TaxTMI 
TaxTMI 
2026 (3) TMI 1539
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....tone Legal for respondent Nos.4 and 6 in WPL/30071/2025 and for respondent Nos.5 and 6 in WPL/31334/2025. For the Respondent: Mr. Cyrus Ardeshir, Senior Advocate, a/w. Mr. Pratik Divkar, Karunya Raghunath and Ms. Vinita Shetty, i/b. Rajni Divkar for respondent No.5 in WPL/30071/2025 and No.4 in WPL/31334/2025. For the Respondent: Mr. Gurdeep Sachar Nos.7 to 9 in WPL/30071/2025 and for respondent Nos.8 to 10 in WPL/31334 of 2025. JUDGEMENT (PER JUSTICE MANISH PITALE): 1. These petitions have been filed by a suspended director of a corporate debtor (Gokul Sugar Industries Limited) and a financial creditor (M/s. Mohandas Chhataram), to challenge an order dated 09.09.2025 passed by National Company Law Tribunal, Mumbai (NCLT). The petitioners claim that although the alternative remedy of filing an appeal before the National Company Law Appellate Tribunal, Mumbai (NCLAT) is available to them, they are entitled to maintain these writ petitions, as there has been flagrant violation of principles of natural justice on the part of the NCLT, while passing the impugned order. 2. By the impugned order, the NCLT allowed the intervention applications filed by the respondents - ....
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.... is the petitioner in Writ Petition No. 31334 of 2025. It was recorded that the suspended director of the corporate debtor could pay only Rs. 17 crores out of the settlement amount of Rs. 50 crores. It was recorded that the said appellant prayed for and was granted time of three weeks to make the payment. While issuing notice, the NCLAT directed that in the meanwhile, the Committee of Creditors (CoC) shall not be constituted. 6. The NCLAT adjourned the hearing on the said appeal to a future date, while continuing the interim order and eventually disposed of the appeal by an order dated 24.01.2025. On the said date, the NCLAT recorded that the appellant - suspended director of the corporate debtor had settled the dispute with the petitioner - financial creditor, while the financial creditor submitted that he had received certain amount, but still the entire payment had not been made. The NCLAT recorded the statement of the suspended director of the corporate debtor that he shall settle the dispute with the petitioner - financial creditor by making payment and shall also file an application under section 12-A of the IBC read with Regulation 30-A of The Insolvency and Bankruptcy Bo....
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....C No. 77 of 2025 in the intervention petition of the respondent - SDCCBL, bearing IBC No. 47 of 2025, seeking a direction for furnishing copies of the application. It is a matter of record that the said intervention petition of the petitioner - financial creditor was listed before the NCLT in the said proceedings, when none was present on behalf of the said petitioner. The NCLT adjourned the hearing, specifically directing that the arguing counsel for the petitioner shall remain present on the next date of hearing without fail, to make its submissions. On 06.08.2025, the said intervention petition of the petitioner - financial creditor was listed along with other applications/petitions before the NCLT in the said proceedings. The record and proceedings do not show appearance on behalf of the said petitioner on the said date also. In this backdrop, the NCLT directed listing of all the said applications for further consideration on 09.09.2025. 11. On 09.09.2025, NCLT passed the impugned order, holding that withdrawal of CIRP could not be allowed in view of substantial majority of financial creditors, including respondents - banks objecting to the withdrawal. The intervention appli....
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....that the NCLAT had sent the matter back to NCLT for consideration of withdrawal from CIRP, in the light of settlement with the petitioner - financial creditor. In such a situation, it was submitted that the said petitioner was vitally interested, as he had paid the amounts for settling the dispute with the petitioner - financial creditor, who had initiated the CIRP. In such a situation, the NCLT could not have passed the impugned order behind the back of the said petitioner. 15. It was further submitted that the copies of the intervention applications/petitions filed by the respondents - banks/financial creditors were not served upon the petitioner - suspended director and no notice was issued to him for hearing of the said applications. In this context, reliance was placed on Rule 34(4) of the National Company Law Tribunal Rules, 2016 (NCLT Rules) and Rule 37 thereof, wherein it is mandated that the NCLT must issue notice to the opposite party on every petition/application, including interlocutory application and that such notice in Form No.NCLT-5, has to be accompanied by a copy of the application and supporting documents. On this basis, it was submitted that the procedure was....
