs. 14,09,554/- with the Operational Creditor, the IRP did not recommend withdrawal under Section 12A. The Corporate Debtor opposed the constitution of the CoC, arguing that the CIRP should conclude with the filing of Form FA before the CoC's constitution.5. Legal Precedents and Interpretation of Section 12A:The Tribunal referred to the Supreme Court judgment in 'Swiss Ribbons Pvt Ltd Vs. Union of India & others,' which established that once the Code is triggered, the proceeding is in rem and requires consultation with the CoC before any settlement. The Tribunal also considered the NCLAT judgment in 'Harpreet Singh Ahluwalia Vs. Eatigo India Pvt Ltd & another,' which emphasized the necessity of considering all creditors' claims before allowing withdrawal.Order:The Tribunal concluded that the CIRP should continue as mandated by IBC, 2016, and the IRP should proceed with the process. The Tribunal vacated the interim stay order restraining the convening of the CoC meeting and directed the IRP to comply with the order dated 23.10.2019 and submit his statement within two days. The Tribunal allowed the possibility of considering a settlement proposal from the Corporate Debtor if it includes all creditors.Conclusion:The Tribunal disposed of all the MAs and scheduled the next hearing for the IRP's statement on 6.12.2019. The judgment emphasized the collective nature of CIRP proceedings and the necessity of involving the CoC in any decision regarding the withdrawal of the process.