Tribunal Upholds Withdrawal of CIRP under IBC, Emphasizes Compliance with Section 12A

The Tribunal upheld the Adjudicating Authority's decision to allow the withdrawal of the Corporate Insolvency Resolution Process (CIRP) initiated under Section 9 of the Insolvency and Bankruptcy Code. The appeal challenging the withdrawal was dismissed as lacking merit. The Tribunal emphasized compliance with Section 12A of the IBC and Regulation 30A, and the necessity to hear all concerned parties before permitting a withdrawal application. The Adjudicating Authority's exercise of judicial discretion was deemed appropriate and free from legal errors.

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Issues Involved:
1. Validity of the withdrawal of the Corporate Insolvency Resolution Process (CIRP) initiated under Section 9 of the Insolvency and Bankruptcy Code (IBC).
2. Whether the Adjudicating Authority erred in allowing the withdrawal application without hearing the Financial Creditor.
3. Compliance with Section 12A of the IBC and Regulation 30A of the Insolvency and Bankruptcy Board of India (IBBI) Regulations.
4. Impact of the withdrawal on other interested parties and stakeholders.

Issue-wise Detailed Analysis:

1. Validity of the Withdrawal of CIRP:
The Appellant challenged the order dated 19.03.2021, wherein the Adjudicating Authority allowed the withdrawal of the CIRP initiated under Section 9 of the IBC. The withdrawal was based on a settlement between the Operational Creditor and the Corporate Debtor. The Adjudicating Authority exercised its power under Section 12A of the IBC, read with Regulation 30A(1)(a), before the constitution of the Committee of Creditors (CoC).

2. Hearing of the Financial Creditor:
The Appellant contended that the Adjudicating Authority failed to hear the Financial Creditor (Appellant/Bank) before permitting the withdrawal application. The Appellant argued that the CIRP was initiated pursuant to an order dated 05.03.2021 and that the withdrawal without considering the concerns of other interested parties would affect their interests. The Appellant cited the Supreme Court's decision in Swiss Ribbons (P) Ltd. v. Union of India and Anr., emphasizing that all concerned parties must be heard before allowing a withdrawal application.

3. Compliance with Section 12A and Regulation 30A:
The Operational Creditor submitted Form FA under Regulation 30A of the IBBI Regulations for the withdrawal of the Company Petition. The Interim Resolution Professional (IRP) received the form and a cheque for estimated expenses. The application for withdrawal was filed within three days of receipt of the application from the Operational Creditor, complying with Regulation 30A(3). The Adjudicating Authority allowed the application under Section 12A of the IBC, read with Regulation 30A(1)(a), before the constitution of the CoC.

4. Impact on Other Interested Parties and Stakeholders:
The Appellant argued that the withdrawal would affect the interests of other Financial Creditors, Operational Creditors, workmen, and stakeholders involved in the CIRP. The Appellant emphasized that the settlement between the Operational Creditor and the Corporate Debtor should not be the sole intention of the IBC. The Respondent countered that the application for withdrawal was allowed before the constitution of the CoC, and hence no consent was required. The withdrawal was in compliance with the IBC and the IBBI Regulations.

Assessment and Disposition:
The Tribunal noted that the Adjudicating Authority exercised its power under Section 12A of the IBC and Regulation 30A(1)(a) before the constitution of the CoC. The Tribunal found no legal flaws in the Adjudicating Authority's decision to allow the withdrawal application and dismiss the main Company Petition (IBA/81/2020). The appeal was dismissed as it lacked merit. The IA/241/2021 for impleading additional respondents was not entertained. The Tribunal concluded that the exercise of judicial discretion by the Adjudicating Authority was appropriate and free from legal errors.

Conclusion:
The Tribunal upheld the Adjudicating Authority's decision to allow the withdrawal of the CIRP and dismissed the appeal. The Tribunal emphasized compliance with Section 12A of the IBC and Regulation 30A, and the necessity to hear all concerned parties before allowing a withdrawal application. The appeal was dismissed, and related interim applications were closed.

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