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Issues: (i) Whether an assignee of the original financial creditor could invoke the withdrawal mechanism for the corporate insolvency resolution process before constitution of the Committee of Creditors. (ii) Whether the Resolution Professional could insist on a substitution application and treat constitution of the Committee of Creditors as defeating the withdrawal request.
Issue (i): Whether an assignee of the original financial creditor could invoke the withdrawal mechanism for the corporate insolvency resolution process before constitution of the Committee of Creditors.
Analysis: The withdrawal framework under Section 12A of the Insolvency and Bankruptcy Code, 2016 and Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 was read with the settled position that, before constitution of the Committee of Creditors, the Adjudicating Authority may consider withdrawal or settlement on the facts of the case. The Court further treated the assignee of the financial creditor as stepping into the shoes of the assignor for purposes of the insolvency claim and the withdrawal request, relying on the inclusive definition of financial creditor. It held that there was no legal impediment to the assignee seeking the benefit of the pre-Committee withdrawal route.
Conclusion: The issue was answered in favour of the appellant. The assignee was entitled to seek withdrawal before constitution of the Committee of Creditors.
Issue (ii): Whether the Resolution Professional could insist on a substitution application and treat constitution of the Committee of Creditors as defeating the withdrawal request.
Analysis: The Court held that the Resolution Professional performs an administrative, not adjudicatory, role. It found that insisting on a substitution application was not warranted on the facts, and that constituting the Committee of Creditors after the withdrawal request had the effect of defeating the pre-Committee withdrawal mechanism envisaged by Regulation 30A(1)(a). The Court found the impugned approach inconsistent with the purpose of the amended regulation and unsustainable in law.
Conclusion: The issue was answered against the respondents. The insistence on substitution and the consequent treatment of the withdrawal request as unavailable were held to be erroneous.
Final Conclusion: The appeal succeeded, the impugned order was set aside, and the matter was sent back for fresh consideration in accordance with law.
Ratio Decidendi: Before constitution of the Committee of Creditors, an assignee of the original financial creditor may seek withdrawal under the insolvency framework, and the Resolution Professional cannot defeat that request by imposing an unwarranted substitution requirement or by altering the process so as to foreclose pre-Committee withdrawal.
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