Case Note & Summary
The case involved an appeal by the suspended director of Yashwant Dugdh Prakriya Ltd. against an order admitting the company to Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Respondent No. 2 had filed a petition alleging default in loan repayment of approximately ₹ 11.22 crores, leading to the initiation of CIRP. During the appeal, the Appellant claimed that a settlement had been reached with the financial creditor regarding the loan, and the claims of the Employees' Provident Fund Organisation (EPFO) had been fully paid. The Appellant sought to withdraw the CIRP proceedings, arguing that both claims had been satisfied. The Respondents concurred with this statement. However, the court noted that the Committee of Creditors had not yet been constituted, and according to the Supreme Court's ruling in Glas Trust Co. LLC v. Byju Raveendran, the interests of all creditors must be considered before allowing withdrawal. The court highlighted that the amended Section 12A of the IBC requires the constitution of the CoC before any withdrawal can be approved. Consequently, the court directed that the settlement proposal should be placed before the Adjudicating Authority after the CoC is constituted, thereby ensuring compliance with the legal provisions. The appeal was not dismissed but allowed the Appellant to present the settlement proposal following the proper procedure.
Headnote
A) Insolvency Law - Withdrawal of CIRP - Procedure for Withdrawal - Insolvency and Bankruptcy Code, 2016, Section 12A - The Appellant sought to withdraw the CIRP proceedings after settling with the financial creditor, but the court held that withdrawal is not permitted without the constitution of the CoC as per the amended provisions of Section 12A. The court emphasized the need for fairness and the necessity to hear all creditors before approving withdrawal (Paras 11-13).
Issue of Consideration
Whether the Appellant could withdraw the Corporate Insolvency Resolution Process (CIRP) initiated against the Corporate Debtor without the constitution of the Committee of Creditors (CoC).
Final Decision
The court dismissed the application for withdrawal of the CIRP proceedings, emphasizing that the constitution of the Committee of Creditors is necessary before any withdrawal can be approved as per the amended provisions of Section 12A of the IBC.
Law Points
- Insolvency resolution process
- Corporate Debtor
- Section 7 of IBC
- Withdrawal of application
- Committee of Creditors
- Inherent powers of the court
