Tribunal Denies Withdrawal Application, Orders Continuation of Insolvency Resolution Process

The Tribunal dismissed the application for withdrawal under Section 12A of the Insolvency and Bankruptcy Code, citing that the settlement agreements did not cover the majority of claims by employees and Financial Creditors, leading to a multiplicity of proceedings. The Tribunal emphasized the need to consider the interests of all stakeholders and ordered the continuation of the Corporate Insolvency Resolution Process against the Corporate Debtor.

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Issues Involved:
1. Withdrawal of Corporate Insolvency Resolution Process (CIRP) under Section 12A of the Insolvency and Bankruptcy Code (IBC).
2. Opposition by Financial Creditors and non-petitioning ex-employees.
3. Settlement agreements between the Corporate Debtor and Operational Creditors.
4. Adherence to Regulation 30A of the Insolvency and Bankruptcy Board of India (IBBI) Regulations.
5. Jurisdiction and discretion of the Tribunal in allowing or rejecting withdrawal applications.

Issue-wise Detailed Analysis:

1. Withdrawal of CIRP under Section 12A of IBC:
The application was filed by an Operational Creditor seeking withdrawal of the admitted Company Petition under Section 12A of the IBC. The Tribunal noted that the applicant approached the IRP to file the application for withdrawal but faced delays, leading to the applicant filing the application independently.

2. Opposition by Financial Creditors and Non-petitioning Ex-employees:
The Financial Creditors and some ex-employees opposed the withdrawal of the application. They argued that the Financial Creditors who have not filed petitions cannot oppose the settlement between the Operational Creditors and the Corporate Debtor. The Financial Creditors contended that their substantial claims, amounting to over Rs. 5,434.74 crores, should be considered, and the CIRP should not be withdrawn.

3. Settlement Agreements Between the Corporate Debtor and Operational Creditors:
The Corporate Debtor entered into settlement agreements with 32 employees, promising to settle their dues upon withdrawal of the CIRP petitions. However, the Tribunal noted that the settlement agreements covered only a fraction of the total employees, leaving out the majority of the workmen and employees whose claims amounted to Rs. 86.41 crores.

4. Adherence to Regulation 30A of IBBI Regulations:
The Tribunal observed that the application for withdrawal was not strictly in line with Regulation 30A, which mandates that such applications be routed through the IRP before the constitution of the Committee of Creditors (CoC). However, the Tribunal referred to the Supreme Court's ruling in "Swiss Ribbons Pvt. Ltd. vs. Union of India," which allows the Tribunal to exercise its inherent powers under Rule 11 of NCLT Rules to allow or disallow withdrawal applications before the constitution of the CoC.

5. Jurisdiction and Discretion of the Tribunal:
The Tribunal emphasized that once a CIRP is initiated, it becomes a proceeding in rem, and the interests of all stakeholders, including Financial Creditors and other employees, must be considered. The Tribunal cited several judgments, including "Indus Biotech Pvt. Ltd. vs. Kotak India Venture (Offshore) Fund & Ors." and "Ranjeet Ramakrishna Yadav vs. JNC Construction Pvt. Ltd.," to support its stance that the Tribunal has the jurisdiction to reject a withdrawal application if it is not in the interest of all stakeholders.

Findings:
The Tribunal found that the settlement agreements covered only a small portion of the total claims and that the interests of the Financial Creditors and the majority of the employees were not addressed. The Tribunal also noted that allowing the withdrawal would lead to multiplicity of proceedings and would not serve the interest of justice. Consequently, the Tribunal dismissed the application for withdrawal under Section 12A and ordered the continuation of the CIRP against the Corporate Debtor.

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