2022 (2) TMI 738 - Tri - Insolvency and Bankruptcy

Tribunal rejects withdrawal application, emphasizes specific procedure under NCLT Rules.

The Tribunal dismissed the application for withdrawal of a Company Petition under Rule 11 of NCLT Rules, 2016, citing the specific provisions of Section ... Seeking withdrawal of petition - settlement arrived at between the Operational Creditor and Corporate Debtor - HELD THAT:- It can be inferred that for withdrawing the application before the constitution of COC, the appropriate course is to apply as per Regulation 30A of CIRP Regulations 2016. Further, the Hon'ble Supreme Court in Arun Kumar Jagtramka case [2021 (3) TMI 611 - SUPREME COURT] has observed the reasons of substitution/amendment in Regulation 30A. Therefore, no reliance can be placed on the order of NCLT Ahmedabad, as placed by the applicants, to demonstrate that there is an impediment in approaching the competent authority for withdrawal under Regulation 30A of CIRP Regulations 2016 - further, the applicants have not placed any decision of Hon'ble Supreme Court or Hon'ble High Court, which had repealed Regulation 30A of CIRP Regulations or any of its part, therefore, there is no ground for the Applicants for not adopting the procedure prescribed under Regulation 30A of CIRP Regulations 2016. Since there is a specific provision and procedure prescribed for withdrawal of an application admitted under section 7, 9 and 10 of IBC, before as well as after the constitution of CoC, in terms of Regulation 30A of CIRP Regulations 2016, which has been taken note of by the Hon'ble Supreme Court in the matter of Arun Kumar Jagtramka Vs Jindal Steel and Power Ltd. & Anr. and the Hon'ble NCLAT has also held recently in the matter of Mr. Harish Raghavji Patel Vs. Shapoorji Pallonji Finance Pvt. Ltd. and Anr. [2021 (10) TMI 340 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] that the inherent power cannot be invoked to by-pass the procedure prescribed under the law, we are of the considered view that Rule 11 of NCLT Rules, 2016 shall not be invoked to in the instant case for withdrawal of CP (IB)-3013 (ND) 2019. The Application is accordingly dismissed. Issues Involved:1. Withdrawal of Company Petition under Rule 11 of NCLT Rules, 2016.2. Applicability of Section 12A of IBC, 2016.3. Consistency of Regulation 30A of CIRP Regulations with Section 12A of IBC, 2016.4. Jurisdiction of NCLT to determine the validity of regulations.Detailed Analysis:1. Withdrawal of Company Petition under Rule 11 of NCLT Rules, 2016:The Applicants sought to withdraw the Company Petition No. (IB)-3013 (ND) 2019 based on a settlement. They filed the application under Rule 11 of NCLT Rules, 2016, arguing that there is no bar in doing so, citing the Supreme Court's judgment in Swiss Ribbons Pvt. Ltd. & Anr. Vs Union of India. The Tribunal noted that the Swiss Ribbons judgment allowed invoking Rule 11 for withdrawal where the Committee of Creditors (CoC) is not yet constituted. However, the Tribunal emphasized that the Swiss Ribbons judgment was delivered before the amendment to Regulation 30A of CIRP Regulations, which now provides a specific procedure for withdrawal before the constitution of CoC.2. Applicability of Section 12A of IBC, 2016:The Applicants contended that Section 12A of IBC, 2016, is applicable only where CoC is constituted. They argued that Regulation 30A, which prescribes a procedure for withdrawal before CoC constitution, is inconsistent with Section 12A. The Tribunal referred to the Supreme Court's judgment in Arun Kumar Jagtramka Vs Jindal Steel and Power Ltd., which clarified that Section 12A and Regulation 30A together provide a comprehensive procedure for withdrawal, including before CoC constitution. The Tribunal concluded that the only way for withdrawal of an application admitted under sections 7, 9, and 10 of IBC is through Section 12A and Regulation 30A.3. Consistency of Regulation 30A of CIRP Regulations with Section 12A of IBC, 2016:The Applicants argued that Regulation 30A is inconsistent with Section 12A, citing the NCLT Ahmedabad's decision in Sintex Plastics Technology Ltd. The Tribunal, however, noted that the Supreme Court in Arun Kumar Jagtramka's case had acknowledged the amendment to Regulation 30A post-Swiss Ribbons judgment, which aligns with Section 12A. The Tribunal emphasized that no higher court had repealed Regulation 30A, thus it remains valid and applicable.4. Jurisdiction of NCLT to determine the validity of regulations:The Interim Resolution Professional (IRP) opposed the application, arguing that the NCLT cannot determine the validity of regulations and must follow the prescribed procedure under Regulation 30A. The IRP cited judgments from the Supreme Court, including PTC India Ltd. v. Central Electricity Regulation Commission, and BSNL vs. Telecom Regulatory Authority of India, which asserted that the validity of regulations can only be tested in judicial review proceedings, not by the NCLT. The Tribunal agreed, stating that the inherent power under Rule 11 cannot be invoked to bypass the specific procedure prescribed under the law.Conclusion:The Tribunal concluded that since there is a specific provision and procedure for withdrawal of an application under Section 12A and Regulation 30A of CIRP Regulations, Rule 11 of NCLT Rules, 2016, cannot be invoked. The application for withdrawal under Rule 11 was dismissed, but liberty was granted to the Applicants to file an appropriate application in accordance with the prescribed procedure.