Withdrawn of Application- After Admission - NCLT - INSOLVENCY CODE


Withdrawn of Application- After Admission - NCLT - INSOLVENCY CODE
IBC is not a Recovery Law, it is Revival Law

SHORT SUMMARY

In this Flash editorial, the author begins by referring the provisions of rules 8 of IBC in relation to Withdrawal of Application – Once Admitted. Since the code come into effect from December 2016 all the applicants/ creditors have begun to file applications under the Code. Since date approx. 80 applications has been admitted. In some situations after admission of application Corporate Debtor settled the claim of Creditor. Then the question arises whether Petition under IBC 2016 can be withdrawn by mutual settlement. The main thrust of the article, however, is upon the “Whether an application can be withdrawn after mutual settlement between the Corporate Debtor and Creditor.

In this editorial author discuss the decisions of Hon’ble National Company Law Tribunal (NCLT), Kolkata Bench in case of Parker Hannifin India Private Limited v/s Prowess International Private Limited. This article contains provisions of withdrawal of application under IBC, key findings of the case.

This is article no. 239 of the series of editorials written by the author on corporate laws {Including Companies Act, 2013, SEBI, RBI Regulations, IBC, LLP Act, 2008 etc.}.

Case Law Detail:
Case Name
Parker Hannifin India Private Limited v/s Prowess International Private Limited
Bench Name
The National Company Law Tribunal (NCLT), Kolkata Bench
Link:
Appeal No.
I.A. No. 226/KB/2017, C.P.(IB) No. 150/KB/2017
Date of Order
29th May, 2017
Order Passed by
Hon'ble Member(J), Sh. VijaiPratap Singh,
Hon'ble Member(T), Sh. S. Vijayaraghavan
Section
9

Factual Background:
I.            An application was filed by Parker Hannifin India Private Limited against Prowess International Private Limited for initiating corporate insolvency resolution process under section 8 and 9 of the IBC. Vide its order dated 20 April 2017, the NCLT admitted the aforesaid petition and inter alia appointed an interim insolvency resolution professional, declared moratorium, directed for public announcement.

II.            In compliance with said order, A public announcement was issued and progress report was submitted by the interim insolvency resolution professional.

III.            After that both the parties agree for the amicable settlement. An application was then filed with the NCLT by Corporate Debtor for withdrawal of the petition based on a settlement arrived at between Parker Hannifin India Private Limited and Prowess International Private Limited.

Provisions relating to Withdrawal Of Application under the IBC, 2016:
as per Rule 44 sub rule 2 of NCLT Rules, 2016“(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.”

as per Section 9(5)(ii)(b) “The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order reject the application and communicate such decision to the operational creditor and the corporate debtor, if - there has been repayment of the unpaid operational debt”

 Findings of the NCLT Bench: 
Based on the above factual background, the NCLT dismissed the application for withdrawal of the petition, and held as follows:

v As per Para 6:
           i.      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.

         ii.      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 claim before IRP

       iii.      Petition cannot be dismissed on the basis of compromise between the operational creditor and corporate debtor.

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

v Operational Creditor and Operational Debtor alone have no right to withdraw the Petition after admission.


Conclusion:

Based on the above judgment NCLT has cleared that once a petition is admitted by the NCLT under IBC, both the parties have no right to withdraw the petition. As it can say IBC is not a Recovery Law it is Revival Law.

(Author – CS DiveshGoyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.
 



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