TaxTMI 
TaxTMI 
2025 (7) TMI 6
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....he Code' or 'the IBC'). Both the applications have been decided by separate Orders of the same date dated 13.02.2025 passed by the Adjudicating Authority. Aggrieved by the Order dated 13.02.2025 in I.A. No. 200/2022, the Appeal No. 336/2025 has been filed and the aggrieved by the Order dated 13.02.2025 passed in I.A. No. 182/2022, Appeal No. 337/2025 has been filed. 2. Both the appeals arise from the same Corporate Insolvency Resolution Process (CIRP) of the corporate debtor, they have been heard together and are being decided by this common judgment. 3. Brief background facts necessary to be noticed for deciding the appeals are: i. Small Industrial Development Bank of India (SIDBI) has filed an application under Section 7 on 20.03.2020 against the Corporate Debtor, Kriti Prakashan Private Limited. ii. NCLT Allahabad Bench vide order dated 13.06.2022 admitted Section 7 application and initiated CIRP against the corporate debtor. Mr. Aditya Agarwal was appointed as IRP. iii. By order dated 15.06.2022, another IRP Anil Kumar Mittal was appointed. iv. On 19.06.2022, IRP made a publication inviting claim from all the creditors by 30.06.2022. ....
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..... 182/2022 was filed by the IRP in accordance with the provisions of Section 12A of the IBC read with Section 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, (for short 'CIRP Regulations, 2016') on 25.06.2022, on which date, the Committee of Creditors (CoC) was not constituted. SIDBI being a financial creditor whose debt was fully paid, Adjudicating Authority ought to have allowed I.A. No. 182/2024 permitting withdrawal of the CIRP. HDFC Bank who also claims to be a financial creditor has no jurisdiction to oppose application filed under Section 12A of the IBC which was filed prior to constitution of the CoC. The filing of the application for withdrawal under Section 12A of the IBC prior to constitution of the CoC and subsequent to the constitution of the CoC are two different circumstances and when application under Section 12A of the IBC is filed prior to the constitution of the CoC, there is no jurisdiction of the Adjudicating Authority to entertain any objection by another creditor and disallow the application under Section 12A. Financial creditor prior to constitution of the CoC has no right to object settlement of the corporate debtor ....
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.... relevant factors and Adjudicating Authority has rightly allowed the I.A. No. 200/2022. Adjudicating Authority has also by considering all relevant factors have rejected the 12A application. Orders passed by Adjudicating Authority need no interference in these appeals. 7. We have considered the submissions of counsel for the parties and perused the record. 8. Section 12A has been inserted in IBC by Act 26/2018. Hon'ble Supreme Court in 'Swiss Ribbons Ltd. & Anr.' (Supra) has occasion to consider the challenge to the provisions of Section 12A of the Code. Hon'ble Supreme Court in the said judgment has noticed the Report of Insolvency Law Committee (ILC), Report of March 2018 which lead to insertion of Section 12A. In, Paragraph 80 of the judgment, the Hon'ble Supreme Court noticing the ILC Report made following observations: "80. The ILC Report of March 2018, which led to the insertion of Section 12-A, stated as follows: "29.1. Under Rule 8 of the CIRP Rules, NCLT may permit withdrawal of the application on a request by the applicant before its admission. However, there is no provision in the Code or the CIRP Rules in relation to permissibility of withdrawal ....
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.... Pharmachem [Uttara Foods and Feeds (P) Ltd. v. Mona Pharmachem, (2018) 15 SCC 587] ] and even otherwise, as the issue can be specifically addressed by amending Rule 8 of the CIRP Rules." (emphasis in original) Before this section was inserted, this Court, under Article 142, was passing orders allowing withdrawal of applications after creditors' applications had been admitted by NCLT or Nclat." 9. Hon'ble Supreme Court has also noticed Regulation 30A of the CIRP Regulations, 2016 in Paragraph 81 of the judgment and after noticing the scheme, observed that at any stage where CoC is not yet constituted, party can approach the NCLT directly which may allow or disallow application for withdrawal or settlement. Hon'ble Supreme Court held that "this will be decided after hearing all the parties concerned and considering all relevant factors on the fact of each case". Paragraph 82 of the judgment is as follows: "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 in rem. Being a proceeding in rem....
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....dent No. 3/IRP filed a reply on 03.05.2023, recorded under Diary No. 1499 dated 24.05.2023, raising objections against the averments made in the present application, which are as follows: a. The Respondent No. 3 submits that pursuant to the order dated 29.06.2022 issued by the Hon'ble NCLAT, which imposed a stay on the CIRP proceedings initiated against the Corporate Debtor, the IRP released all assets under his control and refrained from taking any further steps to conduct the CIRP process against the Corporate Debtor, in compliance with the provisions of the Code. b. It is further submitted that the total claims received by the IRP to date amount to Rs. 4,58,82,649/-, comprising Rs. 4,30,74,985/- from the intervening applicant HDFC Bank and Rs. 28,07,664/- from four Operational Creditors. However, due to the stay imposed on the CIRP proceedings against the Corporate Debtor, the IRP was unable to examine the claims for their admission or rejection, and as a result, the CoC could not be constituted." 12. Form the reply filed by the IRP, it is clear that total claim which was received by the IRP was Rs. 4,58,82,649/- whereas, claim which was settled with the SID....
