2021 (8) TMI 1237 - Tri - Insolvency and Bankruptcy

Tribunal Denies Withdrawal Application, Orders Continuation of Insolvency Resolution Process

Dinesh Gupta Versus Rolta India Limited.

The Tribunal dismissed the application for withdrawal under Section 12A of the Insolvency and Bankruptcy Code, citing that the settlement agreements did ... Seeking withdrawal of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and debt and dispute or not - seeking withdrawal in Form FA - Bonafide settlement agreement of certain employees, or not - HELD THAT:- As per the information provided by the IRP, the Bench notes that the total claim amount pertaining to the 567 employees of Rolta India translates into about ₹ 86.41/- crores. Therefore, Bench notes that even the settlement which has been proposed by the Promoter on the behalf of the Corporate Debtor Company keeps aside the majority of the Workmen Employees’ claim which has been brought out by the IRP. The Bench also notes that the proposed settlement with the employees under the Joint Settlement Agreement will be done only after they withdraw the Petition. Interestingly enough, it is the Corporate Debtor is willing to pay the major part of the dues to the employees only subsequent to withdrawal of Petition through the settlement jointly and/ or severally with the Employees. The Bench feels that this provides an escape route to both the promoter as well as to the Corporate Debtor Company to conveniently wriggle out of the partial mini settlement at any point of time - The Bench is also aware of the fact that the present Application is not strictly speaking as per the procedure prescribed in Regulation 30A of the CIRP Regulations. The Regulation 30A of the CIRP Regulations requires that the Applicant have to put any application for withdrawal under Section 12A through the IRP, before the constitution of the Committee of Creditors. The Bench is fully aware that after passing the “Admission Order” dated 13.05.2021 and after the commencement of CIRP, the proceeding are in rem and therefore, any decision regarding the continuation or otherwise of CIRP has to be decided in the interest of all stakeholders and not just a handful of employees. The Bench is fully aware of the fact that under Section 53 of IBC the debts of the Workmen rank equally with the financial debt owed to the secure/ unsecured creditors - the fact cannot be ignored while taking a decision, the Bench also has to take into account the interest of all stakeholders. The Hon’ble Supreme Court has recently in the matter of Indus Biotech Pvt. Ltd. vs. Kotak India Venture (Offshore) Fund & Ors. [2021 (3) TMI 1178 - SUPREME COURT] has clearly observed 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. As the Bench is aware and as submitted by the RP, about more than 100 employees have lodged their claims against the Corporate Debtor, However, only some employees’ claims are being settled by the ex-management/ Promoter of the Company. Therefore, the purported settlement lacks bona fide. The Bench, therefore, is of the considered view that, be that as it may, the interest of the employees would in any event will be taken care of during the CIRP of the Corporate Debtor and they being Operational Creditors will be entitled to their rights as provided for under the IBC. 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. Application filed by Mr. Dinesh Gupta under Section 12A of the IBC is dismissed and the CIRP against the Corporate Debtor Company would continue. 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.