Tribunal allows CIRP withdrawal pre-COC formation, dismisses Operational Creditors' intervention. Corporate Debtor freed to operate independently.

The Tribunal allowed the withdrawal of CIRP proceedings based on a settlement reached before the formation of the Committee of Creditors, using its inherent powers under Rule 11 of NCLAT Rules, 2016. Intervention applications by Operational Creditors were dismissed, releasing the Corporate Debtor from the insolvency process to operate independently through its Board of Directors. The Order clarified that Financial/Operational Creditors could still initiate CIRP proceedings unaffected by the current judgment.

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Issues Involved:
1. Privity of Contract and Pre-Existing Dispute.
2. Settlement and Withdrawal of CIRP Proceedings.
3. Intervention Applications by Operational Creditors.

Detailed Analysis:

1. Privity of Contract and Pre-Existing Dispute:
The Appellant, a former Director of the Corporate Debtor, challenged the Order of Admission under Section 9 of the Insolvency and Bankruptcy Code, 2016, arguing the absence of any Agreement between the Appellant and the second Respondent, and hence, no privity of contract. The Appellant contended that the Learned Adjudicating Authority ignored the existence of a 'Pre-Existing Dispute' and incorrectly admitted the Petition against an incorrect legal entity. The Tribunal noted that the payments were made by MTH and accepted by the Operational Creditor, thus recognizing MTH and the Corporate Debtor as separate legal entities.

2. Settlement and Withdrawal of CIRP Proceedings:
The Tribunal, on 08.04.2021, issued notice and suspended the Constitution of the Committee of Creditors based on the Appellant's submission that the Operational Creditor wrongly proceeded against the Corporate Debtor instead of the sister concern, which had paid all claimed amounts. The Appellant filed IA No. 815 of 2021 under Rule 11 of NCLAT Rules, 2016, seeking to set aside the Impugned Order dated 30.03.2021 due to a settlement. The Operational Creditor confirmed the settlement and receipt of the total operational debt amount. The Tribunal emphasized that the settlement was reached before the Constitution of the Committee of Creditors, making Regulation 30-A(1)(a) inapplicable. The Tribunal exercised its inherent powers under Rule 11 to allow the Application of Withdrawal.

3. Intervention Applications by Operational Creditors:
Several Intervention Applications were filed by proposed Intervenors, mainly Operational Creditors, seeking to oppose the withdrawal of CIRP Proceedings. These Applications were based on the argument that once CIRP Proceedings are initiated, they cannot be withdrawn without settling claims of all creditors, citing the ratio of 'Swiss Ribbons Pvt. Ltd. and Ors. Vs. Union of India and Ors.' and other judgments. The Tribunal, however, noted that the settlement was reached before the Constitution of the Committee of Creditors and that mere filing of a 'Claim' does not constitute default per se. The Tribunal referred to multiple judgments where it had exercised inherent powers under Rule 11 to allow withdrawal of CIRP Proceedings before the formation of the Committee of Creditors. Consequently, the Intervention Applications were dismissed.

Conclusion:
The Tribunal allowed the Application of Withdrawal based on the settlement reached before the Constitution of the Committee of Creditors, exercising its inherent powers under Rule 11 of NCLAT Rules, 2016. The Intervention Applications filed by various Operational Creditors were dismissed, and the Corporate Debtor was released from the rigors of CIRP, allowing it to function independently through its Board of Directors. The Order emphasized that any Financial/Operational Creditors could still move an Application for CIRP before the Adjudicating Authority, which would hear the matter uninfluenced by the observations made in this Judgment.

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