AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 738
X X X X Extracts X X X X
X X X X Extracts X X X X
....at between the Operational Creditor and Corporate Debtor recorded vide Memorandum of Settlement dated 21.01.2022; (b) pass such other or further order(s) as this Ld. Tribunal may deem fit and proper in the facts and circumstances of the case." 3. To put succinctly, facts of the case are that the Operational Creditor, M/s. Reach International had filed an application bearing no IB-3013(ND)/2019 under Section 9 of IBC 2016 for initiation of CIR Process against the Corporate Debtor M/s. Altech Infrastructure Pvt. Ltd. That vide Order dated 21.01.2022, this Adjudicating Authority had initiated the CIR Process against the Corporate Debtor and appointed Mr. Vinod Kumar Chaurasia as the Interim Resolution Professional ("hereinafter referred to as the IRP"). 4. Through the present IA, the Applicants are seeking withdrawal of the Company Petition No. (IB)-3013 (ND) 2019 on the ground of settlement between the parties. In support of their contention, the Applicants have placed on record the Memorandum of Settlement dated 21.01.2022 duly notarized on 25.01.2022. 5. That during the course of hearing on 27.01.2022, a query was raised by this Bench that as to why the present Ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....drawal or settlement after hearing the parties and considering the relevant factors on the facts of each case. A withdrawal in other words is by the applicant. The withdrawal leads to a status quo ante in respect of the liabilities of the corporate debtor...." 8. During the course of hearing, the Ld. Counsel appearing for the Applicants stated that Section 12A of IBC, 2016 cannot be applied in the instant case as the CoC has not yet been constituted. He further submitted that although Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 prescribes a procedure for withdrawal of petition in a situation, where CoC is not constituted, by applying under Section 12A of IBC 2016; however, on reading of Section 12A of IBC, there is no scope to apply in a situation when the CoC is not constituted. Therefore, they have filed this IA under Rule 11 of the NCLT Rules, 2016. 9. Furthermore, the Ld. Counsel for the Applicants submitted that the provision of Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 is inconsistent with Section 12A of IBC, 2016. Therefore, the appropriate course is to approach this A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion Process for Corporate Persons) Regulations, 2016 as well. Now, we have to look into the scheme, structure and object of provision of IBC, 2016 to find out whether inherent jurisdiction under Rule 11 of NCLT Rules, 2016 can be invoked in the facts of the case. It is also relevant to mention that neither under Section 12A of IBC, 2016, Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 there is no specific bar for application against invocation of Rule 11 of NCLT Rules, 2016 nor any other provisions exists under IBC, 2016 which covers a situation that prior to constitution of Committee of Creditors, if there happens a settlement and application for withdrawal of CIRP is filed, what can be done. Thus, considering all legal aspects, exercise of jurisdiction under Rule 11 of NCLT Rules, 2016 to the fact situation cannot be doubted in any manner." (Emphasis supplied) 10. That the IRP has also appeared during the course of hearing on 27.01.2022 and opposed the Application on the ground that the applicants need to file the application of withdrawal through IRP under Regulation 30A read with Section 12A of IBC, 2016. It was also in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....39;ble Supreme Court in the matter of Swiss Ribbons (supra) has allowed to invoke Rule 11 of NCLT Rules, 2016 for withdrawal of CIRP proceedings, where CoC has not been constituted. ii) That Section 12A of IBC, 2016 to be added, is applicable only where CoC is constituted. iii) The provisions of Regulation 30A are inconsistent with Section 12A of IBC, 2016 as held by the NCLT Ahmedabad Bench in the matter of Sintex Plastics Technology Ltd. (supra). 16. That in order to adjudicate the issue, it is necessary to test the contentions raised by the Applicants. 17. That if we see the chronology, Judgment of the Hon'ble Supreme Court in the matter of Swiss Ribbons (supra) was pronounced on 25.01.2019 whereas, the amendment in Regulation 30A of CIRP Regulations came into effect from 25.07.2019. It is a matter of fact, that prior to 25.07.2019, there was no specific provision either under IBC 2016 or any Rules or Regulations, as per which an admitted IB application could have been withdrawn before the constitution of CoC. Therefore, the only remedy available during that time was under Rule 11 of the NCLT Rules, 2016. 