Withdrawal of Insolvency Petition allowed pre-COC formation under Section 60(5) of the Code. Payment obligations imposed.

The National Company Law Tribunal, Ahmedabad Bench, allowed the withdrawal of the Insolvency and Bankruptcy Petition under Section 60(5) of the Code before the formal constitution of the Committee of Creditors. The Tribunal held that the Adjudicating Authority had the power to order withdrawal and recall the Corporate Insolvency Resolution Process based on legal precedents. The parties were directed to pay the IRP's fees and expenses, as well as the process costs within a specified period. Failure to comply would lead to the completion of the resolution process.

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Issues Involved:
Withdrawal of Insolvency Petition under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.

Analysis:
The judgment by the National Company Law Tribunal, Ahmedabad Bench, involved a petition filed by a Branch Collection Manager seeking withdrawal of the Insolvency and Bankruptcy Petition under Section 60(5) of the Code for recalling the Corporate Insolvency Resolution Process concerning a specific company. The Tribunal had earlier admitted the petition and appointed an Interim Resolution Professional (IRP) to conduct the Corporate Insolvency Resolution Process. The IRP had made a public announcement for the initiation of the process. Subsequently, the Corporate Debtor made a settlement offer to the Financial Creditor, which was accepted and the settlement amount was paid. The applicant sought withdrawal of the petition before the formal constitution of the Committee of Creditors (CoC) and relied on legal precedents to support the withdrawal of the petition post-admission stage.

The applicant argued that the Adjudicating Authority had inherent powers under Section 60(5) read with Rule 11 of the NCLT Rules, 2016 to pass appropriate orders for withdrawal of the petition and recalling of the Corporate Insolvency Resolution Process if the parties settled the claim before the constitution of the CoC. The Tribunal considered the submissions of the applicant and the IRP, along with the legal precedents cited, including a judgment by the Hon'ble NCLAT and a decision by the Hon'ble Supreme Court. The Tribunal noted that the legal position allowed for withdrawal of the petition at the post-admission stage without requiring consent from the CoC, especially when the CoC had not been formally constituted yet.

Based on the legal precedents and the absence of any legal impediment, the Tribunal allowed the application for withdrawal of the petition. However, the Tribunal directed the Financial Creditor and the Corporate Debtor to bear the professional fees and expenses incurred by the IRP, in addition to the cost of the Corporate Insolvency Resolution Process. Both parties were jointly directed to pay a lump sum amount to the IRP within a specified period. Failure to make the payment within the stipulated period would result in the IRP proceeding to complete the Corporate Insolvency Resolution Process as per the provisions of the Code. The Tribunal disposed of the Interlocutory Application and the main Insolvency Petition accordingly, without any order as to costs.

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