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TMI Blog2024 (10) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... ................................. 18 C. Submissions ............................................................................................ 18 D. Legal Background ....................................................................................... 23 i. Legal context and fundamental principles ............................................ 23 a. General principles underlying the IBC .................................................... 23 b. Nature of the proceedings after admission of the application ................ 27 ii. Legal framework for withdrawal and settlement of claims .................. 31 a. Evolution of the legal framework ............................................................ 31 b. Insights from the evolution of the legal framework ................................. 44 iii. Scope of 'Inherent Powers' under Rule 11 ........................................ 49 E. Application to the instant case .................................................................. 51 i. Locus of the appellant before this Court .............................................. 52 ii. Approach of the NCLAT in the Impugned Judgement ......................... 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured parties. Under the terms of the Credit Agreement, the Corporate Debtor acted as a guarantor and issued a guarantee deed dated 24 November 2021 in favour of the appellant. ii. Proceedings before the Delaware Court 6. On account of an alleged default under the Credit Agreement, the appellant enforced the security in respect of the loan and took a series of steps that resulted in the removal of all pre-existing directors of Byju's Alpha Inc., including Riju Raveendran and the appointment of a new sole director. The appellant contends that despite these measures, defaults persisted in payment of the principal outstanding amount and the interest accrued under the Credit Agreement. 7. Accordingly, the appellant, acting as the Administrative Agent of the lenders, issued a notice of demand dated 6 December 2023 to the Corporate Debtor, invoking the guarantee deed and demanding that the Corporate Debtor pay the requisite amount. However, it is the case of the appellant, that the Corporate Debtor too defaulted in its capacity as the guarantor under the Credit Agreement. 8. It is contended that a series of wire transfers were carried out in April and July 2022 by Byju's Alpha Inc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, including funds in his personal bank account(s), and (ii) what other assets he holds" and posted the case to a later date to determine the financial penalties to be imposed on Riju Raveendran. Eventually, on 31 July 2024, the Delaware Court imposed financial penalties of USD 10,000 per day on Riju Raveendran, which is payable until the contempt is "purged by him". iii. Insolvency proceedings against the first respondent 11. On 23 September 2023, the second respondent moved a petition under Section 9 of the IBC, in respect of an operational debt of approximately Rs 158 crore payable by the Corporate Debtor under the Team Sponsor Agreement.10 The NCLT admitted the petition on 16 July 2024 and initiated CIRP. 11 A moratorium under Section 14 of IBC was imposed and an Interim Resolution Professional,12 was appointed. 12. Separately, the appellant also filed a petition under Section 7 of the IBC against the Corporate Debtor on 22 January 2024.13 On 16 July 2024, the NCLT disposed of the Section 7 petition, in view of the order passed on the same day admitting the Section 9 petition filed by the second respondent.14 The appellant was granted liberty to file their claims before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of INR 50 crore had been transferred to the second respondent as part of a settlement. The counsel for the first respondent further submitted, before the NCLAT, that another sum of Rs 25 crore would be paid by 2 August 2024, and the balance amount of Rs 83 crore would be paid thereafter, on or before 9 September 2024.18 16. The payment was purportedly made pursuant to a settlement offer extended by Riju Raveendran, in his personal capacity, to the second respondent by an email dated July 30, 2024. He proposed to clear the operational debt of Rs 158 crore in three tranches on 30 July 2024,19 2 August 2024 and 9 August 2024, respectively. The second respondent agreed to take steps for withdrawal of the petition upon receipt of full payment of the operational debt. Relevant excerpts of the email are as follows: "1. We undertake to pay INR. 50 crores upfront today i.e. 30 June 2024, by way of RTGS from the account of its promoter, Mr. Riju Ravindran. We shall forward the UTR details of the same shortly. 2. We further undertake to pay INR. 25 crores on 02 August 2024 through RTGS. 3. The total dues are approximately INR. 158 crores. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (iii) the first respondent (Byju Raveendran) has not transferred any money or extended any security towards raising the sums for payment of the settlement amount. The undertaking reads as follows: "... 3. I state and confirm that no part of the Settlement Amount is being paid in violation of any order passed by any court or tribunal, including orders passed by the Delaware Bankruptcy Court. 