Cfm Asset Reconstruction Pvt Ltd vs Vishram Narayan Panchpor Resolution ...

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI COMPANY APPEAL (AT)(INSOLVENCY) NO.05/2021 (Arising out of Judgement/Order dated 16.12.2020 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai in IA No.1198/2020 in CP(IB)No.3049/MB/C.IV/2019) In the matter of: CFM Asset Reconstruction Pvt Ltd, Through its Asstt. Vice President, Mr. Anil Mittal A3, 5th Floor, Safal Profitaire, Near Prahlad Nagar Garden, Ahmedabad 380015

Also at 1st Floor, Wakefield House, Ballard Estate Mumbai 400038

Also at Branch Office 101-104, Mohta Building, Bhikaji Cama Place, New Delhi-11006 Appellant

Vs

Mr. Vishram Narayan Panchpor RP B 506, 5th Floor, Building No.83, Chamber Sindhoo CHS, Ti8lak Nagar, Chambur, Mumbai 400089

2. Committee of Creditors, Through its RP B 506, 5th Floor, Building No.83, Chamber Sindhoo CHS, Ti8lak Nagar, Chambur, Mumbai 400089

3. Oaisis Alcohol Ltd. Through RP B 506, 5th Floor, Building No.83,

Company Appeal (AT)(Ins) No.05/2021 2

Chamber Sindhoo CHS, Ti8lak Nagar, Chambur, Mumbai 400089 Respondent Present: Mr Arun Kathpalia, Sr. Advocate with Ms Ruchi Kohli, Ms Srishti Mishra and Ms Devina Bhandari, Advocates for Appellant. Mr Dhaval S. Deshpande and Mr Yash Jariwala, Advocates for R1 and R3. Mr. Amir Ariswala, Advocate for R2.

JUDGEMENT

VIRTUAL MODE JUSTICE M. VENUGOPAL PREFACE The 'Appellant' has filed the instant 'appeal' before this 'Tribunal', being

dis-satisfied with the order dated 16.12.2020 in IA No.1198/2020 in CP(IB)

No.3049/MB/C.IV//2019 (Filed by the Appellant/Applicant/Assignee under

Section 60(5) of I&B code, 2016) passed by the 'Adjudicating Authority'

(National Company Law Tribunal, Mumbai Bench IV Mumbai).

2. The 'Adjudicating Authority' (National Company Law Tribunal, Mumbai

Bench IV, Mumbai) while passing the impugned order dated 16.12.2020 in IA

No.1198/2020 in CP(IB) No.3049/MB/C.IV//2019 under the heading

'Findings and Conclusion' at paragraph 10 has observed the following:-

"We have gone through the documents submitted by the parties and

heard the arguments of Learned Counsel of applicant assignee of

financial creditor, Resolution Professional, COC and Member of

suspended Board of Directors. The Bench observed that the Int3erim

Resolution Professional has act4ed fair and has taken actions as per

requirements of the Code judiciously. It is a settled law by the Hon'ble

Company Appeal (AT)(Ins) No.05/2021 3

Supreme Court through various judicial pronouncements that Corporate

Insolvency Resolution Proceedings are proceedings in rem. On the issue

as to which event is crucial for withdrawal of CIRP, as per the law laid

down by Hon'ble NCLAT in K.C. Sanjeev Vs Solar Offset Printer Pvt Ltd

(Company Appeal (AT)(Insolvency) No.1427/2019) dated 28.02.2020, the

relevant date for considering withdrawal of CIRP is the date of

application and nothing else. As a matter of fact, in this case no

application for withdrawal of CIRP has ever been filed by the Interim

Resolution Professional before the Adjudicating Authority, rather this IA

has been filed by the assignee of financial creditor. As is evident from

the records, since COC has already been constituted in this case, any

application for withdrawal of CIRP has to comply with regulation 30A(i)(b)

of CIRP regulations read with Section 12 A of IBC-2016."

and dismissed the Interlocutory Application resulting in the vacating of

'Stay' granted on the functioning of the 'Committee of Creditors'.

BACKGROUND FACTS

3. According to the Appellant, an 'Application' was filed (under Section 7

of IBC Code, 2016) against the Corporate Debtor (Oaisis Alcohol Ltd) by the

Janata Sahakari Bank Ltd/Original Financial Creditor/Assignor in CP(IB)

No.3049/MB/C.IV//2019 before the 'Adjudicating Authority' (National

Company Law Tribunal, Mumbai Bench) for initiation of CIRP and on

04.08.2020, the said petition was admitted against the Corporate Debtor,

thereby declaring the moratorium as per Section 14 of the I&B Code, 2016

besides appointing the 1st Respondent as an 'Interim Resolution Professional'.

Company Appeal (AT)(Ins) No.05/2021 4

4. Furthermore, the Original Financial Creditor had executed an

Assignment Agreement to and in favour of the Appellant on 21.8.2020,

thereby unconditionally and irrevocably assigned the loan together with

underlying security interest with respect to the 'Corporate Debtor', in favour

of the Appellant. Indeed, the Original Financial Creditor on the very same day

of the execution of the execution of the Assignment Agreement on 21.8.2020

had intimated the Interim Resolution Professional about the assignment of

debt to the Appellant and furnished the 'Assignee' details, together with copy

of the 'Assignment Deed'.

