NCLAT sets aside CIRP withdrawal order due to improper Form FA execution under Section 12A IBC 2016

The NCLAT Chennai set aside the NCLT order permitting withdrawal of CIRP under Section 12A of IBC, 2016. The appellant contended that CIRP withdrawal requires application by the original Section 9 applicant. The NCLAT found that Form FA was improperly executed, lacking the original applicant's signature as mandated under Regulation 30A of IBBI (CIRP) Regulations, 2016. The Adjudicating Authority failed to examine this procedural deficiency. The IRP's request for remittance was noted due to the corporate debtor's failure to honor the settlement agreement. The appeal was allowed, and the withdrawal order dated 09.11.2022 was set aside.

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Issues Involved:
1. Admissibility of the claim under Section 9 of IBC, 2016.
2. Validity of the settlement agreement and subsequent default.
3. Admission and rejection of claims by the IRP.
4. Withdrawal of CIRP under Section 12A of IBC, 2016.
5. Compliance with the procedural requirements for withdrawal of CIRP.

Summary:

Issue 1: Admissibility of the claim under Section 9 of IBC, 2016
The appellant filed Company Petition No. 186 of 2015 seeking winding up of Safire Machinery Company Private Limited due to non-payment of Rs. 118,751,000. The matter was transferred to NCLT and numbered as TCP-141/(IB)/2017 under Section 9 of IBC, 2016.

Issue 2: Validity of the settlement agreement and subsequent default
A settlement was agreed upon on 25.07.2017 and signed on 10.08.2017. The NCLT disposed of the petition with liberty to revive it in case of default. The corporate debtor defaulted, leading to the revival of the petition and initiation of CIRP on 28.04.2022.

Issue 3: Admission and rejection of claims by the IRP
The IRP admitted the principal amount of 30 million yen but rejected the interest component. The CoC, constituted with Tamilnad Mercantile Bank Limited as the sole secured Financial Creditor, decided to initiate liquidation.

Issue 4: Withdrawal of CIRP under Section 12A of IBC, 2016
A settlement agreement dated 09.09.2022 was approved by the CoC with 100% voting. The NCLT allowed the withdrawal of CIRP, treating the main petition as "dismissed as withdrawn," relying on the Supreme Court's decision in Swiss Ribbons Private Limited & Anr. Vs. Union of India & Ors.

Issue 5: Compliance with the procedural requirements for withdrawal of CIRP
The appellant contended that CIRP withdrawal under Section 12A should be made by the applicant who filed the original application. The Form 'FA' was not signed by the appellant but by the Financial Creditor. The NCLAT found that the withdrawal did not comply with Section 12A and Regulation 30A, as the Form 'FA' was not signed by the applicant.

Judgment:
The NCLAT set aside the impugned order dated 09.11.2022, revived TCP-141(IB)/2017, and connected IAs 1035/CHE/2022 and IA No. 1036/CHE/2022, and remitted the matter back to NCLT, Chennai for appropriate action. The appeal was allowed, and all connected IAs were closed.

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