CIRP continuation amid creditor withdrawal request and revival package, s.12A withdrawal process allowed; proceedings stayed pending decision

Whether CIRP should continue when the financial creditor sought withdrawal in view of a proposed revival package was the dominant issue. The NCLAT held that, since the State had decided to infuse funds for revival and the corporate debtor had submitted an OTS proposal, no useful purpose would be served by keeping the appeal pending; consequently, the creditor was granted liberty to initiate withdrawal under s.12A IBC by furnishing Form FA to the IRP, who was directed to move the withdrawal application within two weeks, and all action pursuant to the impugned order was stayed until the AA decided the s.12A application; the appeal was disposed of.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, in light of the lenders' stated consensus to withdraw the insolvency proceedings on the basis of a proposed revival/settlement framework, the appeals should be kept pending or disposed of with liberty to pursue withdrawal under Section 12A of the Code.

(ii) What operative directions were required regarding filing and processing of a Section 12A withdrawal application (including submission of Form 'FA' and steps by the IRP), and whether protection by continuation of stay on the admission order should operate until the withdrawal application is decided.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Disposition of appeals in view of proposed withdrawal/settlement

Legal framework: The Court considered withdrawal of commenced CIRP through a Section 12A process, in the context of the lenders' decision to have the lead lender take steps for withdrawal.

Interpretation and reasoning: The Court proceeded on the submissions that the lead lender had decided to move for withdrawal, that other financial creditors had agreed in principle to such withdrawal, and that consent terms and supporting affidavits were already placed on record. Given this consensus position and the stated intent to pursue withdrawal before the Adjudicating Authority, the Court held that keeping the appeals pending would serve no useful purpose.

Conclusion: The appeals were disposed of, with liberty granted to pursue withdrawal of CIRP through the Section 12A route.

Issue (ii): Directions for Section 12A steps and interim protection pending decision

Legal framework: The Court addressed the procedural steps for moving a withdrawal request under Section 12A, specifically the requirement of furnishing Form 'FA' to the IRP and the IRP thereafter taking steps to file the withdrawal application.

Interpretation and reasoning: The Court directed that the lead lender may file the Section 12A withdrawal application after providing Form 'FA' to the IRP, and fixed a timeline that the IRP shall take steps to file the application within two weeks from receipt of Form 'FA'. Since an interim stay of the admission order had earlier been granted, the Court considered it necessary to maintain protection so that no steps are taken pursuant to the admission order until the Adjudicating Authority decides the Section 12A application.

Conclusion: Liberty was granted to initiate Section 12A withdrawal; the IRP was directed to act within two weeks of Form 'FA' being provided; and no action was permitted to be taken pursuant to the admission order until the Section 12A application is decided by the Adjudicating Authority.

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