5. On 25.8.2020, the Appellant, as per Regulation 28(1) of the CIRP

Regulations, 2016 had sent an email to the 1st Respondent/RP intimating him

about the assignment of loan. Apart from this the Appellant had apprised the

1st Respondent/Resolution Professional that since they were in the process of

restructuring of the debt of the Corporate Debtor, they would not wish to

continue with the CIRP of the Corporate Debtor and requested the 1st

Respondent for the details of 'CIRP Cost', with a view to enable it, to file Forma

'FA' for 'withdrawal of the petition'. The 1st Respondent had sent a reply to

the email on the same day stating that he would respond after considering

the position of law.

6. The 1st Respondent had replied through email dated 26.8.2020 to the

intimation of the 'Appellant' given on 25.8.2020. The 1st Respondent/RP had

insisted that the 'Appellant' shall file a substitution application so as to enable

him to act upon the request of the Appellant, although he was intimated by

Company Appeal (AT)(Ins) No.05/2021 5

the 'Assignor' and 'Assignee' about the 'Assignment of Loan'. However, the

1st Respondent had refrained to take action as required under Law.

7. It is the stand of the Appellant that through an email dated 26.8.2020

it provided a copy of the 'assignment deed' dated 21.8.2020 which was earlier

provided by the 'Financial Creditor' to the 1st Respondent. Besides this, the

Appellant had attached a copy of Form 'A', together with a Demand Draft of

Rs.3 lakhs to the Resolution Professional/1st Respondent requesting him to

withdrawn the application. Further, the Appellant had delivered the aforesaid

Form 'A' together with Demand Draft of Rs.3/- lakh to the 1st Respondent on

27.8.2020, since 'Committee of Creditors' was not constituted till date and

that till 28.8.2020 the 1st Respondent had time to constitute the Committee

of Creditors, in terms of the CIRP Regulations.

8. It is the version of the Appellant that the 1st Respondent/RP has a

bounden duty to present the withdrawal application before the 'Adjudicating

Authority; and that he had deliberately neglected to do the same and instead

constituted the Committee of Creditors on 27.08.2020. The Appellant was

informed about the constitution of 'Committee of Creditors', as per letter dated

27.08.2020 of the 1st Respondent.

9. The grievance of the Appellant is that the 1st Respondent had assumed

the role of an 'Adjudicating Authority' applied his judicial mind and dismissed

it prayer to place the information available with him before the 'Adjudicating

Authority', as regards the withdrawal.

Company Appeal (AT)(Ins) No.05/2021 6

APPELLANT'S CONTENTIONS

10. According to the Learned Senior Counsel for the Appellant, in the

instant 'Appeal' the 'Appellant' is praying for a direction to be passed to the

1st Respondent/Resolution Professional to act in accordance with the

Regulation 30(A)(1)(a) and 30(A)(3) of the Insolvency and Bankruptcy Board of

India (Insolvency Resolution Process for Corporate Persons) Regulations,

2016 (CIRP Regulation, 2016) and to set aside the illegal constitution of

'Committee of Creditors' by him.

11. The Learned Counsel for the Appellant submits that in the light of the

Regulation 28 of CIRP Regulations, 2016 dealing with the 'transfer of debt' to

a Creditor, the 'Appellant/Assignee' was required only to intimate only to the

Interim Resolution Professional regarding such assignment and in the

absence of a provision mandating a 'substitution application' to be filed, the

Resolution Professional should not have set out an arbitrary pre-condition

for the purpose of furnishing Form 'FA' before the 'Adjudicating Authority'.

12. The Learned Counsel for the Appellant submits that the 'Appellant' had

filed a 'withdrawal application' under Regulation 30 A(1)(a) of the CIRP

Regulations, 2016 with the then Interim Resolution Professional, for no fault

committed by it, is being forced (pursuant to the impugned order dated

16.12.2020) to file the an application under Regulation 30A(1)(b), because of

the inaction of the 1st Respondent who failed to submit the same before the

'Adjudicating Authority'.

13. It is the contention of the Appellant that the 1st Respondent cannot

reject the Appellant's withdrawal application under Regulation 30A(1)(a) of the

Company Appeal (AT)(Ins) No.05/2021 7

CIRP Regulations, 2016 based on the single ground that the 'Appellant' was

not substituted in the main application as 'Financial Creditor' in place of

'Janatha Sahakari Bank Ltd'.

14. The Learned Counsel for the Appellant contends that the 'Adjudicating

Authority' had passed the 'impugned order' of dismissing the Interlocutory

Application resting on the reason that no application for 'withdrawal of CIRP'

was ever filed by the 'Interim Resolution Professional' before it. In this regard,

it is the plea of the Appellant that the 'Adjudicating Authority' had to take into

account the fact that the 'Appellant' had filed the 'withdrawal Application' vide

Form 'A', which the then Interim Resolution Professional was bound to file

before the 'Adjudicating Authority'.