18. That here we consider it worthwhile to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e may be. However, where the application under clause (b) is made after the issuance of the invitation for expression of interest, the applicant has to state the reasons justifying withdrawal after the issuance of the invitation. In the decision of this Court in Brilliant Alloys (supra), it has been held that a withdrawal may be contemplated even after the issuance of invitation of expression of interest. In Swiss Ribbons (supra), the provisions of Section 12-A were upheld against the challenge that they violated Article 14 of the Constitution. Justice Rohinton F. Nariman, while adverting to the decision in Brilliant Alloys (supra), noted that Regulation 30-A(1) has been held not to be mandatory but directory because in a given case an application for withdrawal may be allowed for exceptional reasons even after issuance of an invitation for expression of interest under Section 36-A. Dealing with the provisions of Section 12-A, this Court observed: "82. It is clear that once the Code gets triggered by admission of a creditor's petition under Sections 7 to 9, the proceeding that is before the adjudicating authority, being a collective proceeding, is a proceeding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat there is no reason or justification then to preclude a promoter from presenting a scheme of compromise or arrangement under Section 230. 74 There is a fundamental fallacy in the submission. An application for withdrawal under Section 12-A is not intended to be a culmination of the resolution process. This, as the statutory scheme would indicate, is at the inception of the process. Rule 8 of the Adjudicating Authority Rules, as we have seen earlier, contemplates a withdrawal before admission. Section 12-A subjects a withdrawal of an application, which has been admitted under Sections 7, 9 and 10, to the requirement of an approval of ninety percent voting shares of the CoC. The decision of this Court in Swiss Ribbons (para 82 extracted above) stipulates that where the CoC has not yet been constituted, the NCLT, functioning as the Adjudicating Authority, may be moved directly for withdrawal which, in the exercise of its inherent powers under Rule 11 of the Adjudicating Authority Rules, may allow or disallow the application for withdrawal or settlement after hearing the parties and considering the relevant factors on the facts of each case. A withdrawal in other words is b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eme which is sanctioned under Section 230 of the Act of 2013." 20. Whereas, we notice that the paragraph relating to discussion on "withdrawal of application" in the aforesaid judgement is para 72, in which, at the cost of repetition, the Hon'ble Apex Court has clearly observed that "Regulation 30-A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 contains provisions for the withdrawal of an application ......In the decision of this Court in Swiss Ribbons (supra), which was rendered on 25 January 2019, it was contemplated that an application for withdrawal may be presented between the period commencing from the admission of the application and the date of the constitution of the CoC. This led to the substitution of the Regulation 30-A on 25 July 2019. As substituted, Regulation 30-A stipulates that an application for withdrawal under Section 12-A may be made to the adjudicating authority: (a) before the constitution of the CoC, by the applicant through the IRP; and (b) after the constitution of the CoC, by the applicant through the IRP or the RP as the case may be." Thus, the Hon'ble Supreme Court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lication and the arguments of Ld. Counsel for the parties have not specified as to why they do not want to file the Applications as per prescribed procedure. 14. We are of the view that there is a prescribed procedure for withdrawal of Petition under Section 7 of the IBC. Therefore, there is no justification to invoke inherent power of this Appellate Tribunal and take on record the terms of the settlement and pass the order for withdrawal of Petition under Section 7 of the IBC. On the contrary, in the facts of the present case exercising the inherent power under Rule 11 of NCLAT Rules amounts to abuse of process of this Appellate Tribunal...." (Emphasis Supplied) 22. That in the light of the aforesaid Judgements, it can be inferred that for withdrawing the application before the constitution of COC, the appropriate course is to apply as per Regulation 30A of CIRP Regulations 2016. Further, the Hon'ble Supreme Court in Arun Kumar Jagtramka case (supra) has observed the reasons of substitution/amendment in Regulation 30A. Therefore, in our considered view, no reliance can be placed on the order of NCLT Ahmedabad, as placed by the applicants, to demonstrate th....