Whether a Company Petition filed for initiation of CIRP against a Corporate Debtor, can be withdrawn during the process of Liquidation?

Facts of the Case

The issue for consideration is that whether a C.P. filed for initiation of CIRP against a Corporate Debtor, can be withdrawn during the process of Liquidation?

Section 12A read with CIRP Regulation 30A pertaining to the withdrawal of the Applications filed under Section 7, 9 or 10 of the IBC, 2016 provides for filing an Application by the Applicant in the C.P.

In the instant case, the C.P. was filed U/s. 10 of the IBC, 2016, by the Corporate Applicant i.e. M/ s. Aradhya Wire and Ropes Private Limited itself, then order for liquidation was passed and this application is filed by the Liquidator on receipt of settlement proposal from the promotor of the Corporate Debtor with a true intention revive the CD.

1. Following judgements were taken into consideration :
2. 1. 1. Shweta Vishwanath Shirke & Ors. Vs. The Committee of Creditors & Ann (Company Appeal (AT) (Insolvency) No. 601 of 2019)-NCLAT New Delhi.
   3. The question arises for consideration in these appeals is whether Section 29A of the Code is applicable to the applicant, if he intends to withdraw the petition under Section 7 or 9, if the Committee of Creditor, approves a proposal with 90% voting share, in terms of Section 12A.
   5. From Section 12A and the decision of the Hon’ble Supreme Court in ‘Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors. SC, it is clear that the Promoters/Shareholders are entitled to settle the matter in terms of Section 12A and in such case, it is always open to an applicant to withdraw the application under Section 9 of the Code on the basis of which the CIRP was initiated. In view of the aforesaid Judgement, NCLAT held that Section 29A is not applicable for entertaining/considering an application under Section 12A as the Applicants are not entitled to file application under Section 29A as ‘resolution applicant’.
   7. 2. V. Navaneetha Krishnan Vs. Central Bank of India, Coimbatore & Another- (Company Appeal (AT) (Insolvency) Nos. 288 & 289 of 2018)-NCLAT New Delhi.
   9. The above appeal was filed by the aggrieved Resolution Applicant (V. Navaneetha Krishnan) for not considering the resolution plan by him, the CoC decides to Liquidate the assets of the Corporate Debtor given the fact that the Resolution Plan was received only on 178^th day just two days prior to completion of 180 days.
   11. However, the CoC considers the plan submitted by the appellant o 178^th day and decides to liquidate on 179^th day and the appellate authority held that liquidation order was required to
   12. be passed and in absence of any good reason for extension of time, we are not inclined to grant any relief.
   14. NCLAT New Delhi held that, in view of Section 12A even during the liquidation period if any person, not barred under Section 29A, satisfy the demand of ‘Committee of Creditors’ then such person may move before the Adjudicating Authority by giving offer which may be considered by the ‘Committee of Creditors’, and if by 90% voting share of the ‘committee of creditors’, accept the offer and decide for withdrawal of the application under Section 7 of the I&B Code, the observation as made above or the order of liquidation passed by the Adjudicating Authority will not come in the way of Adjudicating Authority to pass appropriate order.
   16. 3. Supreme Court allows the settlement plan of Promoter of Siva Industries at Liquidation stage – Vallal RCK Vs. M/s Siva Industries and Holdings Ltd. and Others (Civil Appeal Nos. 1811-­1812 of 2022) – Supreme Court
   18. Question that falls for consideration in the present appeal is as to whether the adjudicating authority (NCLT) or the appellate authority (NCLAT) can sit in an appeal over the commercial wisdom of the Committee of Creditors (CoC) or not?
   20. The provisions under Section 12A of the IBC have been made more stringent as compared to Section 30(4) of the IBC. When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stake­holders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the appellate authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the adjudicating authority or the appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the statute or the Rules.
   22. In the present case, the decision of the CoC was taken after the members of the CoC, had due deliberation to consider the pros and cons of the Settlement Plan and took a decision exercising their commercial wisdom. The Court held that we are therefore of the considered view that neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of CoC.

Decision of the NCLT

Taking above judgements into consideration, the Petitioner-Corporate Applicant is released from all the rigours of the CIRP. The Liquidator shall handover the Corporate Applicant to the suspended Board of Directors forthwith. He is released from all his duties as the Liquidator.