15 The Learned Counsel for the Appellant adverts to the fact that the 1st

Respondent by transgressing his powers had achieved the role of the

'Adjudicating Authority' and rejected the Form 'A' at the threshold on account

of the same being not 'maintainable'. The Learned Counsel points out that

the instant case is a classic example where the 1st Respondent had violated

the mandate of law and at every stage acted contrary to the provisions of the

Code, 2016 and the CIRP Regulations.

16. The Learned Counsel for the Appellant contends that the 'Adjudicating

Authority' in the impugned order came to the wrong conclusion that the 1st

Respondent/Resolution Professional had acted fairly and took action as per

the requirements of the Code judiciously in spite of the fact that he has failed

to comply with the mandate of law.

Company Appeal (AT)(Ins) No.05/2021 8

17. The Learned Counsel submits that the Appellant subsequent to the

assignment of debt from Janatha Sahakari Bank Ltd on 25.8.2020 had

requested the RP to intimate the estimate of CIRP cost incurred, but no

explanation was furnished by the 1st Respondent for non-intimation of the

said cost. Continuing further the 1st Respondent/RP had not disclosed the

fact either to it or to the 'Adjudicating Authority' that the appellant's

predecessor had deposited a sum of Rs.3 lakh as CIRP cost in respect of

initiation of 'withdrawal' by the appellant for the reasons best known to him.

18. The Learned Counsel for the appellant comes out with an argument

that 'Assignment' places the 'Assignee' in the same position as that of the

'Assignor' and that the 1st Respondent/RP, knowing full well that 'JSBL' was

a 'secured financial creditor' of the 'Corporate Debtor' had failed to apply the

'Law of Assignment' and branded the Appellant as an 'unsecured creditor' at

the time of re-constitution of the 'Committee of Creditors' thereby acting on

his own whims and fancy.

19. The Learned Counsel for the Appellant proceeds to take a stance that

the 'Interim Resolution Professional' being a 'Facilitator' of the 'Rsolution' has

only administrative power and his duties under I&B Code 2016 and its

Regulation are restricted to an extent of collating the documents and/or

applications and later to submit them before the 'Adjudicating Authority' or

the 'Committee of Creditors'.

20. The Learned Counsel for the Appellant submits that the 1st

Respondent/RP cannot conduct itself to scuttle a settlement and that

Regulation 13(1) of Insolvency and Bankruptcy Board of India (Insolvency

Company Appeal (AT)(Ins) No.05/2021 9

Resolution Process for Corporate Persons) Regulations 2016 under the

'Verification of Claims' enjoins that the Interim Resolution Professional or the

RP to verify every claim on the insolvency commence date, within 7 days from

the last date of receipt of claims etc.

21. The Learned Counsel for the Appellant refers to Regulation 17(1) of the

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for

Corporate Persons) Regulations, 2016 under the caption 'Constitution of

Committee' whereby and whereunder the Interim Resolution Professional

shall file a Report certifying the constitution of committee to the 'Adjudicating

Authority' within two days of the verification of claims received under sub-

regulation (1) of Regulation 12 etc.

22. The Learned Counsel for the Appellant contends that with the 1st

Respondent/RP the assignment deed was received on 21.8.2020 and further

that everything was with him as on that date. The Learned Counsel for the

Appellant refers to Regulation 2(1) (a) of the Insolvency and Bankruptcy Board

of India (Insolvency Resolution Process for Corporate Persons) Regulation

2016 which provide the definition of 'Applicant', meaning the person(s) filing

an application under Section 7, 9 or 10 as the case may be.

23. The Learned Counsel for the Appellant adverts to Section 5(7) of the I&B

Code, 2016 which defines 'Financial Creditor' meaning any person to whom a

financial debt is owed and includes a person to whom such debt has been

legally assigned or transferred to. The Learned Counsel for the Appellant

refers to the reply of the 1st Respondent/RP dated 26.08.2020 wherein at para

3.1, 3.2 is observed as under:-

Company Appeal (AT)(Ins) No.05/2021 10

"3.1. regulation 28 of the Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for Corporate Persons) Regulations, 2016

("the said Regulations") provides as follows:

"28. Transfer of debt due to creditors.

(1) In the event a creditor assigns or transfers the debt due to such

creditor to any either person during the insolvency resolution

process period, both parties shall provide the interim resolution

professional or the resolution professional, as the case may be,

the terms of such assignment or transfer and the identity of the

assignee or transferee.

(2) The resolution professional shall notify each participant and the

Adjudicating Authority of any resultant change in the committee

within two days of such change"

3.2 As such, you are requested to kindly send me the details of the terms

of assignment or transfer of the debt by JSBL, to CFMARP and the

identity of the assignee or transferee at the earliest in compliance with

the provisions of the said Regulation 28(1). The said compliance is still

pending at your end."

