top of page
Search
Writer's pictureManish Jha

ONCE PARTIES SETTLED DISPUTE BEFORE THE COC CONSTITUTION, NCLT MUST ALLow APPLICATION FOR WITHDRAWAL

Updated: Jun 13, 2023





Abhishek Singh Vs Huhtamaki PPl Ltd. (Arising out of SLP (Civil) No.6452 of 2021 decided on 28.03.2023)


In this decision, the Supreme Court provided guidance for NCLTs on how to handle a request under S.12A read with Regulation 30A of IBBI Regulation for the withdrawal of the CIRP considering the Corporate Debtor's settlement of its dispute with the Applicant-Creditor prior to the formation of the COC.


The NCLTs, in absence of any guiding principles, sometimes get swayed by the factors extraneous to the object of S.12A and Regulation 30A of IBBI Regulation and disallow the applications for withdrawal of the CIRP.


This judgment in no uncertain terms laid down that:

  • The substituted Regulation 30A of IBC provide for withdrawal applications being entertained before constitution of CoC. Regulation 30A of IBBI Regulations provide a complete mechanism for dealing with the applications filed under such provision.


  • Regulation 30A of IBBI Regulations is binding upon the NCLT. The Board is conferred with powers to frame regulations for various purposes referred to in section 240 of IBC and the other allied sections. These regulations may be subordinate in character but would still carry a statutory flavor and would be binding on the NCLT.


  • Once the parties have settled the dispute even before the CoC had been constituted, the NCLT must allow the application for withdrawal rather than await the other creditors to jump into the fray and allow the IRP to proceed further.


  • In the facts of the present case, even if there was any transaction from the account of the CD, the same may at best be a wrongful transaction and in any other proceedings where CIRP is initiated the amount so transferred could be recovered under section 66 of IBC by the IRP or the RP subject to establishing that the said transactions would be hit by the said provision. However, the settlement on this ground alone cannot be stalled.


  • There is no reason to disallow the withdrawal application on the ground that withdrawal of the proceedings would adversely affect the rights other creditors who have filed their claims in the meantime as the other creditors would have their own right to avail such legal remedies as may be available to them under law with respect to their claims.


  • Any amount spent by the IRP legally admissible to him could always be recovered in the same proceedings and the NCLT or the Adjudicating Authority would be well within its power to get the same cleared under Clause 7 of Regulation 30A of IBBI Regulations.


4 views0 comments

Recent Posts

See All

Comments

Rated 0 out of 5 stars.
No ratings yet

Add a rating
bottom of page