TMI Blog2019 (5) TMI 1584X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed to play with the precious time of a Court by moving a Petition with the prayer to commence CIRP and at the fag end of the process seeking permission of withdrawal of the said Petition? But, the answer is simple and single that the Code has now subscribed such procedure through which withdrawal is possible in respect of a petition filed u/s 10 of the Code. The condition subscribed is that on an Application made by the Applicant withdrawal can be allowed, if approved by 90% voting share of the CoC. On this point, the Applicant has clarified that as a Director of the Debtor Company the said Application u/s 10 was signed by him and now he is the signatory of this withdrawal application, hence qualified. Provisions of section 10 are unambiguous where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating CIRP with the AA. The term corporate applicant is defined u/s 5 of Definitions of IBC , means a member of the corporate debtor company who is authorized to make an application for CIRP under the constitutional document of the Corporate Debtor or a person who has the control and supervision over the financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Earnest Money Deposit of ₹ 50,00,000/- lying to the credit of the Committee of Creditors / Resolution Professional. d) That this Hon ble Tribunal be pleased to pass an order/directions to the Respondents to cancel and terminate the bank guarantee of ₹ 95,00,000/- dated August 24, 2018 and refund the original guarantee to the bank guarantor/ issuing such guarantee . 2. These applications were heard on last few occasions and thereafter on combined and consolidated reading of these applications it was felt necessary to formulate crucial as well as essential questions of law so that the controversies raised can be judicially addressed and properly decided, as reproduced below: ( i) Whether an Applicant who has filed an Application/Petition u/s 10 of the IBC is entitled to withdraw its own petition u/s 12A of IBC 2016? ( ii) Whether a Resolution Applicant who has submitted a Resolution Plan which was approved with majority vote by CoC can be allowed to withdraw the said Resolution Plan which is under consideration for approval before the NCLT? ( iii) Whether ex-director of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Insolvency Proceedings be stayed, however, not accepted and the stay granted on 13 June 2018 was vacated by the Honourable High Court on 12 July 2018. V) The Resolution Professional convened few meetings of Committee of Creditors and finally an improved Resolution Plan was approved by the CoC. Facts have revealed that an Earnest Money of ₹50 lakhs was deposited by the Resolution Applicant. Further on demand also furnished a Bank Guarantee of ₹95 lakhs to show its bona fides. VI) It is interesting to note that on one hand the Resolution Professional has submitted the said Resolution Plan for approval by the Adjudicating Authority, side-by-side, the Applicant of this Miscellaneous Application, Mr. Satyanarayan Malu, was carrying a parallel negotiation with Allahabad bank. VII) It is informed in this Application that on 28th may 2018 this applicant, Mr. Malu, had made a OTS proposal to Allahabad bank. Two settle the account of the corporate debtor SBM paper Mills, this applicant had offered 14 crores of rupees. The said OTS offer was improved and vide a letter dated 23 June 2080 improved one-time settlement offer of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BC on an application made by the Applicant, however, with the approval of 90% voting of the CoC. This was introduced through 3rd Amendment, and modifications in CIRP Regulations as per Notifications No. IBBI/2018-19/GN/REG031 published in the Official Gazette on the 3rd of July 2018. It is also made clear by the Ld. Counsel that the said Notification came into force and made applicable on the date of its publication which shall be applied to CIRP commencing on or after the said date. Simultaneously introduced Regulation 30A to provide a procedure for the implementation of withdrawal u/s 12A of the Code. So, the argument of Ld. AR is that CIRP Regulations (i.e. Regulation 30A) are required to be applied to CIRP proceedings which shall commence after 3rd July 2018. As far as this Company Petition (CP1362 of 2017) is concerned, the same was admitted on 17th October 2017 vide order passed u/s 10 of the Code, hence, the procedure laid down in Regulation 30A are not applicable in respect of withdrawal application filed u/s 12A of IBC, pleaded by the Ld. Counsel. 4.2 Next argument is that an application u/s 10(1) is to be filed by a Corporate Debtor who has committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor after the expiry of the CIRP period until an order is passed by the AA u/s 31. In his opinion, the impugned resolution plan is under consideration, although the resolution applicant is not pursuing the said plan, as well as there is no order for Liquidation, therefore, at this stage the application for withdrawal is maintainable and an order can be passed u/s 12A of the Code. 4.5 Finally it is also pleaded that the applicant is giving the best offer to the Financial Creditor and others, therefore, withdrawal is beneficial for all stakeholders. If withdrawal is permitted, the stakeholders shall get 100% of their dues without haircut. 5. During the course of hearing Ld. Representative from the side of the RP and Allahabad Bank remained present. The stand of the RP is that in a situation when the period had expired hence, the RP is not having any control over the insolvency proceedings. Moreover, according to Ld. RP his job is now over because a resolution plan has already been submitted before the Adjudicating Authority for adjudication u/s 31(1) of the Code. That Resolution Plan was submitted through Miscellaneous Application No. 827/2018 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at length in the light of the pleadings available on record supported by requisite evidences and law applicable. At the outset, it is worth to identify the problem that there are two Miscellaneous Applications for adjudication, one i s an application for withdrawal of the main CP with a proposal of onetime payment of ₹ 18 crores and on the other hand Second application for withdrawal of the Resolution Applicant who has submitted a resolution plan which stood approved by the CoC and now under consideration for recording of satisfaction by the Adjudicating Authority. 