NCLT REJECTS WITHDRAWAL PETITION (ORDER DATED 29/05/2017): EVEN AFTER PARTIES AGREES FOR SETTLEMENTS?

CS ANJALI GORSIA:

NCLT REJECTS WITHDRAWL PETITION (ORDER DATED 29/05/2017): EVEN AFTER PARTIES AGREES FOR SETTLEMENTS?

Insolvency and Bankruptcy Code 2016, is the Federal Law for the benefit and relief of creditors and their debtors in cases in which the latter are unable to / unwilling to pay their debts. Under the IBC 2016,

An application for commencement of Corporate Insolvency Resolution to “National Company tribunal Law” (NCLT) which is designated as the Adjudicating Authority for the purpose dealing with insolvency, bankruptcy, winding up of companies, LLP, corporate debtors. Appeals from orders of NCLT lie with the NCLAT can be made process can be filed by

1.       Financial Creditor (FC)(under section 7 of IBC),

2.       Operational Creditor (OC)(under section 8 and 9 of IBC)or

3.   Corporate Debtor (CD)(where corporate Debtor has committed a default under section 6 of the IBC)

The corporate insolvency process shall commence from the date of admission of the application. 

However, the NCLT may admit or reject the application following grounds under the provisions of IBC, within 14 days of receipt of application:

NCLT shall admit the application if the following requirements are fulfilled: -	NCLT may reject the application in the following circumstances:
(a) The application is complete. (b) There is no repayment of the unpaid operational debt. (c) The invoice or notice for payment to the corporate debtor has been delivered by the corporate creditor. (d) No notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility. (e) There is no disciplinary proceeding pending against any resolution professional proposed if any.	(a) if the application is incomplete; (b) if there has been repayment of the unpaid operational debt; (c) if the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) if the notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; and (e) if any disciplinary proceeding is pending against any proposed resolution professional
The decision of admission of the application will be communicated by NCLT to the operational debtor and the corporate debtor. The corporate insolvency resolution process shall commence from the date of admission of the application	Before rejecting the application, NCLT will have to give notice to the applicant to rectify the defect in his application within 7 days of such notice from NCLT. NCLT shall communicate the decision of rejection of the application to the operational creditor and the corporate debtor.

WITHDRAWAL OF APPLICATION:

Rule 44(2). -  Where at any stage prior to the hearing of the petition or application, the applicant desires to withdraw his petition or application, he shall make an application to that effect to the Tribunal, and the Tribunal on hearing the applicant and if necessary, such other party arrayed as opposite parties in the petition or the application or otherwise, may permit such withdrawal upon imposing such costs as it may deem fit and proper for the Tribunal in the interests of the justice.

BUT: NCLT REJECTS THE WITHDRAWL PETITIONS EVEN AFTER AGREES FOR SETTLEMENT :( KOLKATA BENCH ORDER DATED 29^TH MAY, 2017)

In the case of Parker Hannifin India Private Limited v/s Prowess International Private Limited, ruled on the aspect of withdrawal of insolvency petition based on a settlement arrived at between the disputant parties after it has been admitted under the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC).

FACTS:

§  Parker Hannifin India Private Limited –(Operational Creditor under of IBC)

§  Prowess International Private Limited- (Corporate Debtor under IBC)

§  The petition was filed under Section 9 of IBC and after the receipt of application; order of admission was so passed by Tribunal.

§  In compliance with said order, the public announcement was duly made in the newspaper and advertisement.

§  After the notice of public advertisement, operational creditor and corporate debtor thereafter duly agreed for amicable settlement.

§  Thereafter, an application was filed by the corporate debtor with the NCLT for withdrawal of the petition based on a settlement arrived at between Parker Hannifin India Private Limited and Prowess International Private Limited.

FINDINGS:

§  , In this case, it is undisputed fact, that applications were duly filed under Sec 9 of IBC, for initiation of CIRP, and in compliance with orders, public notice was made through respective modes for inviting claims from other creditors and for the declaration of Moratorium.

§   After the admission of the petition, it acquires the character of representative suit and through publication in the newspapers, other creditors get a right to participate in the insolvency resolution process, and therefore, petition cannot be dismissed on the basis of compromise between the operational creditor and corporate debtor;

§   Thus after admission of petition under IBC, lis does not only remains with the operational creditor and corporate debtor;

§   Therefore operational creditor and corporate debtor; alone have no right to withdraw the petition after admission.

§   From a perusal of section 9(5)(ii)(b) of the IBC, if repayment of the debt amount is made by the corporate debtor, then NCLT has the power to reject the petition, before the admission of the petition.

There are intricate and contradictory details relating to this case which has been argued on the date of hearing, however, the same have not been mentioned in the Order.

SOURCE OF
INFORMATION:http://nclt.c2k.in/OtherNCLT//Publication/Kolkata_Bench/2017/other/18.pdf

DISCLAIMER: The entire contents of this document have been developed on the basis of relevant information and are purely the views of the authors. Though the authors have made utmost efforts to provide authentic information however, the authors expressly disclaim all or any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document. READER SHOULD SEEK APPROPRIATE COUNSEL FOR YOUR OWN SITUATION. I SHALL NO BE HELD LIABLE FOR ANY OF THE CONSEQUENCES DIRECTLY OR INDIRECTLY, OTHER OPINIONS AND SUGGESTIONS ARE WELCOMED.

(Author: ACS ANJALI GORSIA, Company Secretary in Practice from Nagpur (Maharashtra), and contacted at csanjali.gorsia@gmail.com)

.