24. The Learned Counsel for the Appellant contends that the Appellant is

the 'Assignee' and as such there is no question of filing a claim and further

that the 1st Respondent/RP in his reply dated 26.08.2020 at para 3.6 to 6 had

observed the following:-

Company Appeal (AT)(Ins) No.05/2021 11

"3.6. Your attention is invited to the definition of 'applicant' as contained

in Regulation 2(1)(a) of the said Regulations which define the term

'applicant' as under:

'applicant' means the person(s) filing an application under Section

7, 9 or 10, as the case may be."

(emphasis supplied).

4. Your attention is also invited to the contents of Form FA appended to

the Schedule of the said Regulations. A perusal of the said Form also

conclusively establishes that it is only the person who has filed an

application under section 7, 9 or 10 of the Code who/which has the

requisite authority in law to response the IRP/RP (as the case may be) to

file an Application for withdrawal as envisaged under Section 12A of the

Code read with Regulation 30A of the said Regulations.

5. The applicant in this case is JSBL, and it is open for JSBL to make the

request for withdrawal to me, if it so chooses. As on date, CFMARP is

neither the Applicant nor a Claimant of the Corporate Debtor, since

CFMARP has not chosen to file its proof of claim with me till date.

6. In case CFMARP wishes to proceed to withdraw, through me as the

IRP, the claim as an assignee/transferee of the original applicant bank,

then CFMARP will first have to take steps to implead itself in the place

and stead of JSBL and amend the cause title of

CP(IB)No.3049/MP.IV.2019 ('the said Petition') before the Hon'ble NCLT,

Mumbai so that CFMARP becomes the Applicant in place of JSBL. You

Company Appeal (AT)(Ins) No.05/2021 12

may do the needful if you are so advised and thereafter make the said

request to me."

25. The Learned Counsel for the Appellant refers to Form 'FA' filed by the

applicant dated 26.08.2020 (Application for withdrawal of Corporate

Insolvency Resolution Process) wherein at para 1 and 2 it is observed as

under:

"1. The Janatha Sahakari Bank Limited had filed an application bearing

CP(IB)No.3049/MB.IV/2019 on 14th August, 2019 before the

Adjudicating Authority under Section 7 of the Insolvency and Bankruptcy

Code, 2016. The said application was admitted by the Adjudicating

Authority on 4th August, 2020 bearing CP(IB)No.3049/MB.IV/2019.

Pursuant, thereto the debt (viz. loan account together with underlying

security interest) and all right title and interest with respect to the

Corporate Debtor has been assigned by The Janata Sahakari Bank

Limited to CFM Asset Reconstruction Private Ltd vide Deed of Assignment

dated 21st August, 2020.

2. I, Pankaj Agnihotri, the Authorised representative of CFM Asset

Reconstruction Private Ltd (assignee of the Janata Sahakari Bank

Limited) hereby withdraw the application bearing

CP(IB)No.3049/MB.IV/2019 filed by my predecessor/The Assignor

before the Adjudicating Authority under Section 7 of the Insolvency and

Bankruptcy Code, 2016."

26. As a matter of fact the reply dated 27.8.2020 of 1st Respondent/RP

addressed to the President of Appellant/applicant at para 4.3 reads as under:

Company Appeal (AT)(Ins) No.05/2021 13

"Pursuant to the provisions of the Code and the said Regulations, by

issuing the Public Announcement, claims with proof were invited from the

Creditors of the Corporate Debtor. The last date for submission of claims

was 19 August, 2020 and the said claims were required to be verified

within 7 (seven) days i.e. by 25th August, 2020."

The Learned Counsel for the Appellant refers to the Order of this Tribunal in

Comp. App. (AT)(Ins) No.259/2019 dated 7.8.2019 (Three Members Bench) in

the matter of Sukhbeer Singh Vs DC Agarwal (RP) whereby and whereunder

at para 2, it is observed as follows:

"2. Now it is stated that the proposal given by the Appellant/ Promoters

has not been placed before the 'Committee of Creditors' by the 'Resolution

Professional' on technical ground that the Promoters cannot file

application under Section 12A of the Insolvency and Bankruptcy Code,

2016 (for short 'I&B Code'). We reject such objection, if any, raised by the

'Resolution Professional'. It is the Promoters, who can settle the matter

with all the 'Financial Creditors', 'Operational Creditors' including the

Allottees and for that they may give their proposal and the 'Resolution

Professional' is bound to place it before the 'Committee of Creditors',

which is supposed to consider such application in the light of Section 12-

A and the order of this Appellate Tribunal dated 16th July, 2019 as

quoted above. The Allottees (Home Buyers) are also Members of the

'Committee of Creditors', therefore, while calling meeting of the

'Committee of Creditors', they should also be called for voting in

accordance with the existing provisions of law. In that view of the matter,

Company Appeal (AT)(Ins) No.05/2021 14

we direct the 'Resolution Professional' to place the proposal of Appellant/

Promoters before the 'Committee of Creditors'. If necessary, the date of

meeting of the 'Committee of Creditors' be fixed in the manner as

prescribed under the Regulations and information be given to the

'Financial Creditors' including the allottees to take part."

On behalf of the Appellant a reference is made to the decision of the

Hon'ble Supreme Court of India in the matter of Swiss ribbons Pvt Ltd V Union

of India and Ors reported in (2019) 4 SCC 17 wherein it is observed that the

Resolution Professional has only 'Administrative powers' and not an

Adjudicatory powers.

