Appeal Dismissed Against CIRP Initiation Under Section 12A IBC Due to Lack of Evidence on Fraud and Coercion

The NCLAT dismissed the appeal challenging the initiation of CIRP against the Corporate Debtor under Section 12A of the IBC. The appellant's claim of criminal intimidation, threat, coercion, and fraud to enter into a settlement was not accepted as it lacked prima facie evidence or a pending criminal investigation. Additional documents submitted to prove fraud and coercion were rejected since they were not placed before or tested by the Adjudicating Authority and were introduced for the first time at the appellate stage. The tribunal held that allegations of threat or coercion require investigation and legal adjudication, which the appellant failed to pursue. Consequently, the appellant's contention that he was not an applicant under Section 12A was unsubstantiated, and the appeal was dismissed for lack of merit.

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ISSUES:

Whether the application for withdrawal of proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) complies with the procedural requirements prescribed under Section 12A of the I&B Code read with Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.Whether an application under Section 12A filed through Form FA by the Interim Resolution Professional (IRP) on behalf of the applicant satisfies the mandatory timelines and procedural mandates under Regulation 30A.Whether allegations of "threat," "coercion," and "fraud" in obtaining the settlement agreement and Form FA can vitiate the withdrawal application under Section 12A of the I&B Code.Whether the filing of a criminal complaint after the submission of the withdrawal application impacts the validity of the Section 12A application.Whether failure to register an FIR and non-invocation of statutory remedies under Section 173(4) of Bharatiya Nyaya Sanhita (2023) or Section 156(3) of the Code of Criminal Procedure affects the consideration of allegations of criminal intimidation, threat, and coercion.Whether additional documents filed for the first time before the appellate authority, not placed before the adjudicating authority, can be admitted for consideration in the appeal against the Section 12A order.

RULINGS / HOLDINGS:

The application for withdrawal under Section 12A of the I&B Code, 2016, read with Regulation 30A of the IBBI Regulations, was validly filed through Form FA by the IRP on behalf of the applicant within the prescribed timeframe, satisfying the procedural requirements.The contention that the appellant was never an applicant to the Section 12A application is rejected as the settlement agreement and Form FA were placed on record and considered by the Hon'ble Apex Court, which left the matter open for adjudication under the I&B Code.Allegations of "threat," "coercion," and "fraud" in obtaining the settlement agreement and Form FA cannot invalidate the withdrawal application unless established through a criminal investigation and adjudication; mere averments or belated complaints are insufficient.The criminal complaint filed after the withdrawal application does not affect the validity of the Section 12A application, particularly when the complaint was submitted subsequent to the application and no FIR was registered.Failure to invoke statutory remedies under Section 173(4) of Bharatiya Nyaya Sanhita (2023) or Section 156(3) of Cr.P.C. for non-registration of FIR precludes acceptance of allegations of criminal intimidation and coercion in the absence of appropriate legal proceedings.Additional documents not placed before the adjudicating authority and filed for the first time before the appellate tribunal cannot be admitted or considered in the appeal against the Section 12A order.The appeal challenging the order permitting withdrawal under Section 12A of the I&B Code lacks merit and is dismissed.

RATIONALE:

The Court applied the statutory framework under Section 12A of the Insolvency and Bankruptcy Code, 2016, which confers a right to withdraw admitted applications under Sections 7, 9, or 10, subject to compliance with procedural safeguards prescribed in Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.Regulation 30A mandates that an application for withdrawal made before the constitution of the committee must be submitted by the IRP on behalf of the applicant within three days of receipt, accompanied by Form FA and a bank guarantee towards estimated expenses.The Court recognized the Hon'ble Apex Court's prior observations that the existence of a settlement agreement and Form FA was undisputed and that allegations of coercion or fraud must be adjudicated under the I&B Code framework.The Court emphasized that allegations of criminal acts such as threat and coercion require prima facie establishment through criminal investigation and adjudication; mere complaints or averments are insufficient to vitiate the withdrawal application.The Court noted the appellant's failure to pursue statutory remedies available under Section 173(4) of Bharatiya Nyaya Sanhita (2023) or Section 156(3) of Cr.P.C. for non-registration of FIR, which undermines the credibility of the allegations.The Court declined to admit additional documents filed for the first time at the appellate stage, adhering to the principle that evidence must be placed and tested before the adjudicating authority to maintain procedural fairness and judicial discipline.No dissent or doctrinal shift was indicated; the decision aligns with established principles governing withdrawal applications under the I&B Code and procedural compliance under IBBI regulations.

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