2022 (5) TMI 1448 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process withdrawn under Section 12A: Settlement reached, expenses approved

The Tribunal allowed the withdrawal of the Corporate Insolvency Resolution Process (CIRP) under Section 12A of the Insolvency and Bankruptcy Code, 2016, ... Seeking withdrawal of CIRP application - multiple applications are filed by various other creditors (objectors) to the withdrawal of the CIRP - Section 12A of the IBC, 2016 - HELD THAT:- The application has been filed prior to the constitution of the CoC, there is no requirement to obtain the consent of the members of the CoC and the CIRP process should be closed. At the outset, it is noted that the Interim Resolution Professional has himself filed application only after 12 days of commencement of the CIRP but has chosen to continue with normal functions under CIRP without pursuing the application with this Adjudicating Authority. Even if it may be technically correct, it does not sync with the spirit of the Code. It is also noticed that the Directors have not handed over the records and assets to the IRP subsequent to their settlement with the Operational Creditor. This Bench, therefore, proceeds to categorize the activities for which expenses have been claimed as mentioned in Para 14 into two different categories; essential and non-essential - The expenses relating to the valuation are disallowed because the Directors have admittedly not handed over the records and assets. Similarly, the payment to advocate for a PUFE transaction for application under preparation is disallowed because, in the absence of records, it is difficult to justify any payment for the preparation of such an application. The main petition filed under Section 9 of the IBC, 2016 is ordered to be dismissed as withdrawn and the Corporate Debtor is released from all the rigors of the IBC and Regulations made thereunder subject to the payment of Rs. 8,36,001/- towards reimbursement of the expenses incurred by the IRP. Moratorium under Section 14 of the Code comes to an end. Application allowed. Issues Involved:1. Withdrawal of the CIRP under Section 12A of the IBC, 2016.2. Reimbursement of expenses incurred by the Interim Resolution Professional (IRP).3. Restoration of the Suspended Board of Directors.4. Cessation of CIRP proceedings due to settlement.5. Assistance for taking possession of corporate debtor's assets.Detailed Analysis:Issue 1: Withdrawal of the CIRP under Section 12A of the IBC, 2016The application IA No. 510/2021 was filed by the IRP under Section 12A of the Code read with Regulation 30A of the IBBI Regulations, 2016, seeking approval for the withdrawal of the CIRP against M/s. Cheema Spintex Limited due to a settlement with the operational creditor. The settlement amount was Rs. 80 Lakhs, paid by the Suspended Managing Director. The application was filed before the constitution of the Committee of Creditors (CoC), and as per Regulation 30A, there was no requirement to obtain the consent of the CoC members. The Tribunal referred to similar cases, including Ashish Ispat Pvt. Ltd. and Anuj Tejpal, where the Hon'ble NCLAT allowed the withdrawal of CIRP filed prior to the constitution of the CoC. Consequently, the Tribunal allowed the withdrawal of the CIRP process.Issue 2: Reimbursement of Expenses Incurred by the IRPThe Tribunal directed the IRP to file details of expenses incurred during the CIRP. The IRP submitted the expenses, which included fees for various professionals and services. The Tribunal categorized the expenses into essential and non-essential activities. Essential activities included e-voting agency, security services, publishing house, payments to advocates, and transaction auditor. The Tribunal allowed expenses for these essential activities but disallowed expenses related to valuation and preparation of PUFE transactions due to non-cooperation from directors in handing over records and assets. The IRP's fees were restricted to Rs. 2 Lakhs due to his conduct in not pursuing the application promptly. The total CIRP costs allowed were Rs. 8,36,001/-, to be reimbursed by the corporate debtor.Issue 3: Restoration of the Suspended Board of DirectorsWith the approval of the withdrawal of the CIRP, the Tribunal ordered the discharge of the IRP and the restoration of the Suspended Board of Directors to their original position. The moratorium under Section 14 of the Code was lifted.Issue 4: Cessation of CIRP Proceedings Due to SettlementIA No. 527/2021 was filed by the Suspended Director of the Corporate Debtor under Rule 11 of the NCLT Rules, 2016, seeking cessation of CIRP proceedings due to the settlement with the operational creditor. Since the Tribunal had already allowed the withdrawal of the CIRP in IA No. 510/2021, this application was rendered infructuous and disposed of accordingly.Issue 5: Assistance for Taking Possession of Corporate Debtor's AssetsIA No. 605/2021 was filed by the IRP seeking directions for assistance in taking physical possession of the corporate debtor's assets. Given the Tribunal's order in IA No. 510/2021, this application was also rendered infructuous and disposed of accordingly.Conclusion:The Tribunal allowed the withdrawal of the CIRP under Section 12A of the IBC, 2016, due to a settlement between the corporate debtor and the operational creditor. The IRP's expenses were partially approved, and the Suspended Board of Directors was restored. Applications seeking cessation of CIRP and assistance for asset possession were rendered infructuous due to the withdrawal approval. The corporate debtor was released from CIRP proceedings, subject to the reimbursement of approved expenses.