India: Withdrawal Of The Resolution Process: Taking A Step Back

The law of insolvency and bankruptcy is in its evolving phase, learning from the past slipups and longing for its improvement for the future. The law of withdrawal of the process initiated under the Insolvency & Bankruptcy Code 2016 ("Code") is also spreading its wings along with the overall expansion of the Code.

Recently, the legislature had inserted Section 12A and also added a Regulation 30A to the Code providing for such withdrawal. The said provisions deal with the situation of a settlement between the creditors and the promoters of the Corporate Debtor, in respect of which the insolvency process has been initiated, and provide that the application for withdrawal may be filed only before the invitation of expression of interest.

The question arises here is as to what happens to the proceedings initiated under Code where the two sides have arrived at a settlement after an issue of the invitation of Expression of Interest? This controversy has been settled by the Hon'ble Supreme Court recently in a matter namely Brilliant Alloys Private Limited vs. Mr. S. Rajagopal & Ors. (SLP Civil No. 31557 of 2018). The Hon'ble Supreme Court has held that the Regulation 30A has to be read along with the main provision of Section 12A which contains no such stipulation and hence such stipulation can only be construed as directory depending upon the facts of each case.

An overview of withdrawal of Corporate Insolvency Resolution Process (CIRP) Proceedings:

Withdrawal of Application before admission has been provided under Rule 8 of the Insolvency and Bankruptcy (Adjudicating Authority) Rules, 2016 ("Relevant Rules"), however, there have been cases where the parties have reached settlement post the admission of CIRP application. The insolvency and Bankruptcy Code 2016 had no provisions dealing with the withdrawal of CIRP Application post admission.

The aforesaid controversy reached the Hon'ble Supreme Court in the matter of Lokhandwala Kataria Construction Private Limited v. Nisus Finance and Investment Manager LLP (Civil Appeal No. 9279 of 2017) wherein an interesting question was raised before the Hon'ble Supreme Court that whether, in view of Rule 8 of the I&B (Application to Adjudicating Authority) Rules, 2016, the National Company Law Appellate Tribunal could utilize the inherent power recognized by Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 to allow a compromise before it by the parties after admission of the matter. The Apex court has utilized its power provided in Article 142 of Indian Constitution and allowed the settlement between the parties by taking consent terms dated 28.06.2017 and 12.07.2017 on record. The said observation was followed in other decision such as Mothers Pride Dairy India Private Limited v. Portrait Advertising and Marketing Private Limited and in Uttara Foods and Feeds Private Limited v. Mona Pharmachem (Civil Appeal No. 18520/2017), wherein the settlement was allowed and said applications were disposed by utilizing its inherent power under Article 142 of the Indian Constitution.

The Insolvency Law Committee ("Committee") was constituted on November 16, 2017, to make the recommendation to the Government in relation to the issues arising from the implementation of IBC ("Report"). The Committee unanimously agreed that the relevant rules may be amended to provide for withdrawal post admission if the COC approves of such action by a voting share of ninety per cent.

Pursuant to the aforesaid recommendation of Committee, an ordinance was promulgated on June 6, 2018 and the hindrance in a withdrawal of application after the acceptance by the Adjudicating Authority has been cured by inserting Section 12A to IBC and to complement the change in the Code a Regulation 30A was inserted w.e.f. 04-07-2018 wherein it was provided that withdrawal of an Application admitted under Sections 7, 9 or 10 of the Code by the Hon'ble Adjudicating Authority can be filed before the issue of invitation for expression of interest under Regulation 36A.

Recently a controversy has arisen in a matter namely Mr. Vimal Chandrunwal Vs. Brilliant Alloys Private Limited in MA/536/2018 in CP/582/IB/CB/2017 wherein the settlement of all the claims was entered into, after publication of Expression of Interest. The Hon'ble NCLT, Division Bench Chennai was of the opinion that the Tribunal cannot pass an order under Section 60(5) of the Code ignoring the conditional clause in the Regulation 30A of IRPCP Regulations to submit Applications u/s12A of the Code before issue of invitation for expression of Interest, hence the application was dismissed.

Subsequent to the dismissal, a Special Leave Petition was filed before the Hon'ble Supreme court in a case titled Brilliant Alloys Private Limited vs. Mr. S. Rajagopal & Ors. (SLP Civil No. 31557 of 2018) wherein the Hon'ble Supreme Court held that the Regulation 30A which states that withdrawal cannot be permitted after issue of invitation for expression of interest, has to be read along with the main provision of Section 12A which contains no such stipulation and hence such stipulation can only be construed as directory depending upon the facts of each case.

The judgment in Brilliant Alloys is clear in its applicability, however, it raises certain questions as to the applicability of Regulation 30A on the other cases of withdrawal. It would, therefore, be interesting to observe as to how the Hon'ble Supreme Court would interpret the law of withdrawal of the corporate insolvency resolution process in the upcoming days.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions