Corporate debtor's withdrawal application fails without mandatory 90% creditor approval under Section 12A IBC

The NCLAT dismissed an appeal seeking withdrawal of CIRP under Section 12A of IBC. The corporate debtor failed to obtain mandatory 90% voting support from Committee of Creditors (CoC), with one respondent holding 19.94% voting share opposing the withdrawal application. The tribunal upheld the adjudicating authority's decision, emphasizing that Section 12A clearly requires 90% CoC approval for CIRP withdrawal. The court noted that commercial wisdom of CoC is non-justiciable with limited scope for judicial intervention, and the IBC aims for corporate revival rather than serving as a recovery mechanism for bankers.

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Issues Involved:
1. Whether the Adjudicating Authority committed any error in accepting the CIRP application of the Operational Creditor.
2. Whether the dismissal of the application for withdrawal of CIRP under Section 12A of the Code was justified.

Summary:

Issue 1: Acceptance of CIRP Application
The Appellant, Mr. Narendra Jindal, challenged the Impugned Order dated 08.04.2022, which admitted the application filed by the Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process (CIRP) against M/s Sharda Ma Enterprises Private Limited (Corporate Debtor). The Appellant argued that the Corporate Debtor faced financial difficulties due to government policies and international market conditions, leading to defaults. Despite attempts to settle the dues, the Corporate Debtor failed to comply with the terms of the settlement agreements. The Adjudicating Authority found a clear debt of more than Rs. 1 Crore payable to the Operational Creditor and initiated the CIRP. The tribunal upheld the Adjudicating Authority's decision, noting the Appellant's repeated failures to meet payment commitments.

Issue 2: Dismissal of Withdrawal Application under Section 12A
The Appellant also challenged the dismissal of the application for withdrawal of CIRP under Section 12A of the Code. The Appellant argued that a fresh settlement was reached with the Operational Creditor, and the majority of the Committee of Creditors (CoC) supported the withdrawal. However, HDFC Bank, holding 19.94% of the voting share, opposed the withdrawal, leading to the resolution's failure to meet the 90% voting threshold required under Section 12A. The tribunal emphasized that the commercial wisdom of the CoC is paramount and non-judiciable. The tribunal found no error in the Adjudicating Authority's decision, noting that the settlement proposal did not secure the necessary approval from the CoC, particularly from HDFC Bank, which found the proposed settlement commercially unviable.

Conclusion:
Both appeals were dismissed, with the tribunal affirming the Adjudicating Authority's decisions on initiating the CIRP and rejecting the withdrawal application under Section 12A. The tribunal highlighted the importance of the commercial wisdom of the CoC and the statutory requirements under the Insolvency & Bankruptcy Code.

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