National Company Law Appellate Tribunal, New Delhi (NCLAT): The Coram of Justice Ashok Bhushan (Chairperson) and Jarat Kumar Jain (Judicial Member) and Dr Alok Srivastava (Technical Member) allowed withdrawal of application for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor.
Two appeals were filed against the same judgment passed by the National Company Law Tribunal, Allahabad Bench.
Whether the approval of the Committee of Creditors for withdrawal of the application was required or not on the present matter?
Supreme Court in Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17, 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 the exercise of its inherent powers under Rule 11 of NCLT Rules, allow or disallow an application for withdrawal or settlement.
In the present matter, the Application under Section 12A was filed on 25.08.2021 on which date settlement between the Appellants and the Corporate Debtor had already been entered. On the day when the Application was filed, there was no requirement of approval of ninety percent of the voting share of the Committee of Creditors.
Tribunal expressed that, when the application is filed prior to the constitution of Committee of Creditors, the requirement of ninety percent vote of Committee of Creditors is not applicable and the Adjudicating Authority has to consider the Application without requiring approval by ninety percent vote of the Committee of Creditors.
Another aspect was that, as per the Memorandum of Understanding, two Demand Drafts of Rs 19 Lacs and Rs 6 Lacs were handed over to the Appellant and the cheque of Rs 38,74,000/- was also given. The cheque of Rs 38,74,000 was returned and subsequently, the said payment was made by RTGS before the order was passed by the Adjudicating Authority.
The entire payment as per the Memorandum of Settlement having been paid, there is no debt of the Appellant- ‘M/s. Ashish Ispat Pvt. Ltd.’ due on the Corporate Debtor.
In the instant case, the entire dues of the appellant were paid by the Corporate Debtor under the Memorandum of Settlement. An application was filed before the constitution of the Committee of Creditors. There was no requirement of directing for obtaining approval of ninety per cent vote of Committee of Creditors for considering the application.
Coram held that the NCLT without considering the facts and sequence of the events had refused to entertain the application on the ground that it was not supported by 90% vote of the Committee of Creditors. Hence, Tribunal opined that present is a case where the Application for withdrawal ought to be allowed permitted withdrawal of CIRP.
The appeal was allowed. [Ashish Ispat (P) Ltd. v. Primsuss Pipes & Tubes Ltd., Comp. App. (AT) (Ins.) No. 892 of 2021, decided on 7-1-2022]
Advocates before the Tribunal:
For the Appellant: Mr. Adhitya Srinivasan, Ms. Shalya Agarwal, Mr. Rahul Patel, Mr. Varun Chugh, Ms. Shagun Shahi, Advocates.
Ms. Mrinali Prasad, Advocate for R1.
For the Respondents: Mr. Aditya Gauri, Advocate for R2.
Mr. Abhishek Kumar Advocate for Kotak Mahindra
Mr. Saket Singh, Mr. Ankur Goel, Advocates (Intervenor)