27. The Learned Counsel for the Appellant refers to Judgement of this

Tribunal in Comp App (AT)(Ins) No.105/2020 in the matter of Gouri Pd

Goenka Vs Surender Kumar Agarwal wherein at para 8 it is observed as

under:-

"8. Taking into consideration the fact that the Appellant has already

settled the matter with the 2nd Respondent - ('M/s. Tirupati Timber &

Packaging Limited' - 'Operational Creditor') much prior to the constitution

of the 'Committee of Creditors' and two demand drafts have also been

handed over on 9th January, 2020 and the 'Interim Resolution

Professional' also accepted that the 'Committee of Creditors' was not

constituted by that date and the Application under Rule 11 of the NCLT

Rules, 2016 has been moved, we hold that the Adjudicating Authority

without disposing of the Application filed under Rule 11 of the NCLT

Rules, 2016 has no jurisdiction to defer the matter and direct the 'Interim

Company Appeal (AT)(Ins) No.05/2021 15

Resolution Professional' to constitute the 'Committee of Creditors' to

render Application filed under Rule 11 as infructuous. If the Adjudicating

Authority (National Company Law Tribunal) is of the view that the

Application under Rule 11 is fit to be rejected and only after rejecting the

same, it could have directed the 'Interim Resolution Professional' to

constitute the 'Committee of Creditors'."

1ST AND 3RD RESPONDENTS' CONTENTIONS

28. The Learned Counsel for the 1st and 3rd Respondent appearing for the

Resolution Professional submits that the Appellant on 26.08.2020 had

addressed a letter to the 1st Respondent stating that they are in the process

of filing necessary application before the National Company Law Tribunal,

Mumbai Bench for getting it substituted in place of the "Assignor' in the said

order dated 4.8.2020 in CP (IB) No.3049/MB.IV/2019 and in any event as per

Regulation 28, it was emphasised both the 'assignor' and 'assignee' are

required to provide it, the terms of the assignment or transfer and the identity

of the assignee or transferee which was now provided to you and hence the

said Regulation 28 stood completed with by the Appellant.

29. The Learned Counsel for the Respondent 1 and 3 adverts to the letter

dated 25.08.2020 addressed to the 1st Respondent wherein it was mentioned

that 'JSBL' had assigned the financial assets of the subject borrower to CFM

ARC Pvt Ltd through Deed of Assignment dated 21.8.2020 etc. Moreover the

Appellant had requested 1st Respondent to provide upto date CIRP cost to

enable it to prepare the Form FA to be submitted to him for filing the

application regarding withdrawal of CIRP.

Company Appeal (AT)(Ins) No.05/2021 16

30. The Learned Counsel for the 1st and 3rd Respondent points out that in

IA No.1198/2020 in CP(IB)No.3049/MB.IV/2019 filed by the

Appellant/Applicant (CFM ARC Pvt Ltd) against the 1st Respondent and

another (filed under Section 60(5) and 12A of I&B Code, 2016 r/w Regulation

28 and 30A of the Insolvency Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016) in which the

following reliefs were sought:-

"(a) that this Hon'ble Tribunal be pleased to declare that the action of IRP

of not accepting Form FA from the Applicant was contrary to law and not

in accordance with the provisions of IBC as well as SARFAESI Act, 2002;

(b) that this Hon'ble Tribunal be pleased to direct the IRP to accept the

request of Applicant herein for withdrawal of the proceedings and take

steps in accordance with law;

©That this Hon'ble Tribunal be pleased to declare that constitution of

COC on 27th August, 2020 i.e. after receiving request ffor withdrawal of

the proceedings is contrary to law and therefore same may be quashed

and set aside;

(d) Pending the hearing and final disposal of this Application, this Hon'ble

Tribunal be pleased to restrain the IRP to conduct further meeting of the

COC;

(e) Pending the hearing and final disposal of this Application, this Hon'ble

Tribunal be pleased to direct the IRP to provide copies of the

documents/report submitted by IRP, intimating constitution of COC."

Company Appeal (AT)(Ins) No.05/2021 17

and that the 'Adjudicating Authority' on 16.12.2020 had passed the

impugned order by observing that in this case that no application for

withdrawal of CIRP was ever made by the Interim Resolution Professional

before the Adjudicating Authority, rather this IA was filed by the Assignee of

the Financial Creditor and that since COC was already constituted, any

application for withdrawal of CIRP was to comply with Regulation 30A(1)(b) of

CIRP Regulations r/w Section 12A of IBC, 2016.

31. The Learned Counsel for the 1st and 3rd Respondent submits that when

Form Fa was submitted, no 'COC' was constituted and during the process of

consideration of the same, the COC was formed (on 27.08.2020).