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....espondent - bank/financial creditor i.e. SDCCBL for serving a copy of its application opposing the withdrawal of CIRP. The said application was simply dismissed by the NCLT in the impugned order without any discussion at all. The respondents - banks/financial creditors although opposing withdrawal from CIRP, which was being pursued at the behest of the petitioner - financial creditor, did not serve copies of their applications and no notice was issued by the petitioner - financial creditor about hearing on their applications. In the absence of applications being served, the petitioner - financial creditor was deprived of an opportunity to verify the claims made by the respondents - banks/financial institutions about the huge amounts of dues payable by the corporate debtor to them. This deprived the petitioner - financial creditor of crucial information, which could be countered, if opportunity was granted. 19. The learned counsel appearing for the petitioner - financial creditor also relied upon the position of law clarified by the Supreme Court and this Court in the aforesaid judgments and submitted that since there was clear violation of principles of natural justice, the peti....
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....um, but the original authority has to strictly conduct the proceedings in terms of the scheme of the concerned statute. It was submitted that the NCLT followed the correct procedure and found that the prayer for withdrawal from CIRP could not be granted. No prejudice was caused to the petitioners as the IRP was duly served and heard. It was submitted that if the contentions raised on behalf of the petitioner - suspended director are to be accepted, all the directors and even the shareholders may come forward and claim their right to be heard, which would be against the scheme of the IBC itself. On this basis, it was submitted that the writ petition deserves to be dismissed. 22. Mr. Ardeshir, learned senior counsel appearing for the respondent - SDCCBL supported the contentions raised by the aforesaid similarly situated respondents - banks/financial creditors. In addition, it was highlighted that although the NCLAT in its order dated 24.01.2025, had granted liberty to the petitioner - suspended director of the corporate debtor to approach the NCLT for withdrawal of CIRP under section 12-A of the IBC, he chose not to file any such application through the IRP. Hence, it cannot lie ....
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.... 27. Having considered the rival submissions, we find that the petitioners' claim that their writ petitions are maintainable despite availability of alternative remedy of filing appeals before the NCLAT under Section 61 of the IBC is based on the sole ground that principles of natural justice have been violated by the NCLT, while passing the impugned order. The respondents-banks/financial creditors have vehemently opposed the said contention. If this Court finds, on an analysis of the rival submissions, that the petitioners have not been able to make good their case of violation of principles of natural justice, the petitions will have to be dismissed on that score alone, leaving it open for the petitioners to take recourse to the said alternative remedy. On the other hand, if this Court accepts that principles of natural justice were violated, upon setting aside of the impugned order, the matter may have to be remitted to the NCLT for consideration afresh. 28. In order to examine the rival submissions in the backdrop of the said question, as to whether the impugned order of the NCLT suffers from violation of principles of natural justice, it would be appropriate to refer to t....
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....of corporate debtor from information utility having financial information of the corporate debtor; (d) have the authority to access the books of account, records and other relevant documents of corporate debtor available with government authorities, statutory auditors, accountants and such other persons as may be specified; and (e) be responsible for complying with the requirements under any law for the time being in force on behalf of the corporate debtor. 25. Duties of resolution professional. - (1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely:- (a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor; (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings; (c) ra....
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.... shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt. (4) Where an application for withdrawal is under clause (b) of sub-regulation (1), the committee shall consider the application, within seven days of its receipt. (5) Where the application referred to in sub-regulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with the approval of the committee, to the Adjudicating Authority on behalf of the applicant, within three days of such approval. (6) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (3) or (5). (7) Where the application is approved under sub-regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate....
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.... of the Constitution of India to permit withdrawal from CIRP after the application filed for CIRP had been admitted. The Insolvency Law Committee (ILC) setup by Ministry of Corporate Affairs of the Government of India, after considering the challenges arising from the implementation of the IBC recommended amendments, so as to facilitate withdrawal applications that could be submitted through the IRP at the behest of a party. The amendment resulted in introduction of Regulation 30-A of the IBC Regulations, providing for such contingencies. 33. The Supreme Court took into consideration the effect of admission of a petition filed before the NCLT, under Section 7 of the IBC. It was held that upon admission, the proceeding became in rem and all creditors of the corporate debtor became stake holders in the process. In this context, the Supreme Court in the case of Glas Trust Company LLC vs. Byju Raveendran and others (supra) held as follows : "44.1. 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 ....