4. I have not received any portion of the USD 533 million that are the subject matter of the proceedings before the Delaware Bankruptcy Court and, accordingly, no part of those funds have been, or will be, used to pay the BCCI. In fact, the funds forming part of the Settlement Amount are being paid out of my personal funds, as explained in paragraph 8 below. 5. To clarify, under the terms of the Credit Agreement dated 24 November 2021 (the "Credit Agreement"), a group of lenders represented by GLAS Trust LLC (GLAS) disbursed an amount of USD 1.2 billion to Byju's Alpha, Inc. (a step-down subsidiary of Think & Learn Pvt. Ltd. (TLPL)). Under the Credit Agreement, monies disbursed thereunder could not be brought into India. Therefore, none of the monies disbursed under the Credit A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the NCLAT passed an interim order staying the constitution of the CoC. v. Impugned Judgement 20. Before the NCLAT, the appellant contended that (i) Section 12A of the IBC and Regulation 30A of the CIRP Regulations 2016 deal with the settlement of claims after CIRP is initiated, both before and after the CoC is constituted. The first respondent should have, thus, approached the NCLT as mandated by Rule 30A instead of invoking the inherent powers of the NCLAT under Rule 11; (ii) NCLAT should not exercise its discretionary power under Rule 11 of the NCLAT Rules because the directors of the Corporate Debtor and its allied entities are fugitives, living abroad; have defaulted on government dues; Enforcement Directorate proceedings are pending, look out notices have been issued; and there has been a significant drop in the valuation of the Corporate Debtor; and (iii) the interests of all creditors must be considered while accepting a settlement, including the appellant who has a substantial interest with regard to the Corporate Debtor. 21. On 2 August 2024, the NCLAT delivered the Impugned Judgement. After recording the factual background and submissions of the parties before it, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g order against Riju Raveendran, inter alia restraining him from using his personal assets to satisfy the dues of the second respondent. Before the Delaware Court, the appellant contended that fraudulent payments were being made by Riju Raveendran to pay the operational debt due to the second respondent and dismiss insolvency proceedings against the Corporate Debtor, which is "his older brother's crumbling business enterprise in India". On 8 August 2024, the Delaware Court passed an order rejecting the motion. 25. The appellant instituted the present Civil Appeal before this Court, challenging the Impugned Judgement of the NCLAT. By an Order dated 14 August 2024, this Court issued notice on the appeal and directed that there would be a stay on the operation of the Impugned Judgment. The second respondent was directed to maintain the amount of Rs 158 crores, which has been realized in pursuance of the settlement, in a separate escrow account, to abide by further directions of this Court. 26. In view of the above directions of this Court granting an interim stay on the Impugned Judgement, the CIRP proceedings resumed. On 19 August 2024, the IRP addressed a letter to the appellant n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions against the Corporate Debtors on account of their unpaid dues; c. NCLAT failed to deal with the objections raised by the appellant about the source of the funds and the conduct of the first respondent and his brother, Mr Riju Raveendran. Facts such as - the purported fraudulent transfer of USD 533 million to a hedge fund in the United States; the orders of the US Court restraining the brothers from transferring or dissipating the amount; the contempt proceedings against Mr Riju Raveendran; the ongoing investigation by the Enforcement Directorate against the first respondent and the Corporate Debtor; attempts by the Corporate Debtor to dissipate assets - were not adequately dealt with in the Impugned Judgement; d. There are clear indications that the Corporate Debtor cannot service its outstanding debts to its financial creditors. There has been a 99% drop in the valuation of the Corporate Debtor, defaults in paying employees' salaries, the exit of key managerial persons, failure to file financial statements, and oppression and mismanagement petitions by the shareholders against the promoters, all of which indicate that insolvency proceedings are inevitable; e. Settin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hutting down, disruption of services, teachers resigning, and students dropping out; and f. The Corporate Debtor is a solvent company with a running business of 27,000 employees and 150 million students. A viable company capable of repaying its debts must not be admitted into CIRP. 32. Mr Tushar Mehta, the learned Solicitor General appearing for the second respondent, supported the arguments of the first respondent in support of the Impugned Judgement and also advanced the following submissions: a. The IBC aims to prevent the economic death of entities, which involves encouraging settlement between the parties. NCLAT passed the Impugned Judgement after hearing all concerned parties. Thus, there was no infirmity in invoking inherent powers under Rule 11 of the NCLAT Rules 2016; b. Regulation 30A was a statutory response to the decision of this Court in Swiss Ribbons (P) Ltd. v. Union of India22 and the intent is to encourage settlement. The provision is directory as no consequence of noncompliance is stipulated. It does not contemplate adjudication about the factum of settlement, the mode/method of settlement or any specific legal ground by the NCLT; c. Regulation 30A, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LT) and their respective Appellate Tribunals. Liquidation of companies is handled by the High Courts. Individual bankruptcy and insolvency is dealt with under the Presidency Towns Insolvency Act, 1909, and the Provincial Insolvency Act, 1920 and is dealt with by the courts. The existing framework for insolvency and bankruptcy is inadequate, ineffective and results in undue delays in resolution, therefore, the proposed legislation. 