32. The Learned Counsel for 1st and 3rd Respondent brings to the notice of

this Tribunal that the present Appeal filed on earlier occasion, an application

for substitution and that the same Corporate Debtor went on CIRP and further

that the Regulation 30A does not talk of settlement. The Learned Counsel for

1st and 3rd Respondent proceeds to point out that 1st Respondent/Resolution

Professional in adherence to the time line, in accordance with the provisions

of the I&B Code, 2016 had filed a Report certifying the constitution of the

Committee of Creditors of the Corporate Debtor on 27.08.2020 before the

Adjudicating Authority and on 28.8.2020 the 1st Respondent was served with

a copy of the application filed by the Appellant, in which the 'Adjudicating

Authority' had passed the impugned order.

33. The Learned Counsel for the 1st Respondent and 3rd Respondent

submits that in the instant case, the Insolvency commence date was 4.8.2020

and that the public announcement was made on 6.8.2020 and that the last

Company Appeal (AT)(Ins) No.05/2021 18

date for filing of proof of claim was 19.8.2020 and last date for verifications of

claims including 19.8.2020 was stipulated as 25.8.2020.

34. It is represented on behalf of 1st and 3rd Respondent that the

'predecessor' of the 'Appellant' had not deposited Rs.3 lakhs towards initiation

of 'withdrawal' and that the Appellant's predecessor had deposited Rs.3 lakhs

as per order dated 4.8.2020 in respect of CIRP related expenses and that the

said amount was deposited on 18.08.2020 when the 'assignment deed' was

not even signed. This fact was brought to the notice of the COC during its 1st

Meeting, and the same was recorded in the Minutes of the said Meeting.

35. The Learned Counsel for the 1st and 3rd Respondent submits that when

the assignment took place on 21.8.2020, for four days after the assignment,

the Appellant had not taken any action and there was no explanation from

the Appellant as to why it has not submitted Form FA till 25.08.2020. Apart

from that the claim of the Appellant was received only on 7.9.2020 and was

admitted on 14.9.2020.

PLEAS OF 2ND RESPONDENT

36. The Learned Counsel for the 2nd Respondent submits that in IA

No.1198/2020 in CP(IB) No.3049/MB.IV/2019 there is no prayer for

withdrawal either under Section 12 A of I&B Code, Regulation 30A of CIRP

Regulations or Rule 11 of National Company Law Tribunal Rules 2016 and

that no relief in Ia No.1198/2020 was sought for admission to the Committee

of Creditors as a Member and as such the applicant has no desire to

participate in the CIRP of the Corporate Debtor.

Company Appeal (AT)(Ins) No.05/2021 19

37. The Learned Counsel for the 2nd Respondent comes out with a stand

that 'CIRP' once started, it is for the benefit of all the 'Creditors' and not just

the 'Original Petitioner' and in the instant case there is no settlement and

remaining Members of the COC do not wish for withdrawal under Section 12A

of the I&B Code.

38. The Learned Counsel for 2nd Respondent points out that the 'Corporate

Debtor' is a 'serial defaulter' who had defaulted in making payment to all its

'financial creditors'. The Learned Counsel for the 2nd Respondent refers to the

Judgment of this Tribunal in the matter of Jai Kishan Gupta V Green Edge

Buildtech LLP wherein it is held that the 'Adjudicating Authority' need not

allow withdrawal under Section 12A of I&B Code r/w Rule 11 of NCLT Rules,

2016 in every case but directs the proposal to be placed before the COC

whenever required.

39. It is the version of the Learned Counsel for 2nd Respondent that earlier

another Financial Creditor had project CP (IB)2619/I&BP/MB/2018 under

Section 7 of the I&B Code against the same Corporate Debtor which was

admitted on 06.03.2019 and the said petition was withdrawn on 01.04.2019

vide MA No.1144/2019 in CP(IB)3619/MB/2018 on the file of Adjudicating

Authority (National Company Law Tribunal, Mumbai)

WITHDRAWAL OF APPLICATION:

40. It transpires that Rule 8 of the Insolvency & Bankruptcy (Application to

Adjudicating Authority) Rules 2016 provide that the Adjudicating Authority

may permit withdrawal of the application made under Rules 4,6 or 7, as the

case may be, on a request made by the applicant before its admission.

Company Appeal (AT)(Ins) No.05/2021 20

Further, (Second Amendment) Act, 2018 to the I&B Code, 2016, the

'Adjudicating Authority' may allow 'withdrawal application' under Sections 7,

9 and 10 even after admission, of course, based on an application filed by the

Applicant with approval of 90% voting shares of the Committee of Creditors.

In the event of Applicant/Creditor seeks withdrawal of an application, as the

Corporate Debtor had paid its debt, then there is a possibility of another

creditor of the Corporate Debtor to file an application for initiation of CIRP

process and the Rule 8A of the Insolvency & Bankruptcy (Application to

Adjudicating Authority) Rules, 2016, the Adjudicating Authority may allow a

'withdrawal application' at the behest of one applicant.

INSOLVENCY & BANKRUPTCY BOARD OF INDIA (INSOLVENCY

RESOLUTION PROCESS FOR CORPORATE PERSONS) REGULATIONS

2016.