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....ce the application has been admitted, the proceedings are no longer the sole preserve of the applicant creditor and the corporate debtor. They are now in rem and at this stage, NCLT must hear the parties concerned and consider all relevant factors before approving or rejecting the application for withdrawal. NCLT being a quasi-judicial body, must not act as a mere post office, which stamps and approves every settlement agreement, without application of judicial mind. 66.1. Firstly, that the application is to be submitted by the IRP rather than the parties themselves is not a distinction without difference. As noted above, once the application is admitted and CIRP is initiated, it is the IRP who takes charge of the affairs of the corporate debtor. The proceedings become collective proceedings and the interests of the former management of the corporate debtor, become disjunct from the interest of the corporate debtor. Therefore, the parties (such as the former management of the corporate debtor) must submit their application for withdrawal through the IRP who is now the person in control of the insolvency proceedings. To subvert this requirement would run contrary to the sch....
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....there is no rigid locus requirement to institute an appeal challenging an order of NCLT, before NCLAT or an order of NCLAT, before this Court. Any person who is aggrieved by the order may institute an appeal, and nothing in the provision restricts the phrase to only the applicant creditor and the corporate debtor. As noted above, once CIRP is initiated, the proceedings are no longer restricted to the individual applicant creditor and the corporate debtor but rather become collective proceedings (in rem), where all creditors, such as the appellant, are necessary stakeholders. The appellant is not an unrelated party to CIRP, but is in fact, an entity whose claims had been verified by the IRP vide letter dated 19-8-2024. The appellant who claims to be a financial creditor, has expressed reasonable apprehensions about the prejudice it would face if there were roundtripping of the funds, and the prioritisation of the debts of the second respondent, an operational creditor." 37. Thus, the question before the Supreme Court was, as to whether in an application for withdrawal under Section 12-A of the IBC read with Regulation 30-A of the said Regulations, only the applicant - financial c....
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....is Form FA submitted by the petitioner - financial creditor, paragraph 4 of which reads as follows : "4. We hereby authorize IRP Mr. Neehal Mahamulal to file necessary application before the Hon'ble NCLT for withdrawal of the Company Petition for and our behalf as prescribed." 40. Thus, insofar as the petitioner - financial creditor is concerned, it had authorised the IRP for taking all necessary steps in the matter. The withdrawal from CIRP can be on the basis of settlement between the financial creditor and the corporate debtor, which is represented by the IRP. The suspended directors of the corporate debtor no longer have any control over the assets, business records, business operations and affairs of the corporate debtor. 41. Even if the petitioner - suspended director of the corporate debtor were to seek withdrawal from CIRP, he would necessarily have to approach the NCLT through the IRP. It is significant to note that in the present case, although the order dated 24.01.2025 passed by the NCLAT in the appeal filed by the petitioner - suspended director of the corporate debtor, allowed him to file application for withdrawal from CIRP under Section 12-A of the IB....
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....r. Hence, the principles of natural justice were fully satisfied, as all the stake holders in the context of the said withdrawal application were duly heard by the NCLT. The IRP was arrayed as respondent No. 3 in both the writ petitions before this Court. It was represented by an Advocate, who joined the hearing through video-conferencing. No grievance was raised in respect of the order passed by the NCLT and the learned counsel representing the IRP submitted that this Court may pass appropriate orders in the present writ petitions. 43. We are of the opinion that there is substance in the contention raised on behalf of the respondent-banks/financial creditors that this is not a pure case of violation of principles of natural justice or a case of procedural irregularity, as all the parties who are crucial stake holders in the context of the consideration of a withdrawal application were before the NCLT, when the impugned order was passed. The IRP was duly heard and the application for withdrawal moved by the petitioner - financial creditor through the IRP was taken into consideration. Upon taking note of the fact that there were huge dues payable to the respondents-banks/financia....
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....between the petitioner - financial creditor and the corporate debtor. As noted hereinabove, the petitioner - suspended director also did not care to take benefit of the permission granted by the NCLAT for approaching NCLT under Section 12-A of the IBC, for withdrawal from CIRP. The NCLAT had granted time of three weeks for filing such an application. The petitioner - suspended director of the corporate debtor failed to approach the NCLT through the IRP and yet, claims violation of principles of natural justice. 47. We are of the opinion that the factual scenario in the present case shows that the petitioners have raised the argument of violation of principles of natural justice, on a misreading of the provisions of the IBC, as also the IBC Regulations framed thereunder and the law laid down by the Supreme Court in that context. 48. As regards reliance placed on judgment of Division Bench of this Court in the case of Kamal K. Singh vs. Union of India, Through the Ministry of Corporate Affairs and others (supra), we find that the said case is clearly distinguishable. In the said case, there was a gross violation of the procedure, in as much as an application was heard and reser....