Withdrawal of CIRP under Section 12A requires CoC approval if filed after CoC constitution per Regulation 30A(1)(a)

The NCLAT held that an application for withdrawal of CIRP under Section 12A filed before the constitution of the CoC does not require 90% CoC approval, per Regulation 30A(1)(a), but if filed after CoC constitution, Section 12A's approval requirement applies fully. The Tribunal rejected the appellant's argument relying solely on the Supreme Court's order, clarifying that the application filed on 14.11.2024 was after CoC constitution on 21.08.2024, thus requiring CoC approval. The appellant's failure to challenge the IRP's conduct before the Tribunal was noted. Finding no merit in the appeals, the NCLAT dismissed both.

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ISSUES:

Whether an application for withdrawal of a Corporate Insolvency Resolution Process (CIRP) filed under Section 12A of the Insolvency and Bankruptcy Code, 2016 (IBC) and Regulation 30A of the CIRP Regulations should be treated as filed before or after the constitution of the Committee of Creditors (CoC) for the purpose of applicability of Regulation 30A(1)(a) or 30A(1)(b).Whether the Interim Resolution Professional (IRP) erred in not submitting the withdrawal application within three days as stipulated under Regulation 30A(3) when the applicant directed the IRP to file the application only after dismissal of a pending appeal before the Supreme Court.Whether the IRP was justified in refusing to act upon the withdrawal application and Form FA submitted by the operational creditor before the dismissal of the appeal and constitution of the CoC.Whether the appellant had the locus standi to challenge the withdrawal application and whether the appellant was denied an opportunity of hearing in violation of principles laid down by the Supreme Court regarding hearing of all concerned parties before approving withdrawal of CIRP.Whether the reconstitution of the CoC by the IRP was valid and whether the Tribunal erred in setting aside the reconstitution and restoring the earlier CoC.

RULINGS / HOLDINGS:

The application for withdrawal filed on 14.11.2024 by the IRP is to be considered as filed after the constitution of the CoC on 21.08.2024; therefore, Regulation 30A(1)(b) and Section 12A of the Code apply, requiring approval of ninety percent voting share of the CoC for withdrawal.The IRP did not err in delaying submission of the withdrawal application within three days under Regulation 30A(3) since the applicant explicitly instructed the IRP to file the application only after the Supreme Court appeal was dismissed, which was a reasonable direction.The IRP was justified in refusing to act on the withdrawal application and Form FA before the dismissal of the appeal and constitution of the CoC, as acting otherwise would have contravened the Supreme Court's stay order dated 14.08.2024.The appellant had the opportunity to be heard and was present throughout the hearing of the withdrawal application; the application for impleadment filed by the appellant was in the main petition and not in the withdrawal application, and no prejudice was caused by this procedural aspect.The Tribunal rightly set aside the reconstitution of the CoC carried out by the IRP on 31.08.2024 and restored the CoC constituted on 21.08.2024, as the reconstitution lacked validity.

RATIONALE:

The Court applied Section 12A of the IBC, which mandates that withdrawal of an application admitted under Sections 7, 9, or 10 requires approval of ninety percent voting share of the CoC, and Regulation 30A of the CIRP Regulations, 2016, which distinguishes between withdrawal applications filed before and after constitution of the CoC (Regulation 30A(1)(a) and 30A(1)(b)).The Supreme Court's judgment dated 23.10.2024 was interpreted in its entirety, noting that paragraph 78 describes the factual position before CoC constitution, while paragraph 87 acknowledges that the CoC was constituted during pendency of proceedings, thus requiring application of Regulation 30A(1)(b) for withdrawal filed post-CoC constitution.The Court emphasized that the date of filing the withdrawal application by the IRP is determinative, not the date of settlement or submission of Form FA to the IRP by the applicant.The IRP's refusal to act on the withdrawal application prior to dismissal of the Supreme Court appeal was consistent with the Supreme Court's stay order dated 14.08.2024, which mandated maintenance of the settlement amount in escrow and restrained actions that would render the stay ineffective.The Court underscored the quasi-judicial role of the Adjudicating Authority in considering withdrawal applications, requiring judicial mind and hearing of all concerned parties, as per the Supreme Court's directions, and found no violation of the appellant's right to be heard.The decision to set aside the IRP's reconstitution of the CoC and restore the earlier CoC was supported by the facts and consistent with the statutory framework governing CoC constitution and powers.

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