Resolution Professional has authority to withdraw insolvency petition under Section 12A after CIRP admission

NCLAT dismissed an appeal challenging a Resolution Professional's authority to withdraw an insolvency petition under Section 12A of IBC. The court held that following SC precedent in GLAS Trust Company LLC, after CIRP admission, proceedings become in rem and the Resolution Professional has jurisdiction to conduct all proceedings including withdrawal applications. The withdrawal was justified as a subsequent creditor's claim was admitted after the withdrawal application, requiring CoC reconstitution. The Adjudicating Authority's order permitting withdrawal was upheld as legally sound, making the appeal infructuous.

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Issues Involved:

1. Jurisdiction and authority of the Resolution Professional to withdraw the Section 12A application.
2. Admission and impact of the claim of Mitsubishi Heavy Industries Ltd. (MHIL) on the withdrawal process.
3. Compliance with the statutory scheme under Section 12A of the Insolvency and Bankruptcy Code (IBC) and Regulation 30A of the CIRP Regulations, 2016.
4. Validity of the Committee of Creditors' (CoC) decision prior to the inclusion of new creditors.

Issue-wise Detailed Analysis:

1. Jurisdiction and Authority of the Resolution Professional:

The primary contention raised by the appellant was regarding the jurisdiction and authority of the Resolution Professional (RP) to file a purshish for the withdrawal of the application under Section 12A of the IBC. The appellant argued that the RP acted beyond its authority since the withdrawal application should be filed by the original applicant, i.e., the Operational Creditor. The judgment clarified that according to the statutory scheme, once the Corporate Insolvency Resolution Process (CIRP) is initiated, it becomes a proceeding in rem, and the RP is the person in control of the insolvency proceedings. The Supreme Court's ruling in "GLAS Trust Company LLC v. BYJU Raveendran & Ors." was cited, emphasizing that the RP is responsible for conducting the proceedings, including filing for withdrawal under Section 12A. Thus, the tribunal found no lack of jurisdiction in the RP's actions.

2. Admission and Impact of MHIL's Claim:

The admission of MHIL's claim as a Financial Creditor and its subsequent impact on the withdrawal process was a significant issue. MHIL's claim, which accounted for a 92.35% voting share in the CoC, was admitted after the initial CoC decision to approve the withdrawal. The tribunal noted that the RP delayed the verification and admission of MHIL's claim, which was only acknowledged on 16.09.2024. The tribunal emphasized that the CoC's decision for withdrawal on 16.08.2024 was made prior to MHIL's claim admission. Therefore, the tribunal ruled that the withdrawal could not proceed without considering MHIL's substantial interest, as the CoC needed to be reconstituted following the claim's admission.

3. Compliance with Section 12A and Regulation 30A:

The tribunal scrutinized whether the procedures under Section 12A and Regulation 30A were followed. Section 12A requires withdrawal applications to be filed through the RP with the CoC's approval. Regulation 30A further outlines the process for withdrawal, emphasizing that the RP must submit the application on behalf of the applicant. The tribunal confirmed that the RP adhered to these procedures, and the withdrawal was processed in accordance with the law. The tribunal rejected the appellant's argument that the RP lacked authority, affirming that the RP acted within its jurisdiction by filing the withdrawal purshish.

4. Validity of CoC's Decision Prior to Inclusion of New Creditors:

The appellant argued based on Regulation 12(3) that the inclusion of a new creditor should not affect the validity of prior CoC decisions. The tribunal acknowledged this regulation but clarified that the issue was not about the validity of the CoC's decision on 16.08.2024. Instead, the focus was on subsequent events, specifically the admission of MHIL's claim, which necessitated a reconstitution of the CoC. The tribunal concluded that the RP appropriately informed the Adjudicating Authority of these developments, and the withdrawal of the Section 12A application was justified.

Conclusion:

The tribunal upheld the Adjudicating Authority's decision to allow the withdrawal of the Section 12A application, finding no error in the process. The appeals challenging the orders dated 12.11.2024 and 15.10.2024 were dismissed, with the latter deemed infructuous due to the former's resolution.

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