TMI Blog2023 (5) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... n under Section 7 and 9 of the Code. Hon ble Supreme Court Swiss Ribbons Pvt. Ltd. Anr. v. Union of India Ors. [ 2019 (1) TMI 1508 - SUPREME COURT ] held that before a Committee of Creditors is constituted, a party can approach the NCLT directly under inherent powers of Rule 11 for withdrawal of Section 7 or 9 Application. The present is a case where Committee of Creditors has not yet been constituted and the Appellant after filing settlement agreement by the Financial Creditor dated 08th May, 2023, prays for withdrawal of the CIRP in exercise of inherent power of this Tribunal under Rule 11 of NCLAT Rules, 2016. A categorical observation made by the Hon ble Supreme Court in Ashok G. Rajani v. Beacon Trusteeship Ltd. Ors. [ 2022 (9) TMI 1011 - SUPREME COURT] is that Settlement cannot be stifled before the Constitution of Creditors in anticipation of the claims against the Corporate Debtor from 3rd Persons. In another recent Judgment of the Hon ble Supreme Court Abhishek Singh v. Huhtamaki PPL Ltd. Anr. [ 2023 (3) TMI 1285 - SUPREME COURT] , Hon ble Supreme Court again referring to the Judgment of Ashok G. Rajani again reiterated the same preposition. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the bank. Learned Counsel for the Bank submits that the said settlement proposal is under active consideration of the management. Learned Counsel for the Bank submits that the appeal be listed in the second week of February to enable the counsel to communicate the decision of the bank. List the appeal on 6th February, 2023. In view of the fact that settlement proposal has been forwarded which is under consideration we are of the view that CoC may not be constituted till the next date. In the meantime, IRP shall endeavor to run the Corporate Debtor as a going concern and carry all such business which is the normal business of the Corporate Debtor. 3. An I.A. No. 1905 of 2023 has been filed by the Catalyst Trusteeship Limited praying for intervention in the Appeal. 4. An Affidavit has been filed by the Appellant dated 09th May, 2023 stating that Settlement Letter has been executed on 08.05.2023 by the IDFC First Bank Limited addressed to the Corporate Debtor and Appellant. Affidavit states that parties having settled the dispute, this Tribunal in exercise of power under Rule 11 of NCLAT Rules, 2016 may set aside the admission order and clo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no statutory provision permitting withdrawal of an Application under Section 7 and 9 of the Code. Hon ble Supreme Court in (2019) 4 SCC 17 Swiss Ribbons Pvt. Ltd. Anr. v. Union of India Ors. in paragraph 82 held that before a Committee of Creditors is constituted, a party can approach the NCLT directly under inherent powers of Rule 11 for withdrawal of Section 7 or 9 Application. In paragraph 82, following observations have been made: 82. It is clear that once the Code gets triggered by admission of a creditor s petition under Sections 7 to 9, the proceeding that is before the adjudicating authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a Committee of Creditors is constituted (as per the timelines that are specified, a Committee of Creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the Committee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withdrawal is under clause (b) of sub-regulation (1), the committee shall consider the application, within seven days of its receipt. (5) Where the application referred to in sub-regulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with the approval of the committee, to the Adjudicating Authority on behalf of the applicant, within three days of such approval. (6) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (3) or (5). (7) Where the application is approved under sub-regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under subregulation (2) shall be invoked, without prejudice to any other action permissible against the applicant unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines for completion of the resolution process is not a reason to stifle the settlement. 31. Mr. Mukul Rohtagi, learned Senior Counsel appearing on behalf of the Appellant drew our attention to an order dated 25th August 2021, passed by a Bench of coordinate strength comprising S. Abdul Nazeer and Krishna Murari, J.J. in Civil Appeal No. 4993 of 2021, the relevant part whereof is extracted hereinbelow: (3) We have heard learned counsel for the parties. It is not in dispute that CoC has not been constituted so far. This Court in Swiss Ribbons Private Limited and Anr. v. Union of India and others- (2019) 4 SCC 17 has held that at any stage, before a Committee of Creditors is constituted, a party can approach National Company Law Tribunal (NCLT) directly and that the Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, allow or disallow an application for withdrawal or settlement. It was held thus: 82. It is clear that once the Code gets triggered by admission of a creditor's petition under Sections 7 to 9, the proceeding that is before the adjudicating 9 authority, being a collective proceeding, is a proceeding in rem. Being a proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39, following has been observed: 37. In Kamal K. Singh (supra), relying upon paragraph 82 of the report in the case of Swiss Ribbons (supra), the Supreme Court, which was dealing with a similar situation where the settlement had been arrived before constitution of CoC allowed the proceedings to be withdrawn and held that the applications filed under Rule 11 of the NCLT Rules would be maintainable and the OCs therein was justified in moving such application. 38. In the case of Ashok G. Rajani (supra), the settlement had been arrived at between the parties on 08.08.2021, after the NCLT had admitted the application under section 7 of IBC vide order dated 03.08.2021. On appeal, the NCLAT vide order dated 18.08.2021 stayed the formation of CoC but declined to exercise its powers under Rule 11 of the NCLAT Rules. The said order was challenged before this Court. This Court in its order in paragraphs 29 and 30 gave reasons as to why the applications for withdrawal cannot be stifled before the constitution of CoC by third parties. The said paragraphs are reproduced below: 29. Considering the investments made by the Corporate Debtor and considering the number of people depe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not, in any manner, affect the claim of other creditors of whatever category and they would be 34 free to raise their own independent claims in appropriate proceedings which would be dealt with in accordance with law. 21. The above judgement of the Hon ble Supreme Court in Ashok G Rajani and Abhishek Singh (supra) where the cases were Application for withdrawal was filed before the Committee of Creditors was constituted. Present is also a case where Settlement has been entered between the parties and prayer is being made to withdraw the CIRP in exercise of jurisdiction under Rule 11 of NCLAT Rule, 2016. The Financial Creditor having settled the matter with the Corporate Debtor and Settlement letter dated 08th May, 2023 having been brought on record, we find it a fit case to exercise jurisdiction under Rule 11 of NCLAT Rules, 2016 to close the CIRP. We are of the view that on account of objection raised by the intervener of his filing claim before the IRP, the CIRP can not be allowed to proceed since the debt for which CIRP has been initiated, has been settled with the Financial Creditor. The Intervener is free to take such legal proceedings as may be advised to protect h ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
