NCLT - Simultaneous withdrawal application under Rule 11 of NCLT Rules and Regulation 30A of Insolvency Rules

IN THE MATTER OF Mr. K.C. Sanjeev vs Mr. Easwara Pillai Kesavan Nair, appeal was filed against order of NCLT alleging that the impugned order was passed by NLCT as the IRP did not duly move form F.A. for withdrawal.

The Appellant stated that the Appellant had settled with the original Operational Creditor soon after the Application under Section 9 was admitted on 23.10.2019 and even filed the settlement with the IRP under Regulation 30 A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016 (Regulations in Short) requesting the IRP to place the settlement before the Adjudicating Authority. It is stated that the IRP asked for further Rs. 2 Lakhs claiming that it is required for closure of CIRP which the Appellant paid. The Learned Counsel for the Appellant states that documents regarding the settlement were handed over to the IRP on 08th November, 2019, and the same were required to be placed before the Adjudicating Authority within three days as required by the Regulations but the IRP did not do so and proceeded to constitute CoC on 20th November, 2019. The Learned Counsel for the Appellants states that Corporate Debtor being Solvent Company, the Appellant wants to save it and made serious efforts with all the Financial Creditors and Operational Creditors but the IRP is creating various hurdles.

Regulation 30A(1) of the amended Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 requires that an application for withdrawal under section 12A of the Insolvency Code shall be submitted to the Interim Resolution Professional (IRP) or Resolution Professional (RP), as the case may be, in Form FA of the Schedule to the said Regulations, before issue of expression of interest (EoI) under regulation 36A whereas Rule 11 of the National Company Law Tribunal Rules, 2016  authorize an NCLT to pass any such orders as may be necessary for meeting the ends of justice.

Referring to the judgment of the Hon'ble Supreme Court in Swiss Ribbons Pvt. Ltd. vs. Union of India 2019 SCC Online SC 73 in Para 79 and 80, the NCLAT held that it is apparent that Constitution of CoC makes a difference to the original Applicant and the Corporate Debtor in settling. Before Constitution of CoC they both can settle and withdrawal can be permitted but once CoC is constituted, the Scenario changes and requirement is to settle with the other Financial Creditors and Operational Creditors and one is required to go before the CoC which may allow withdrawal with 90 per cent voting share.

Subsequent to Judgment in the matter of Swiss Ribbons, the Regulations come to be amended. Considering this, and the practical difficulties which Applicants and the Corporate Debtor like the present one are facing, we are of the view that there is no reason why Parties cannot resort simultaneously to the window given by Hon’ble Supreme Court in above Para 79. In our view when the Applicant wants to withdraw the application before Constitution of CoC, while resorting to amended Regulation 30 A, there is no bar for a party to simultaneously move Adjudicating Authority for withdrawal relying on Rule 11 of the NCLT Rules 2016 in view of Right given in the Judgment of Hon’ble Supreme Court. The Adjudicating Authority should receive such applications and can deal with the Applications in terms of above Para 79 while it may await response from IRP.