2. The objective of the Insolvency and Bankruptcy Code, 2015 is to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund, and matters connected therewith or incidental thereto. An effective legal framework for timely resolution of insolvency and bankruptcy would support development of credit markets and encourage entrepreneurship. It would also improve Ease of Doing Business, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends." (emphasis supplied) 38. A two-judge Bench of this Court, speaking through one of us (DY Chandrachud, J), in Arun Kumar Jagatramka v Jindal Steel & Power Ltd24 also had occasion to observe the quantum change in corporate governance and the rule of law brought in by the enactment of the IBC. This Court observed as follows: "41. ... First and foremost, the IBC perceives good corporate governance, respect for and adherence to the rule of law as central to the resolution of corporate insolvencies. Second, the IBC perceives corporate insolvency not as an isolated problem faced by individual business entities but places it in the context of a framework which is founded on public interest in facilitating economic growth by balancing diverse stakeholder interests. Third, the IBC attributes a primacy to the business decisions taken by creditors acting as a collective body, on the premise that the timely resolution of corporate insolvency is necessary to ensure the growth of credit markets and encourage investment. Fourth, in its diverse provisions, the IBC ensures that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management. b. Nature of the proceedings after admission of the application 40. Chapter II of the IBC provides that CIRP can be invoked in three ways: (i) by a financial creditor under Section 7; (ii) by an operational creditor under Section 9; and (iii) by a corporate debtor itself under Section 10.27 Section 5(11) of the IBC defines the "initiation date" as the date on which the financial creditor, operational creditor or corporate applicant makes an application to the NCLT for initiating insolvency proceedings, including CIRP. This is distinct from the "insolvency commencement date" which is defined in Section 5(12) of the IBC as the date of admission of an application for initiating CIRP by the NCLT under Sections 7, 9 or 10, as the case may be. 41. Once the application is admitted, the CIRP commences and the NCLT inter alia declares a moratorium; issues a public pronouncement of the initiation of CIRP and a call for submission of claims; and appoints an IRP.28 Once an IRP is appointed, the affairs of the corporate debtor are managed by the IRP,29 who inter alia receives and collates all the claims submitted by the creditors pursuant to the public announcement of the CIRP. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided under sub-section (5)(b) to Section 7 of IB Code. In that circumstance if the finding of default is recorded and the adjudicating authority proceeds to admit the application, the corporate insolvency resolution process commences as provided under sub-section (6) and is required to be processed further. In such event, it becomes a proceeding in rem on the date of admission and from that point onwards the matter would not be arbitrable. The only course to be followed thereafter is the resolution process under IB Code. Therefore, the trigger point is not the filing of the application under Section 7 of IB Code but admission of the same on determining default. 26. [...] On admission, third-party right is created in all the creditors of the corporate debtors and will have erga omnes effect. The mere filing of the petition and its pendency before admission, therefore, cannot be construed as the triggering of a proceeding in rem. Hence, the admission of the petition for consideration of the corporate insolvency resolution process is the relevant stage which would decide the status and the nature of the pendency of the proceedings and the mere filing cannot be taken as the trigg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 a two-judge bench of this Court invoked its power under Article 142 to record the settlement of the parties and allow the compromise between the creditor and the corporate debtor after the admission of the concerned application. While doing so, this Court also prima facie agreed with the proposition that in view of Rule 8 of the CIRP Rules, the NCLAT cannot use its inherent powers under Rule 11 of the NCALT Rules 2016 to allow a settlement or withdrawal after the admission of the application. 