Tribunal grants withdrawal of CIRP application under Rule 11

The Tribunal allowed the application for withdrawal of Corporate Insolvency Resolution Process (CIRP) under Rule 11 of NCLT Rules, 2016. The Corporate Debtor was directed to pay the fee and expenses incurred by the Interim Resolution Professional (IRP) and instructed the IRP to hand over all records to the management. The Tribunal emphasized that the suspended management must act in the best interests of the Corporate Debtor and creditors. The Corporate Debtor was released from CIRP following the Tribunal's decision.

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Issues Involved:
1. Withdrawal of Corporate Insolvency Resolution Process (CIRP) under Rule 11 of NCLT Rules, 2016.
2. Locus standi of Intervenors in opposing the withdrawal application.
3. Applicability of Section 12A of IBC, 2016 and Regulation 30A of IBBI (CIRP) Regulations, 2016.
4. Validity and scope of delegated legislation under Section 240 of IBC, 2016.
5. Interests of stakeholders post-admission of Corporate Debtor into CIRP.
6. Conduct of Interim Resolution Professional (IRP) during CIRP.

Detailed Analysis:

1. Withdrawal of CIRP under Rule 11 of NCLT Rules, 2016:
The application for withdrawal of CIRP was filed by the promoter shareholder of the Corporate Debtor following a settlement with the Original Operational Creditor. The applicant argued that Rule 11 of NCLT Rules, 2016, and not Regulation 30A of IBBI (CIRP) Regulations, 2016, should apply in this case. The Tribunal noted that, as per the Supreme Court's decision in "Swiss Ribbons Pvt. Ltd vs. Union of India," Rule 11 can be invoked when Section 12A of IBC, 2016 is not applicable. The Tribunal held that Rule 11 was applicable in this case as the Committee of Creditors (COC) had not been constituted.

2. Locus Standi of Intervenors:
The Intervenors, M/s. KKR India Financial Services and M/s. DSP Investment Managers Pvt. Ltd., opposed the withdrawal application, arguing that their interests as Financial Creditors would be prejudiced. The applicant contended that the Intervenors had no locus standi as they could file their claims under Section 7 of IBC, 2016. The Tribunal agreed with the applicant, stating that the Intervenors' interests would not be prejudiced as they could approach the Adjudicating Authority under Section 7 if they wished.

3. Applicability of Section 12A of IBC, 2016 and Regulation 30A of IBBI (CIRP) Regulations, 2016:
The applicant argued that Section 12A of IBC, 2016, which requires a 90% voting share of the COC for withdrawal, was not applicable as the COC had not been constituted. The Tribunal noted that Regulation 30A, which provides for withdrawal before the constitution of the COC, was inconsistent with Section 12A of IBC, 2016. The Tribunal held that Rule 11 of NCLT Rules, 2016, was applicable and not Regulation 30A.

4. Validity and Scope of Delegated Legislation under Section 240 of IBC, 2016:
The Tribunal examined the scope of delegated legislation under Section 240 of IBC, 2016. It noted that the power to make regulations is limited to carrying out the provisions of the Code and cannot expand the scope of the Act. The Tribunal held that Regulation 30A, to the extent it was inconsistent with Section 12A, was not binding. The Tribunal emphasized that any regulation made under Section 240 must be consistent with the Code and the rules made thereunder.

5. Interests of Stakeholders Post-Admission of Corporate Debtor into CIRP:
The Tribunal considered the interests of all stakeholders, including Operational Creditors, Financial Creditors, employees, and shareholders. It noted that the Corporate Debtor had sufficient funds to settle the claims of Operational Creditors and that allowing the withdrawal would not prejudice the interests of Financial Creditors. The Tribunal emphasized that the objective of IBC, 2016, is to ensure the Corporate Debtor remains a going concern and that the interests of all stakeholders are protected.

6. Conduct of Interim Resolution Professional (IRP) During CIRP:
The applicant alleged that the IRP was taking instructions from lenders instead of the suspended management, which was not in the interests of the Corporate Debtor. The Tribunal found no merit in this contention, noting that the IRP was running the affairs of the Corporate Debtor as a going concern and no grievances were raised by employees, Operational Creditors, or lenders against the IRP's conduct.

Conclusion:
The Tribunal allowed the application for withdrawal of CIRP under Rule 11 of NCLT Rules, 2016, and directed the Corporate Debtor to pay the fee and expenses incurred by the IRP. The IRP was instructed to hand over all records and documents to the management of the Corporate Debtor. The Tribunal made it clear that the suspended management should not act against the interests of the Corporate Debtor or creditors. The application under Rule 11 of NCLT Rules, 2016, was allowed, and the Corporate Debtor was released from CIRP.

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