Important IBC Judgments by the NCLAT (7 July 2021)

  July 10, 2021

Delhi Bench

Withdrawal based on settlement can be permitted by the NCLAT in the exercise of its inherent powers: Anuj Tejpal v. Rakesh Yadav & Anr.

The Appeal was against the admission of an application u/s. 9 of the Code, filed by an Operational Creditor. The Appellant, in the view of the settlement arrived with the Operational Creditor, had sought a direction to set aside the impugned order in exercise of the inherent powers u/r. 11 of the NCLAT Rules, 2016.

Meanwhile, several Intervention Applications were filed against such withdrawal. The primary argument of the proposed intervenors was that after the initiation of CIRP, there can be no withdrawal without settlement of claims of all the creditors, as it is in rem. They also relied on the decision of the NCLAT in Mother Pride Dairy India Pvt. Ltd. v. Portrait Advertising and Marketing Pvt. Ltd on the point that an admitted insolvency application cannot be withdrawn. On the other hand, the Appellant contended that the settlement between the parties was arrived before forming CoC and thus, Section 12A was applicable. The Appellant relied on several orders in which the NCLAT had exercised its inherent powers u/r. 11 to withdraw.

The Appellate Tribunal relied on Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. (2020) 8 SCC 531, in which the Supreme Court observed that an appeal is a continuation of proceedings and therefore, an amended law can be applied. The NCLAT in Jogender Kumar Arora v. Dharmendar Sharma and Ors. Company Appeal (AT) (Insolvency) No. 94, 95 of 2019 did not entertain the Intervention Applications of eight financial creditors and allowed the withdrawal in the exercise of its inherent powers. The Appellate Tribunal distinguished the facts of the judgments relied on by the proposed Intervenor Association, since in those cases the CoC had already been constituted, and they also preceded the insertion of Section 12A and Regulation 30A. The Appellate Tribunal held that Regulation 30A(1)(a) provides for withdrawal before the constitution of CoC. However, the Appellate Tribunal clarified that any creditor may move an application for CIRP before the Adjudicating Authority without any influence.


Chennai Bench

NCLAT directs NCLT to allow withdrawal based on a settlement: Karaipudur Common Effluent Treatment Plant Pvt Ltd v. Eco Pure Technologies Pvt Ltd

The Adjudicating Authority admitted the application filed by the Operational Creditor u/s. 9 despite the efforts by the Corporate Debtor for an amicable settlement. The Adjudicating Authority granted time to the parties to settle the disputes and report; or in the alternative, to argue on merits. Owing to the lockdown imposed by the Tamil Nadu Government, no fruitful solution could be achieved within the time and the CD requested an extension for a full and final settlement. The Adjudicating Authority rejected the request and reserved orders.

The Appellant CD decided to make the due payment to the Operational Creditor and filed an application u/rs. 11 and 32 of the NCLT Rules, 2016 to reopen the proceedings. The application was dismissed, but the Appellant CD had paid the dues in full.

The Appellate Tribunal, based on the Letter of Acknowledgement, directed to file an application for withdrawal before the Adjudicating Authority as per Section 12A.

~ By Manikanda Prabhu J

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