48. The above position was followed by the same Bench of this Court in Uttara Foods & Feeds (P) Ltd. v. Mona Pharmachem,38 while allowing another settlement between the parties under Article 142. However, on this occasion, the bench also observed that instead of all such orders coming to this Court to utilize its powers under Article 142, the relevant rules may be amended to account for cases where an agreement has been reached after admission of the application. This Court observed as follows: "2. ... this Bench had observed that in view of Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, the National Company Law Appellate Tribunal prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riately amended. The observations in the ILC Report on this aspect are as follows : "29.2. On a review of the multiple NCLT and NCLAT judgments in this regard, the consistent pattern that emerged was that a settlement may be reached amongst all creditors and the debtor, for the purpose of a withdrawal to be granted, and not only the applicant creditor and the debtor. On this basis read with the intent of the Code, the Committee unanimously agreed that the relevant rules may be amended to provide for withdrawal post admission if the CoC approves of such action by a voting share of ninety per cent. It was specifically discussed that rule 11 of the National Company Law Tribunal Rules, 2016 may not be adopted for this aspect of CIRP at this stage (as observed by the Hon'ble Supreme Court in the case of Uttara Foods and Feeds Private Limited v. Mona Pharmacem) and even otherwise, as the issue can be specifically addressed by amending rule 8 of the CIRP Rules." 51. Accepting the recommendation of the ILC, the legislature introduced Section 12A in the IBC by the Insolvency and Bankruptcy (Second Amendment) Act, 2018 with effect from 6 June 2018.41. It reads as follows: "12A. Withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or seven days of receipt of the application, whichever is later. (4) Where the application is approved by the committee with ninety per cent voting share, the resolution professional shall submit the application under sub-regulation (1) to the adjudicating authority on behalf of the applicant, within three days of such approval. (5) The adjudicating authority may, by order, approve the application submitted under subregulation (4)." 54. Regulation 30A(1), as it stood originally, required that an application for withdrawal shall be submitted to the IRP or the RP in the prescribed form, before the invitation for expression of interest under Regulation 30A. It did not provide the procedure for withdrawal after the invitation of expression of interest had been issued. Regulation 30A(2) provided that the application for withdrawal shall be accompanied by a bank guarantee towards the specified estimated costs. Regulation 30A(3) mandated that the CoC must consider the application within seven days of its constitution or the receipt of the application, whichever is later. Finally, Regulation 30A(4) provided that once the CoC approved the application with ninety percent voting sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty can approach NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the parties concerned and considering all relevant factors on the facts of each case. 83. The main thrust against the provision of Section 12-A is the fact that ninety per cent of the Committee of Creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report (supra). Also, it is clear, that under Section 60 of the Code, the Committee of Creditors do not have the last word on the subject. If the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state the reasons justifying withdrawal after issue of such invitation. (2) The application under sub-regulation (1) shall be made in Form FA of the Schedule-I accompanied by a bank guarantee- (a) towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of sub- regulation (1); or (b) towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) of sub-regulation (1). (3) Where an application for withdrawal is under clause (a) of sub-regulation (1), the interim resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt. (4) Where an application for 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 subregulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be made in the manner prescribed in Form FA of Schedule-I,45 and must be accompanied by a bank guarantee towards the specified expenses. Regulation 30A(3) provides that in cases where the application for withdrawal is moved before the constitution of the CoC, the IRP shall submit the application to the NCLT on behalf of the applicant within three days of receipt. Regulations 30A (4) and (5) deal with the situation where the CoC has already been constituted. They provide that the CoC shall consider the application within seven days of receipt, and subsequently, if the application is approved by the CoC with a ninety-percent voting share, the RP must submit the application with the approval to the NCLT within three days of the approval. Finally, regulation 30A(6) provides that on the receipt of the application under both mechanisms (before the CoC and after), the NCLT may pass an order approving the application submitted by the RP or IRP, as the case may be. b. Insights from the evolution of the legal framework 63. In essence, after a series of deliberations by the legislature, the executive and nudges by this Court, the framework created by Rule 8 of the NCLT Rules and Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proval with a ninety percent voting share, the RP shall submit the application to the NCLT. iv. After an application under Section 7, 9 or 10 is admitted, the CoC has been formed and the invitation for expression of interest has been issued: The procedure is the same as that detailed in (iii) above, with the added requirement stemming from the proviso to Regulation 30A (1). in such cases, the applicant must state the reasons for withdrawal at this belated stage. 