CoC Approval Not Needed for Withdrawal Under Section 12A

The judgment clarified that a withdrawal application under Section 12A of the Insolvency and Bankruptcy Code, filed before the constitution of the Committee of Creditors, does not necessitate ninety percent approval from the CoC. The settlement between the parties, including full payment to the appellant before the adjudicating authority's order, justified the withdrawal of the CIRP application. The requirement for CoC approval was overturned, allowing the withdrawal application. The appeals were allowed without costs.

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Issues Involved:
1. Requirement of Committee of Creditors' approval for withdrawal of application under Section 12A of the Insolvency and Bankruptcy Code, 2016.
2. Validity of the withdrawal application filed before the constitution of the Committee of Creditors.
3. Impact of settlement between the parties on the CIRP process.
4. Legal precedents relevant to the withdrawal of applications under Section 12A.

Detailed Analysis:

1. Requirement of Committee of Creditors' approval for withdrawal of application under Section 12A of the Insolvency and Bankruptcy Code, 2016:
The judgment addresses whether the approval of the Committee of Creditors (CoC) is necessary for the withdrawal of an application under Section 12A of the Insolvency and Bankruptcy Code, 2016. Section 12A states, "The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be specified." This implies that the approval of ninety percent of the CoC is required only after the CoC is constituted.

2. Validity of the withdrawal application filed before the constitution of the Committee of Creditors:
The judgment clarifies that if a withdrawal application is filed before the constitution of the CoC, the requirement of obtaining ninety percent approval from the CoC does not apply. Regulation 30A(1)(a) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, supports this by stating that an application for withdrawal can be made before the constitution of the CoC by the applicant through the interim resolution professional. The judgment cites the Supreme Court's decision in "Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors." which allows the NCLT to exercise its inherent powers under Rule 11 to permit withdrawal before the CoC is constituted.

3. Impact of settlement between the parties on the CIRP process:
The judgment highlights that the settlement between the appellant and the corporate debtor was reached on 25.08.2021, before the CoC was constituted. The settlement included payments through demand drafts and a cheque, with the cheque amount being subsequently paid via RTGS before the adjudicating authority's order on 29.09.2021. Given that the entire payment was made as per the settlement, there was no outstanding debt from the corporate debtor to the appellant, justifying the withdrawal of the CIRP application.

4. Legal precedents relevant to the withdrawal of applications under Section 12A:
The judgment references several legal precedents to support its conclusions:
- The Supreme Court's decision in "Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors." which allows for withdrawal applications to be considered by the NCLT before the CoC is constituted.
- The Supreme Court's decision in "Kamal K. Singh vs. Dinesh Gupta & Anr." where the withdrawal application was allowed despite the CoC not being constituted.
- The NCLAT's decision in "Sunil Tandon vs. Manoj Kumar Anand, I.R.P. & Ors." which allowed a withdrawal application filed before the CoC's constitution.
- The NCLAT's decision in "Anuj Tejpal vs. Rakesh Yadav & Anr." which upheld the principle that substantive law takes precedence over regulations, allowing for withdrawal applications before CoC constitution under Rule 11 of NCLT Rules.

Conclusion:
The judgment concludes that the application for withdrawal under Section 12A, filed before the constitution of the CoC, does not require the approval of ninety percent of the CoC. The settlement between the parties and the subsequent full payment to the appellant justified the withdrawal of the CIRP application. The adjudicating authority's order requiring CoC approval was set aside, and the withdrawal application was allowed. The appeals were thus allowed, with no order as to costs.

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