Tribunal Upheld COC Reconstitution & CIRP Withdrawal: Section 12A Application Granted

The Tribunal upheld the reconstitution of the Committee of Creditors (COC) and exclusion of certain creditors. The application for withdrawal under Section 12A of IBC was allowed, meeting the 90% voting threshold. The Corporate Insolvency Resolution Process (CIRP) was withdrawn, returning management to the Board of Directors. The Tribunal emphasized the IRP's compliance with the law and integrity of the insolvency process.

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Issues Involved:
1. Validity of the 2nd Committee of Creditors (COC) meeting and its constitution.
2. Status of claims by M/s. Sree Sankeswara Foundations and Investments, Gurudev Foundations Pvt. Ltd., and Kanchanjanga Securities Company Pvt. Ltd.
3. Inclusion of home buyer Mr. P. Velmurugan in the COC.
4. Application for withdrawal under Section 12A of IBC, 2016.

Detailed Analysis:

1. Validity of the 2nd Committee of Creditors (COC) Meeting and Its Constitution:
The Tribunal examined whether the COC was validly constituted when the resolution for withdrawal under Section 12A of IBC was passed on 14.01.2020. The IRP had excluded certain creditors from the 2nd COC based on their status as related parties and other legal grounds. The Tribunal emphasized that a validly constituted COC with a 90% voting share is mandatory for approving a withdrawal under Section 12A, as per the Supreme Court's decision in Swiss Ribbons (P) Ltd. v. Union of India. The IRP's power to revise the COC based on additional information was upheld, ensuring compliance with the principles of natural justice.

2. Status of Claims by M/s. Sree Sankeswara Foundations and Investments, Gurudev Foundations Pvt. Ltd., and Kanchanjanga Securities Company Pvt. Ltd.:
- M/s. Sree Sankeswara Foundations and Investments: Initially admitted as a financial creditor and allowed to participate in the 1st COC, the claim was later excluded based on a Tribunal decision that the debt was barred by limitation. The exclusion was upheld under Regulation 14 of IRCP Regulations, 2016.
- Gurudev Foundations Pvt. Ltd.: Filed as an operational creditor but later directed to file as a financial creditor. The claim was excluded from the 2nd COC based on a decision by the Hon'ble NCLAT that joint venture agreements do not constitute operational debt.
- Kanchanjanga Securities Company Pvt. Ltd.: Filed in Form F and initially included as a financial creditor but later excluded from the 2nd COC. The Tribunal did not dwell on this entity due to the absence of a formal application challenging the exclusion.

All three entities were also considered related parties under Section 5(24) of IBC, 2016, and thus were not allowed to participate or vote in the COC meetings.

3. Inclusion of Home Buyer Mr. P. Velmurugan in the COC:
The claim by Mr. P. Velmurugan, a home buyer, was pending admission by the IRP due to discrepancies and lack of disclosures in the submitted claim form. The Tribunal noted that the applicant-home buyer could not oppose the withdrawal of the CIRP based on an unadmitted claim. The Tribunal referenced the decision in Flat Buyers Association Winter Hills - 77, Gurgaon v. Umang Realtech Pvt. Ltd., emphasizing that claims related to specific projects should not affect the entire corporate debtor.

4. Application for Withdrawal under Section 12A of IBC, 2016:
The Tribunal allowed the application for withdrawal under Section 12A, noting that the COC's unanimous decision met the required 90% voting threshold. The Tribunal emphasized a liberal approach to withdrawal applications, referencing the decision in Dhiraj Prabhu v. Rajeev Shetty & Anr. The CIRP initiated on 13.11.2019 was withdrawn, and the management and affairs of the corporate debtor were restored to its Board of Directors.

Conclusion:
The Tribunal upheld the IRP's actions in reconstituting the COC and excluding certain creditors based on legal grounds. The application for withdrawal under Section 12A was allowed, and the CIRP was withdrawn, restoring the corporate debtor's management to its Board of Directors. The Tribunal also highlighted the importance of the IRP acting in accordance with the law and maintaining the integrity of the insolvency process.

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