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....tituted. Operational creditor received the amount and an application under Section 12A of the IBC read with Section 30 of the CIRP Regulations, 2016, was filed on 10.03.2021 before the Adjudicating Authority. An appeal was filed challenging the admission order dated 01.03.2021 which appeal was decided on 26.03.2021 by this Tribunal permitting appeal to be withdrawn with a liberty to the appellant for revival of the appeal in case the settlement failed. NCLT stayed the formation of the CoC by the same order. NCLT by subsequent order dated 13.04.2021 rejected the settlement proposal and fixed the matter for disposal of application after hearing all creditors. CoC was constituted on 15.04.2021. Appellant thereafter filed the appeal on 19.04.2021, where this Tribunal passed an interim order directing party to maintain a status quo. In Paragraph 10 of the judgment of the Hon'ble Supreme Court, primary objections made by the IRP by way of an intervention application was noticed. Other creditors who had raised their claim has also filed intervention/impleadment. Hon'ble Supreme Court in the above background noticed the scheme of the IBC. Hon'ble Supreme Court held that Regulation 30A of t....
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....nd they would be free to raise their own independent claims in appropriate proceedings which would be dealt with in accordance with law." 15. When we look into the observations made in Paragraph 42, Hon'ble Supreme Court observed that objection raised by the IRP does not merit any consideration in this appeal. 16. The next judgment which has been relied by the Appellant is judgment of the Hon'ble Supreme Court in 'GLAS Trust Company LLC' (Supra), which is 3 Member Bench judgment which had occasion to consider the entire scheme of the IBC regarding withdrawal as well as the earlier judgments including the judgment of the Hon'ble Supreme Court in 'Abhishek Singh' (Supra). In the above case, the CIRP commenced against the corporate debtor. Vide order dated 16.07.2024, public announcement was made, on 17.07.2024. Appellant, GLAS Trust Company LLC has filed its claim in the prescribed proforma before the IRP in response to the publication. Section 7 application which was filed by GLAS Trust Company LLC was disposed of noticing the admission of the CIRP under Section 9 on 16.07.2024 itself. The admission order under Section 9 was challenged before this Appellate Tribunal by the Rij....
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....laims against the corporate debtor. Therefore, the proceedings now change character - they become in rem and are no longer the preserve of only the applicant creditor and the corporate debtor and even creditors who were not the original applicants, become necessary stakeholders." 17. Hon'ble Supreme Court also in Paragraph 44 noticed two significant principles in following words: "44. In summary, the scheme of the IBC under Chapter II gives rise to two significant principles: a. Once the petition is admitted, the proceedings are no longer the preserve of the applicant creditor and the debtor. They now become in rem and all creditors of the corporate debtor become stakeholders in the process; and b. Once the petition is admitted, the management of the affairs of the corporate debtor is vested in the IRP and eventually, in the RP. Thus, the corporate debtor no longer exists in the form that it did, before the admission of the petition. Once CIRP is initiated, the interests of the erstwhile management of the corporate debtor must be distinguished from the interests of the corporate debtor." 18. In Paragraph 49 of the judgment, ILC Report (March, 2018) ....
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.... the financial creditors have to put their heads together to allow such withdrawal; and d. Under Section 60 of the IBC, the decision of the CoC to reject or accept the settlement claim can be challenged before the NCLT and then, the NCLAT." 20. In Paragraph 58(b), Hon'ble Supreme Court had made following significant observation "however, given the in rem nature of the proceedings, such an application must be decided only after hearing all the parties concerned and considering the relevant factors in the case". The above observations have been made with regard to situation when 12A application have been filed before the constitution of the CoC. It is further relevant to notice that argument was raised before the Hon'ble Supreme Court that at the stage when CoC is not constituted, Adjudicating Authority is not required to hear any other parties but only approve the application. In Paragraph 65, the above argument has been noticed, which is as follows: "65. Mr. Tushar Mehta, Senior Counsel for the second respondent, has sought to contend that the requirement under Regulation 30A (1) to move an application before the NCLT through the IRP, in cases where the CoC is ....
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....n initiated. Similarly, this Court in Swiss Ribbons (supra), in response to which Regulation 30A was amended, specifically observed that in cases where withdrawal is sought after initiation of CIRP, but before the CoC is constituted, the NCLT must decide on the application after "hearing all the parties concerned and considering all relevant factors on the facts of each case." Therefore, the NCLT does conduct an adjudicatory exercise when the application for withdrawal is placed before it, and the procedure is not a mere technicality." 22. When we look into what has been held in Paragraph 66(b), it is clear that before the CoC is constituted, NCLT must decide on the application after hearing all the parties concerned and considering all relevant factors on the facts of each case. It was held that NCLT does conduct an adjudicatory exercise when the application for withdrawal is placed before it, and the procedure is not a mere technicality. It was further held that NCLT cannot be considered a post office that merely puts a stamp on the withdrawal application submitted by the parties through the IRP. Ratio of the judgment categorically laid down that the Adjudicating Authority whi....
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.... their interests would cause unjust. Therefore, a unilateral settlement between Respondent No. 1 and Respondent No. 2 would violate the rights of other creditors, particularly when all claims have been filed in compliance with the prescribed timelines under the Code. Such an approach would contradict the collective resolution framework mandated by the Code and undermine the interests of other stakeholders in the insolvency process." 24. We are of the view that Adjudicating Authority has rightly allowed the I.A. No. 200/2022 filed by the HDFC Bank opposing the 12A application for withdrawal. The claim was filed by HDFC within the time given by the IRP is a relevant factor and any objection raised by the HDFC Bank to the 12A application cannot be said to be meritless. The Adjudicating Authority has taken into consideration all relevant factors including the quantum of the claim admitted and the quantum of the claim settled with the SIDBI. Adjudicating Authority is not mere post office who has to allow the withdrawal filed under 12A which is filed before the constitution of the CoC which is the ratio of the judgment of the Hon'ble Supreme Court in 'GLAS Trust Company LLC' (Supra). ....