Skip to main content

NCLAT: Withdrawal of application by promoters under Section 12 of I & B Code

In Company Appeal (AT) (Insolvency) No. 601 of 2019, IN THE MATTER OF Shweta Vishwanath Shirke vs The Committee of Creditors, an application under section 7 of IBC was filed by Andhra Bank against Sterling Biotech in June 2018. Apart from defaulting loan of Rs 8,100 crore, the promoters of the debt- ridden Sterling Biotech were already facing charges of corruption and money laundering. The promoters of the Corporate Debtor absconded and government agencies like Enforcement Directorate and CBI were unable to trace them. Thereafter, a one- time settlement offer was made by on behalf of the promoters of the Corporate Debtor to the creditors. The offer stated that the entire payment under OTS shall be made by the promoters and not through the corporate debtor and its properties. The offer got a green signal by the committee of creditors. It subsequently prompted filing of withdrawal application as per section 12A of IBC. The NCLT did not accept the application and sent the corporate debtor for liquidation on the ground that the ‘Promoter’ not eligible to file the ‘resolution plan’ under Section 29A cannot file the application under Section 12A of the 1&B Code. 

The NCLAT reversed the impugned order dated of NCLT and allowed the appellant to withdraw the application. 

The NCLAT observed that from Section 12A of I & B Code and the decision  the Supreme Court in Swiss Ribbons Pvt. Ltd. & Anr  vs. Union of India & Ors.- ‘2019 SCC Online SC 73, it is clear that the Promoters/Shareholders are entitled to settle the matter in terms of Section 12A and in such case, it is always open to an applicant to withdraw the application under Section 9 of the ‘I&B Code’ on the basis of which the ‘Corporate Insolvency Resolution Process’ was initiated. In view of the aforesaid provisions of law, we hold that Section 29A is not applicable for entertaining/considering an application under Section 12A as the Applicants are not entitled to file application under Section 29A as ‘resolution applicant’. In the present case, the ‘Corporate Insolvency Resolution Process’ was initiated pursuant to an application under Section 7 filed by the ‘Andhra Bank’ (Appellant herein). The application under Section 12A having been approved by the ‘Committee of Creditors’ more than 90% of the voting share, it was not open to the Adjudicating Authority to reject the same and that too on a ground of ineligibility under Section 29A, which is not applicable. In so far the assets of the ‘Corporate Debtor’ is concerned, if it is based on the proceeds of crime, it is always open to the ‘Enforcement Directorate’ to seize the assets of the ‘Corporate Debtor’ and act in accordance with the ‘Prevention of Money Laundering Act, 2002’ but that  it will not come in the way of the individual such as ‘Promoter’ or ‘Shareholder’ or ‘Director’, if he pays not from the proceeds of crime but in his individual capacity the amount from his account and not from the account/assets of the ‘Corporate Debtor’ and satisfies all the stakeholders, including the ‘Financial Creditors’ and the ‘Operational Creditors’. There is nothing on the record to suggest that the individual property of the ‘Promoter’ / ‘Shareholder’/ ‘Director’ who proposed to pay the amount has been subjected to restraint by the ‘Enforcement Directorate’. Therefore, even if the asset of the ‘Corporate Debtor’ is held to be proceeds of crime, the Adjudicating Authority cannot reject the prayer for withdrawal of application under Section 7, if the ‘Promoter’ / ‘Director’ or ‘Shareholder’ in their individual capacity satisfy the creditors.


Comments

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...

Vanishing promoters and languishing shareholders

Over Rs 60,000 crore of shareholders’ wealth is stuck in 1,450 companies suspended by the stock exchanges. More importantly, near 100 per cent pledging of promoter holding appears to be common in many of these companies. This, almost rules out any chance of the companies bouncing back. The suspension is for non-compliance of the listing norms. Vanishing Companies - Definition As per the definition stipulated by SEBI, any listed company, which raised moneythrough initial public offer and, thereafter, stopped operations, did not file returnseither with the RoC or SEBI and did not exist on the registered premises wastermed as vanishing.There are provisions under Companies Act under which companies are termedvanishing companies on satisfying certain conditions. it is provided a companywould be deemed to be a vanishing company, if it satisfies all the conditions given below : a) Failed to file returns with Registrar of Companies (ROC) for a period of two years; b) Failed to fil...

Property can be sold on power of attorney - Delhi High Court

As reported in the Hindusthan Times on 5th May:-  http://www.hindustantimes.com/India-news/NewDelhi/Property-can-be-sold-on-power-of-attorney/Article1-1054964.aspx In a judgment that will benefit lakhs of Delhi residents living in co-operative housing societies and DDA flats, the Delhi High Court has quashed a Delhi government circular banning property sale in the Capital through general power of attorney (GPA). The court found that the directions in the circular, issued by the revenue department on April 27 last year, were contrary to the Supreme Court judgment dated October 11, 2011. The HC order will increase the number of saleable properties in Delhi and could bring down the value of freehold properties. According to realty watchers, on an average, around 20% of properties are registered through GPA transfers — a common way of selling leasehold properties and those that don’t have a clear title. The judgment came on a petition filed by a company, Pace Developers and ...