CS ANJALI GORSIA
NCLT REJECTS WITHDRAWAL PETITION (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.
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 lies with the NCLAT can be made process can be filed by
- Financial Creditor (FC)(under section 7 of IBC),
- Operational Creditor (OC)(under section 8 and 9 of IBC) or
- 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 WITHDRAWAL PETITIONS EVEN AFTER AGREES FOR SETTLEMENT : (KOLKATA BENCH ORDER DATED 29TH MAY, 2017)
In the case of Parker Hannifin India 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).
- 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 the tribunal.
- In compliance with said order, 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, application was filed by 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.
- In this case it is undisputed fact, that applications was duly filed under Sec 9 of IBC, for initiation of CIRP, and in compliance of orders public notice were made through respective modes for inviting claims from other creditors and for 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 power to reject the petition, before admission of the petition.
There are intricate and contradictory details relating to this case which have been argued on the date of hearing however, the same have not been mentioned in the Order
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(Author: ACS ANJALI GORSIA, Company Secretary in Practice from Nagpur (Maharashtra), and contacted at firstname.lastname@example.org)