IB Petition Withdrawal Granted pre-CoC Formation: Payment Obligations Imposed

The Interlocutory Application for withdrawal of IB Petition and recalling of CIRP was allowed by the Adjudicating Authority before the constitution of the Committee of Creditors (CoC). The decision was based on the timing of the application, the settlement agreement reached before CoC formation, and the practical difficulties in obtaining CoC consent. Specific payment obligations were imposed on the petitioner and the Corporate Debtor for CIRP expenses, with non-compliance leading to CIRP continuation as per the Insolvency and Bankruptcy Code provisions.

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Issues:
Application for withdrawal of IB Petition and recalling of Corporate Insolvency Resolution Process (CIRP) before the constitution of Committee of Creditors (CoC) under Sections 60(5) & 12-A of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Withdrawal of IB Petition and Recalling of CIRP:
The application was filed seeking withdrawal of the IB Petition and recalling of the CIRP before the constitution of the CoC. The petitioner relied on the judgment of the Hon'ble Supreme Court in Swiss Ribbons v. Union of India, emphasizing the need for consultation with the overseeing body before allowing a corporate debtor to settle its claim. The petitioner contended that the Adjudicating Authority had the power to permit withdrawal post-admission without CoC consent, citing the judgment of the Hon'ble NCLAT in Ashish Garodia v. Impact Event Management.

2. Settlement and CoC Consent:
The petitioner settled the matter before the constitution of the CoC and expressed willingness to pay the CIRP costs as per the NCLAT judgment. The petitioner assured that the settlement would not affect the rights of other financial creditors to file fresh IB petitions. The IRP opposed the application, mentioning the proposed CoC meeting and the involvement of the sole member, Indian Overseas Bank (IOB), with a higher claim than the petitioner.

3. Decision and Rationale:
The Adjudicating Authority considered the timing of the application, which was before CoC constitution, and the practical impossibility of 90% CoC consent due to the sole member situation. It was noted that the settlement amount was agreed upon before CoC formation, aligning with the principles in the Swiss Ribbons and NCLAT judgments. The proposal for settlement was accepted in the interest of justice, with a direction for the petitioner and the Corporate Debtor to bear CIRP expenses.

4. Costs and Payment Obligations:
The order mandated the petitioner and the Corporate Debtor to pay the IRP a specified fee along with actual expenses incurred for CIRP initiation within two weeks. Failure to make the payment would allow the IRP to proceed with the CIRP. The settlement was subject to the timely payment of costs, and non-compliance would lead to CIRP continuation as per the Code provisions.

5. Conclusion:
The Interlocutory Application for withdrawal of IB Petition and recalling of CIRP was allowed and disposed of with specific payment obligations outlined for the petitioner and the Corporate Debtor. The decision was made in line with the legal precedents cited and the interests of all parties involved, ensuring compliance with the Insolvency and Bankruptcy Code.

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