41. It is to be remembered that Regulation 30A of the Insolvency &

Bankruptcy Board of India (Insolvency Resolution Process for Corporate

Persons) Regulations, 2016 provides that an application for withdrawal

should be submitted to the Interim Resolution Profession or the Resolution

Professional, as the case may be in Form FA of the Schedule before issue of

invitation for 'Expression of Interest' under Regulation 36A. In fact, the said

application should be accompanied by a Bank Guarantee towards estimated

cost incurred for the purposes of clauses (c) and (d) of Regulation 31 till date

of application. The Committee of Creditors will consider the application

within 7 days of the receipt of the application and if approved the same, with

90% voting share, the Resolution Professional will submit application to the

Company Appeal (AT)(Ins) No.05/2021 21

Adjudicating Authority on behalf of the applicant, within 3 days of such

approval. Thereafter, the Adjudicating Authority, may by an order, approve

the application submitted before it.

ASSESSMENT

42. It comes to be known that an application under Section 7 of the

Insolvency and Bankruptcy Code, 2016 in CP(IB) No.3049/MB.IV/2019 was

filed by the Financial Creditor/Janatha Sahakari Bank Ltd seeking the

initiate CIRP against the Corporate Debtor/Oasis Alcohals Ltd and the

application was admitted on 04.08.2020. The 1st Respondent was appointed

as an 'Interim Resolution Professional' and the public announcement was

published by the 1st Respondent on 07.08.2020, within 3 days from the date

of his appointment. The last date for submission of claims was on

19.08.2020.

43. The Financial Creditor/JSBL had entered into an Assignment Deed

with the Appellant/CFM Assets Reconstruction Co Pvt Ltd on 21.08.2020 and

intimated the said fact to the 1st together with intention to withdraw their

claim through email on the same date. The Appellant on 25.08.2020 had

intimated 1st Respondent about the email and requested the 1st Respondent

to provide the CIRP cost to enable it to file withdrawal application in Form FA

under Regulation 30A(1)(a). The 1st Respondent had completed the task of

verification of claims on 25.08.2020 but the last date for verification was on

26.08.2020, since it is 7 days from the submission of claim as per Rule 13 of

CIRP Rules, 2016.

Company Appeal (AT)(Ins) No.05/2021 22

44. The grievance of the Appellant is that the 1st Respondent rushed CIRP

process despite having knowledge of the Assignment Deed through email

dated 21.08.2020 sent by the JSBL, (Financial Creditor/Assignor).

45. The 1st Respondent had replied on 26.08.2020 to the intimation

provided by the Appellant on 25.08.2020 requiring the Appellant to file a

substitution application but the Appellant, because of the fact that there is

no provision for substitution under the IBC 2016, in compliance to Rule 28 of

CIRP Rules, 2016, furnished Form FA, withdrawal application under

Regulation 30A(1)(a) of the CIRP Rules, 2016, a copy of the Assignment Deed

and a DD for Rs. 3 lakhs towards the CIRP cost to the 1st Respondent on the

same day.

46. According to the Appellant, when it delivered the aforesaid documents

on 27.08.2020 to the 1st Respondent, the 1st Respondent on 27.08.2020

through email had intimated the constitution of Committee of Creditors and

ordered to file substitution application and later withdrawal application under

Regulation 30A(1)(b) of CIRP Rules, 2016. The clear cut stand of the Appellant

is that the 1st Respondent by constituting the COC on 27.8.2020 had defeated

the endeavour of the Appellant seeking pre COC constitution withdrawal

under Regulation 30A(1)(a) of the CIRP Rules, since the last date for the

constitution of COC ought to have been 28.08.2020, in terms of Rule 17 of

CIRP Rules, 2016.

47. The other contention of the Appellant is that it was excluded from the

COC, if classified as unsecured creditor and further that Appellant alone

Company Appeal (AT)(Ins) No.05/2021 23

would have had 74% of voting rights and would have had majority in the

Committee of Creditors.

48. At this stage this tribunal worth recalls and recollects the order of the

Hon'ble Supreme Court of India dated in Brilliant Alloys Pvt Ltd V. Mr. S.

Rajagopal and Ors, Special Leave Petition (Civil) No.31557/2018, wherein it

is observed that Regulation 30A(1) is not mandatory but is directory for the

simple reason that on the facts of a given case, an application for withdrawal

may be allowed in exceptional cases even after issue of invitation for

Expression of Interest under Regulation 36A.

49. Further this Tribunal aptly points out the observations made by the

Hon'ble Supreme Court of India in the decision Swiss Ribbons Pvt Ltd and

Ors Vs Union of India (UOI) and Ors reported in MANU/SC/0079/2019

whereby and whereunder at paras 52 and 53 it is observed as under:-

"52. It is clear that once the Code gets triggered by admission of a

creditor's petition under Sections 7 to 9, the proceeding that is before the

Adjudicating Authority, being a collective proceeding, is a proceeding in

rem. Being a proceeding in rem, it is necessary that the body which is to

oversee the resolution process must be consulted before any individual

corporate debtor is allowed to settle its claim. A question arises as to

what is to happen before a committee of creditors is constituted (as per

the timelines that are specified, a committee of creditors can be appointed

at any time within 30 days from the date of appointment of the interim

resolution professional). We make it clear that at any stage where the

committee of creditors is not yet constituted, a party can approach the

Company Appeal (AT)(Ins) No.05/2021 24

NCLT directly, which Tribunal may, in exercise of its inherent powers

under Rule 11 of the NCLT Rules, 2016, allow or disallow an application

for withdrawal or settlement. This will be decided after hearing all the

concerned parties and considering all relevant factors on the facts of each

case.