7.1 To go to the root of the matter, it is expected from an author of a judgement to first identify which principle of Interpretation of statute, he is going to follow in his decision. An opening observation is that the Laws governing financial transactions must not be static due to one of the fundamental reason that the economic condition of the society keeps on fluctuating depending upon the government policies and market conditions. The consequence is that each financial year is peculiar in nature hence advisable to be governed by special provisions of Law applicable to that year. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be impractical and unworkable creating some stringent condition of compliance, which may lead to inequitable results. Even might not have been foreseen by the Hon ble Legislatures while a legislation was drafted. 7.3 Under the fitness of circumstances, I have taken a conscious decision that a workable solution is to first decide the question framed above that whether an Applicant who has filed a petition u/s 10 is entitled to withdraw its own petition u/s 12A of the Code, especially when the said applicant has furnished the impugned Petition(CP 1362/2018) and now offering a onetime settlement as a Director in the suspended management of the Debtor Company. Section 12A is inserted w.e.f. 06.06.2018 which prescribes that the Adjudicating Authority may allow the withdrawal of application admitted either u/s 7 or u/s 9 or u/s 10, on an application made by the Applicant with the approval of 90% voting share of the CoC. The first reaction during the course of hearing of this Bench was that how it is justifiable on the part of an applicant who has moved a Petition u/s 10 to declare itself insolvent (as happened in this case) at one point of time and thereafter at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed person holding the company and also in the management for control of the business of the Corporate Debtor. 7.6 As far as the applicability of Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Person) Regulations 2016 is concerned, it is inserted as a (3rd amendment) Regulations 2018 w.e.f. 03.07.2018. It is clarified that this Regulation shall apply to CIRP commencing on or after 03.07.2018. A procedure is laid down in this Regulation for withdrawal of application after the insertion of section 12A in the statute. A question was that as per the procedure prescribed under Regulation 30A an application for withdrawal is to be submitted to IRP or RP in Form No. FA but before issue of invitation for expression of interest under Regulation 36A. So, a query has been raised that in a situation when EoI had already been invited then how this application for withdrawal can be entertained? It is vehemently pleaded that when the CIRP has commenced as per the order of this Bench dated 17.10.2017 the said Regulation was not in the statute Book. Moreover, Section 12A was introduced w.e.f. 06.06.17 and even at that time Regulation 30A was not in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. In addition to the above factual matrix, one more development in this case is not only relevant but has a direct impact on the decision whether withdrawal application can be allowed when a Resolution Plan is subjudice for the pronouncement of an order u/s 31(1) i.e. approval of Resolution Plan. The Resolution Professional has submitted a Resolution Plan of M/s. Khandesh Roller Floor Mills Ltd. annexed with Miscellaneous Application No. 827/2018 dated 21.08.2018 seeking an order u/s 31(1) of the Code. As per this plan prima-facie the restructuring of liabilities of the Financial Creditor i.e. Allahabad Bank was only to the extent of ₹ 1,250 lakhs as a full and final payment. While it was pending for disposal strangely an Application was moved by the Resolution Applicant (MA No. 1142/2018) seeking permission for withdrawal of the Resolution Plan. To my knowledge, this has happened for the first time in the two and half years (Approx.) that a Resolution Applicant is withdrawing a Resolution Plan which is approved by the CoC with majority vote. In the following paragraph I shall deal with the relevant provisions, if any, available to deal with the situation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allow the withdrawal of Application/Petition (CP 1362/2018). 10. Before parting with this Miscellaneous Application on my own seeking an answer from myself that whether such an attempt of a Corporate Debtor be encouraged to first allow an Application/ Petition u/s 10 for its insolvency and later on after consuming precious time of few months of the Court, as also resolution professional along with the members of the CoC, be allowed to withdraw Section 10 Petition? Because the jurisprudence is developing everyday concerning various provisions of this Code, hence in the absence of any precedent my conscientious view is that if deem fit such an attempt is required to be discouraged. This Code shall not be made a tool for deferment of payment of liabilities which ought to happen due to declaration of moratorium . I, therefore, take a conscious decision to impose a cost of litigation on the Corporate Debtor of ₹ 5,00,000/- (Rupees Five Lakhs only) to be paid to MCA/NCLT within 15 days on receipt of this order. Compliance is to be reported to the Registrar, NCLT with evidence. 11. Subject to the fine imposed (supra) this withdrawal application i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency) No.75 of 2018] a liberty be granted to withdraw the Resolution Plan, as held in the said precedent. On the other hand, the Resolution Professional has opposed the request of withdrawal primarily on the ground that such an Order granting withdrawal may be in contradiction of the provisions of the Insolvency Code. In support of this argument, reliance was placed on the decision of Nagarkar Ajit Chandrakant and Ors. Vs. Mulund Gymkhana s College of Physical Education and Ors. (MANU/MH/0753/2003) Order dated 24.07.2003 for the legal proposition that, quote The tribunal is a creature of the Act and it is not open to them to travel beyond the provisions of the statute. The High Court while examining the correctness or otherwise of the order passed by the tribunal or any action taken by an officer under the Act is also to be guided by the provisions of the statute unquote. 12.2. Be that as held by Hon'ble Courts, I am of the view that under the peculiar situation as discussed hereinabove at length, this Resolution Plan has although become futile, however, such attempt on the part of a Resolution Applicant is to be discouraged. It is a common practice, as also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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