Tribunal Allows CIRP Withdrawal After Creditor-Debtor Settlement; Recommends Fraud Investigation, Orders Fee Payment.

The NCLT permitted the recall of the Corporate Insolvency Resolution Process (CIRP) and allowed the withdrawal of Company Petition No. 463 of 2019 following a settlement between the Operational Creditor and Corporate Debtor. The Tribunal exercised its inherent powers under Rule 11 of the NCLT Rules, 2016, due to the absence of a constituted Committee of Creditors (CoC). However, concerns about fraudulent initiation of proceedings under Section 9 of the IBC were raised, prompting a recommendation for further investigation under Section 65 of the IBC. Both parties were ordered to pay the IRP's fees and costs, with the matter referred for additional review.

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Issues Involved:
1. Recall of the order dated 25-11-2019.
2. Withdrawal of Company Petition (IB) No. 463 of 2019.
3. Payment and settlement between Operational Creditor and Corporate Debtor.
4. Constitution of the Committee of Creditors (CoC).
5. Application of Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016.
6. Allegations of fraudulent initiation of proceedings under Section 9 of IBC.
7. Payment of fees and costs to the Interim Resolution Professional (IRP).

Issue-wise Detailed Analysis:

1. Recall of the Order Dated 25-11-2019:
The Interim Resolution Professional (IRP) filed an application under Section 12A read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking to recall the order dated 25-11-2019. This order had admitted the Company Petition (IB) No. 463 of 2018 and initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The IRP argued that the Corporate Debtor was unaware of the order until 20-12-2019, and subsequently, the Corporate Debtor settled the claims with the Operational Creditor.

2. Withdrawal of Company Petition (IB) No. 463 of 2019:
The IRP requested permission to allow the Operational Creditor to withdraw the Company Petition following the settlement. The settlement involved a payment of Rs. 32,00,000 to the Operational Creditor, which was communicated to the IRP. The Tribunal referred to the Supreme Court's decision in Swiss Ribbons (P.) Ltd. v. Union of India, which allows withdrawal of the I.B. Petition at any stage before the constitution of the CoC.

3. Payment and Settlement Between Operational Creditor and Corporate Debtor:
The Corporate Debtor made a full and final settlement payment of Rs. 32,00,000 to the Operational Creditor. The IRP annexed the pay order and consent terms dated 25-12-2019 to the application. The Tribunal acknowledged the settlement and the absence of a formal CoC at the time of the settlement.

4. Constitution of the Committee of Creditors (CoC):
The Tribunal noted that the CoC had not been constituted before the settlement was reached. This allowed the Tribunal to consider the withdrawal application directly, as per the Supreme Court's guidance in Swiss Ribbons (P.) Ltd. v. Union of India.

5. Application of Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016:
Section 12A of the IBC allows the withdrawal of an application admitted under Sections 7, 9, or 10 with the approval of ninety percent of the voting share of the CoC. Since the CoC was not constituted, the Tribunal exercised its inherent powers under Rule 11 of the NCLT Rules, 2016, to allow the withdrawal.

6. Allegations of Fraudulent Initiation of Proceedings Under Section 9 of IBC:
The Technical Member highlighted several discrepancies and potential fraudulent actions in the initiation of the CIRP. The Operational Creditor's invoices were addressed to a different entity, 'Sunita Creation,' and not the Corporate Debtor. The Corporate Debtor had denied any transactions with the Operational Creditor and had not authorized any counsel to appear on its behalf. The Technical Member suggested that the case involved serious misuse of the IBC process and recommended reopening the matter under Section 65 of the IBC.

7. Payment of Fees and Costs to the Interim Resolution Professional (IRP):
The Tribunal directed the Operational Creditor and Corporate Debtor to bear the fees and costs incurred by the IRP, amounting to Rs. 50,000, along with actual expenses. This payment was to be made within four weeks, failing which the IRP could approach the Tribunal for non-payment.

Conclusion:
The Tribunal allowed the IRP's application to recall the CIRP and the moratorium. However, the Technical Member raised concerns about the fraudulent initiation of the proceedings and recommended further investigation under Section 65 of the IBC. The Operational Creditor and Corporate Debtor were directed to pay the IRP's fees and costs, and the case was referred to the President, NCLT, for further action.

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