53. The main thrust against the provision of Section 12A is the fact that

ninety per cent of the committee of creditors has to allow withdrawal.

This high threshold has been explained in the ILC Report as all financial

creditors have to put their heads together to allow such withdrawal as,

ordinarily, an omnibus settlement involving all creditors ought, ideally, to

be entered into. This explains why ninety per cent, which is substantially

all the financial creditors, have to grant their approval to an individual

withdrawal or settlement. In any case, the figure of ninety per cent, in

the absence of anything further to show that it is arbitrary, must pertain

to the domain of legislative policy, which has been explained by the

Report (supra). Also, it is clear, that under Section 60 of the Code, the

committee of creditors do not have the last word on the subject. If the

committee of creditors arbitrarily 102 rejects a just settlement and/or

withdrawal claim, the NCLT, and thereafter, the NCLAT can always set

aside such decision under Section 60 of the Code. For all these reasons,

we are of the view that Section 12A also passes constitutional muster.

50. Moreover, in the order dated 09.08.2018 of this 'Tribunal' in the matter

of 'V. Navaneetha Krishnan V. Central Bank of India, Coimbatore & Another'

Company Appeal (AT)(Ins) No.05/2021 25

in Company Appeal (AT)(Ins) No.288 & 289 of 2018, this Tribunal at para 5

had observed the following:-

"5. However, 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. Both the

appeals are dismissed with aforesaid observations."

51. The reality of the matter is that the Appellant, the Assignee of 'JSB',

standing in the shoes of 'JSBL', will become an 'Applicant' in so far as the

withdrawal is concerned as per Regulation 30A and 12A of the IBC, 2016. If

the Regulation 30A(1)(a) is pressed into service then it is incumbent on the

part of the Interim Resolution Professional/Resolution Professional to

constitute the 'Committee of Creditors'. Furthermore, in the instant case it

can safely and securely be said that 1st Respondent/Resolution Professional

by constituting 'Committee of Creditors' on 27.08.2020 as thwarted an

endeavour of the Appellant in seeking a pre Committee of Creditors

constitution withdrawal as per Regulation 30A(1)(a). Suffice it for this

Tribunal to make a pertinent mention as the 1st Respondent/Resolution

Professional, by constituting the Committee of Creditors after the submission

Company Appeal (AT)(Ins) No.05/2021 26

of Form A, the 1st Respondent had acted not in tune with the intention of the

Amendment dated 25.07.2019 brought in the CIRP Regulations, 2016.

52 In view of the detailed upshot and this 'Tribunal' keeping in mind a

pivotal fact that the Appellant/Assignee of 'JSBL', is an 'Applicant' for the

purpose of 'CIRP Regulations' and also considering the fact that the 'person'

to whom debt has been legally assigned or transferred is also a 'Financial

Creditor' as per Section 5(7) of the I&B Code, 2016, there is no impediment in

Law for it to reap the benefit of amendment to Regulation 30A(1) of CIRP

Regulations and further that, based on the facts and circumstances of the

instant case, comes to consequent conclusion that the contrary views arrived

at by the Adjudicating Authority in the impugned order in IA No.1198/2020

in CP(IB) No.3049/MB.IV/2019 are clearly unsustainable in the eye of law.

Viewed in that perspective this Tribunal interferes with the impugned order

passed by the Adjudicating Authority (National Company Law Tribunal,

Mumbai Bench, Mumbai) and set aside the same. Resultantly the Appeal

succeeds.

CONCLUSION

53. In fine the Company Appeal (AT)(Ins) No.05/2021 is allowed. No costs.

54. The impugned order in IA No.1198/2020 in CP(IB)

No.3049/MB.IV/2019 passed by the Adjudicating Authority (National

Company Law Tribunal, Mumbai Bench, Mumbai) is hereby set aside. No

costs. The Adjudicating Authority (National Company Law Tribunal, Mumbai

Bench IV, Mumbai) is directed to restore the IA No. 1198/2020 in CP (IB)

No.3049/MB.IV/2019 to its file and to pass orders afresh on merits, of course,

Company Appeal (AT)(Ins) No.05/2021 27

providing due opportunity to respective sides to raise all factual pleas, in

accordance with law as expeditiously as possible.

55. All the pending IAs in the instant Appeal are closed. Interim order

granted earlier by this Tribunal in the instant Appeal on 11.01.2021, and

extended from time to time shall stand vacated.

(Justice M. Venugopal) Member (Judicial)

(Mr. V.P. Singh) Member (Technical)

(Dr. Alok Srivastava) Member (Technical)

Dated:30.11.2021

bm

Company Appeal (AT)(Ins) No.05/2021