64. Not only is there an exhaustive framework to deal with withdrawal and settlement, but the evolution of the law and the creation of an comprehensive framework indicates an attempt to reduce reliance on discretionary powers. As detailed above, the IBC and the allied rules and regulations, in their original form did not provide any procedure for the settlement/withdrawal of claims after admission of the application by the creditor. This Court was compelled to invoke Article 142 in decisions such as Lokhandwala Kataria Construction (supra) and Uttara Foods & Feeds (P) Ltd. (supra). To reduce reliance on Article 142, Section 12A and Regulation 30A were introduced to provide a detailed procedure for such cases. In fact, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (such as the former management of the corporate debtor) must submit their application for withdrawal through the IRP who is now the person in control of the insolvency proceedings. To subvert this requirement would run contrary to the scheme of the IBC and the underlying principles discussed in this judgment; and b. Secondly, the NCLT cannot be considered a post office that merely puts a stamp on the withdrawal application submitted by the parties through the IRP. The ILC Report, in response to which, the parent provision, i.e. Section 12A was introduced in the IBC specifically discussed the possibility of the creditors, apart from the applicant creditor agreeing to a settlement as the underlying reason to permit withdrawal even after initiation of the CIRP. It was never fathomed by the ILC that withdrawal of claims would remain a unilateral process, even though the application is admitted and CIRP has been initiated. Similarly, this Court in Swiss Ribbons (supra), in response to which Regulation 30A was amended, specifically observed that in cases where withdrawal is sought after initiation of CIRP, but before the CoC is constituted, the NCLT must decide on the application afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said provisions. Whatever limitations are imposed by construction on the provisions of Section 151 of the Code, they do not control the undoubted power of the Court conferred under Section 151 of the Code to make a suitable order to prevent the abuse of the process of the Court." (emphasis supplied) 70. When a procedure has been prescribed for a particular purpose exhaustively, no power shall be exercised otherwise than in the manner prescribed by the said provisions. In such cases, the court must be circumspect in invoking its 'inherent powers' to deviate from the prescribed procedure. If such deviation is made, the court must justify why this was necessary to "prevent the abuse of the process of the Court". 71. The need to be circumspect while invoking "inherent powers", when there is an exhaustive legal framework is amplified in the context of a legislation like the IBC. In Ebix Singapore (P) Ltd. vs. Educomp Solutions Ltd. (CoC),49 a twojudge bench of this Court, speaking through one of us (DY Chandrachud, J), affirmed this position and observed as follows: "Any claim seeking an exercise of the adjudicating authority's residuary powers under Section 60(5)(c) IBC, NCLT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law arising out of such order under this Code within forty-five days from the date of receipt of such order. (2) The Supreme Court may, if it is satisfied that a person was prevented by sufficient cause from filing an appeal within forty-five days, allow the appeal to be filed within a further period not exceeding fifteen days." (emphasis supplied) 75. The provision stipulates that "any person" who is aggrieved by the order of the NCLAT may file an appeal before the Supreme Court within the prescribed limitation period. Similar language is used in Section 61 of the IBC, which provides for appeals to NCLAT from orders of the NCLT.50 The use of the phrase "any person aggrieved" indicates that there is no rigid locus requirement to institute an appeal challenging an order of the NCLT, before the NCLAT or an order of the NCLAT, before this Court. Any person who is aggrieved by the order may institute an appeal, and nothing in the provision restricts the phrase to only the applicant creditor and the corporate debtor. As noted above, once the CIRP is initiated, the proceedings are no longer restricted to the individual applicant creditor and the corporate debtor but rather be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and (iii) it be placed before the NCLT for approval. None of these requirements were met in the present case. First and foremost, there was no formal application instituted to seek the withdrawal of the CIRP. The settlement agreement was taken on record and approved by the NCLAT based on the submissions and assurances of the counsel before it and the affidavits/undertakings filed by the parties. Further, the first respondent, who is a former director of the Corporate Debtor, did not move the application through the IRP and instead approached the NCLAT directly. Finally, the request to approve the settlement was moved before the NCLAT during appellate proceedings, instead of being placed before the NCLT. Despite these grave deviations, the NCLAT still proceeded with approving the settlement and setting aside the CIRP by invoking its inherent power under Rule 11 of the NCLAT Rules. 