Jahanvi Solanki
Published on : 4th June,2022 at 17:38 IST
The Supreme Court on Friday, held that when 90% or more of the creditors decide that it will be in the interest of all the stake-holders to promote Settlement Plan filed by the Promoters of the Corporate Debtor and withdraw Corporate Insolvency Resolution Process as per Section 12A of the Insolvency and Bankruptcy Code,2016, the Adjudicating Authority (NCLT) Or the Appellate Authority (NCLAT) cannot appeal over such commercial wisdom of COCs. (Committee of Creditors)
A Bench comprising Justice B.R. Gavai and Hima Kohli allowed the Appeal filed against orders of the National Company Law Tribunal (NCLT) rejecting the application filed by Resolution Professional under Section 12A of the Insolvency and Bankruptcy Code,2016.
The Appellant, Promoter of the Corporate Debtor, had also come against NCLAT’s dismissal of the Appeal challenging the order of the NCLT to initiate liquidation proceedings.
The SC in this case refereeing to Section 12A, which deals with the withdrawal of the applications admitted under Section 7,9 and 10, the Court noted that the provision was inserted by way of the Insolvency and Bankruptcy Code, 2018.
The Committee had recommended that an exit should be allowed provided the Committee of Creditors approves it by 90% voting share.
Section 12A – When 90% and more of the creditors, in their wisdom after due deliberations, find that it will be in the interest of all the stake-holders to permit settlement and withdraw CIRP, in our view, the adjudicating authority or the Appellate Court cannot sit in an appeal over the commercial wisdom of CoC to be wholly capricious, arbitrary, irrational and De Hors the provisions of the Statute or the Rules.
Factual Background –
IDBI Bank Limited has filed an application under Section 7 of the IBC seeking initiation of Corporate Insolvency Resolution Process (CIRP) against M/s Siva Industries and Holdings Ltd. (Corporate Debtor). On 04.07.2019, the application was admitted by the NCLT and CIRP was initiated. The Resolution was passed which was not approved as per the requirement of the statute. The promoter of the company filed a settlement application to offer a one-time settlement plan.
The final settlement proposal was approved on 01.04.2021. Consequently, application seeking withdrawal of CIRP was filed. However, the NCLT rejected the said application.
