CAUSE TITLE:
ASHOK G. RAJANI V BEACON TRUSTEESHIP LTD. & ORS.
DATE OF ORDER: 22-09-2022
JUDGE(S) :
INDIRA BANERJEE ,J.K. MAHESHWARI
PARTIES:
Petitioner: ASHOK G. RAJANI
Respondent: BEACON TRUSTEESHIP LTD. & ORS
SUBJECT
According to the Supreme Court, there are no restrictions on withdrawing the application of the applicant admitted under Section 7 of the Insolvency and Bankruptcy Code for starting the corporate insolvency resolution process (CIRP) before the Committee of Creditors (CoC) is established.
BRIEF FACTS
- The Appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) is against an interim order passed by the National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi in Company Appeal, filed by the Appellant, whereby the NCLAT issued notice of the Appeal, but did not restrain the Interim Resolution Professional (IRP) from proceeding with Corporate Insolvency Resolution Process (CIRP) of M/s Seya Industries Limited (Corporate Debtor).
- However, the NCLAT prohibited the IRP from forming a Committee of Creditors (CoC) until the next hearing date.
- According to Section 12A of the IBC read with Rule 11 of the National Company Law Tribunal Rules, 2016 (NCLT Rules), the Appellant and the Respondents were given the chance to resolve their differences before the Adjudicating Authority (NCLT) in the interim.
ISSUE
whether an appeal under IBC Section 62 may be filed to the Supreme Court against the NCLAT's ruling staying the formation of CoC in order to permit the withdrawal of CIRP under Section 12A?
ANALYSIS OF COURT
- The Supreme Court noted that IBC Section 12A expressly enables withdrawal of an application under IBC Section 7 that has been accepted on the applicant's application. Only after the Committee of Creditors has been formed can the issue of whether the required number of votes must be cast to approve the Committee of Creditors come up. There is no restriction on the applicant withdrawing an application that has been accepted under Section 7 of the IBC prior to the Committee of Creditors being established.
- The Supreme Court further noted that Section 12A of the IBC gives the Adjudicating Authority the ability to grant the withdrawal of an application that has been admitted under Sections 7, 9, or 10 upon a request made by the applicant and approved by 90% of the Committee of Creditors' voting shares in a manner that may be specified.
- The NCLAT's decision to postpone CoC's formation and grant the applicant permission to submit a request under Section 12A of the NCLT for the withdrawal of their application in cases where they and the corporate debtor reach a settlement after a CIRP application has been approved under Sections 7, 9, or 10 of the IBC was appropriate, according to the Supreme Court.
- Additionally, the Adjudicating Authority (NCLT) was instructed to review the settlement application and make a determination in light of the noted facts. As a result, there was no legal issue that needed to be resolved by this Court. The appeal was therefore to be denied.
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