80. We are of the view that recourse to Rule 11 of the NCLAT Rules was not warranted in the present circumstances. As noted above, 'inherent powers' cannot be used to subvert legal provisions, which exhaustively provide for a procedure. To permit the NCLAT to circumvent this detailed procedure by invoki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cited in the Impugned Judgement 82. The respondents relied on the decisions of this Court in Ashok G. Rajani v. Beacon Trusteeship Ltd.51, and Abhishek Kumar (supra) to argue that before the CoC is formed, the proceedings are between the applicant creditor and the debtor and thus, Rule 11 can be invoked to allow the settlement. In the Impugned Judgement too, the NCLAT relies on the decisions of this Court in Abhishek Kumar (supra) and Kamal K Singh (supra), to justify the invocation of Rule 11 of the NCLAT Rules and observe that there has been "a change in the law on settlement". The respondents are correct to contend that each of these decisions was rendered after Section 12A was inserted and Regulation 30A was amended. However, it is important to understand the context in which this Court upheld the invocation of Rule 11 of the NCLAT Rules and whether these decisions considered the prescribed procedure under Section 12A and the amended Regulation 30A. We are of the considered view that these judgements do not advance the case of the respondents. 83. In Kamal Singh (supra), a two-judge bench of this Court passed a brief order setting aside an order of the NCLT, which dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered by a two-judge bench of this Court speaking through Justice Vikram Nath, correctly identifies the legal framework. However, it is distinguishable from the present factual situation and the findings of this Court do not support the case of the respondents. The facts are comparable vis-à-vis the stage of the proceedings - the petition had been admitted, but the CoC had not been constituted. However, in that case, the IRP had moved an application under Regulation 30A of the CIRP Regulations. Instead of adjudicating upon the application under Regulation 30A, the NCLT took the view that Regulation 30A is a mere directory provision and dismissed the application. The NCLT vacated the stay on the constitution of the CoC and directed that the application under 12A be decided directly (i.e. including for compliance with the requirement of a ninety-percent voting share of the CoC). This Court set aside the order of the NCLT on the ground that Regulation 30A provides a complete mechanism for dealing with the applications filed under such a provision, and it is not necessary to get the approval of a ninety percent voting share of the CoC if the application for withdrawal is moved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019) 4 SCC 17. 24 (2021) 7 SCC 474. 25 Swiss Ribbons, para 28; 26 Mobilox, para 36. 27 Section 6, IBC reads: "6. Persons who may initiate corporate insolvency resolution process. - Where any corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor in the manner as provided under this Chapter." 28 Sections 13, 14, 15, 16, IBC. 29 Section 17, IBC reads "17. Management of affairs of corporate debtor by interim resolution professional. - (1) From the date of appointment of the interim resolution professional, - (a) the management of the affairs of the corporate debtor shall vest in the interim resolution professional; (b) the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the interim resolution professional; (c) the officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to such documents and records of the corporate debtor as may be required by the interim resolution profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor] Subject : Withdrawal of Application admitted for corporate insolvency resolution process of [name of corporate debtor] I, [Name of applicant], had filed an application bearing [particulars of application, i.e, diary number/ case number] on [Date of filing] before the Adjudicating Authority under [Section 7 / Section 9/ Section 10] of the Insolvency and Bankruptcy Code, 2016. The said application was admitted by the Adjudicating Authority on [date] bearing [case number]. 2. I hereby withdraw the application bearing [particulars of application, i.e, diary number/ case number] filed by me before the Adjudicating Authority under [Section 7 / Section 9/Section 10] of the Insolvency and Bankruptcy Code, 2016. 3. I attach the required bank guarantee as per sub-regulation (2) of regulation 30A. (Signature of the applicant) Date: Place: [Note: In the case of company or limited liability partnership, the declaration and verification shall be made by the director/manager/secretary/designated partner and in the case of other entities, an officer authorised for the purpose by the entity]".] 46 Regulation 30A (1), CIRP Regulations, 2016. 47 "CPC" 48 1966 SCC OnLine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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