NCLAT Chennai: Not Open To NCLT To Reject Withdrawl Application U/S 12A, Where 90% Voting Share Of CoC Exists
Sachika Vij
6 Oct 2023 8:00 AM GMT
The National Company Law Appellate Tribunal (‘NCLAT’), Chennai Bench comprising of Justice M. Venugopal (Judicial Member) and Shreesha Merla (Technical Member) dismissed the appeal filed in Mayuras Industrial Services vs. S R Shriraam Shekher & Anr. The appeal was filed by Mayuras Industrial Services, an Operational Creditor (‘Appellant’) against S R Shriraam Shekher,...
The National Company Law Appellate Tribunal (‘NCLAT’), Chennai Bench comprising of Justice M. Venugopal (Judicial Member) and Shreesha Merla (Technical Member) dismissed the appeal filed in Mayuras Industrial Services vs. S R Shriraam Shekher & Anr. The appeal was filed by Mayuras Industrial Services, an Operational Creditor (‘Appellant’) against S R Shriraam Shekher, Resolution Professional (‘RP’) of Prodeb Brewery Technology Belgium Pvt. Ltd. (‘Corporate Debtor’) challenging the NCLT order dated 02.11.2022.
The Tribunal held that the jurisdiction of NCLT under 12A of the Code is very much limited. Further, where the CoC had approved more than 90% of the voting share, it is not open to the NCLT in law to reject the application.
Background Facts:
The RP had filed an application seeking an order of withdrawal of the Corporate Insolvency Resolution Process (‘CIRP’) resting upon the Resolution passed by the Committee of Creditors (CoC) for accepting the offer of settlement, submitted by the Corporate Debtor and for withdrawal of CIRP as per Section 12A of the Insolvency and Bankruptcy Code, 2016 (‘Code’).
The Appellant filed the appeal against the NCLT Division Bench II order dated 02.11.2022. which had allowed the withdrawal of the CIRP under Section 12A of the Code.
The Appellant submitted that without receipt of any consent viz. Form –FA from the Appellant, who initiated CIRP, the RP should not have passed a resolution for withdrawal of the CIRP. The Principles of Natural Justice were not adhered to by the NCLT and without furnishing any detailed recording of the objections, projected by the Appellant, the said order came to be passed in a mechanical manner.
NCLAT Verdict:
The NCLAT dismissed the appeal and held that the jurisdiction of NCLT under 12A of the Code is very much limited which reads as follows.
Section 12-A: Withdrawal of application admitted under Section 7, 9, or 10.—
The Adjudicating Authority may allow the withdrawal of an application admitted under Section 7 or Section 9 or Section 10, on an application made by the applicant with the approval of ninety percent. voting share of the committee of creditors, in such manner as may be specified.
The Tribunal observed that where the CoC had approved more than 90% of the voting share, it is not open to the NCLT in law to reject the application. It pointed out that one cannot remain in the oblivion of the fact that the ‘mandate of the Code’ is for the Resolution and Revival of companies. In the instant case, the Appellant is an aggrieved person as they want more money than what is owed to them by the Corporate Debtor.
It placed reliance on K.N. Rajakumar vs. V. Nagarajan & Ors., wherein the Supreme Court had observed that a Company Director is entitled to seek withdrawal of an application initiating CIRP, if, is able to establish that he would be settling the dues of Creditors.
Further, in Vallal RCK vs. Siva Industries and Holdings, the Apex Court observed that Tribunals should not interfere with the commercial wisdom of the CoC, agreeing to the settlement Plan submitted by the Corporate Debtor, once it got the approval of the CoC with more than 90% voting in its favor.
In conclusion, the NCLAT affirmed the order of the NCLT Division Bench II allowing the application to be free from any legal infirmities.
Case Title: Mayuras Industrial Services vs. S R Shriraam Shekher & Anr
Case No.: Company Appeal (AT) (CH) (Ins) No. 07/2023
Counsel for Appellant: Mr. A.G. Sathyanarayana, Advocate
Counsel for Respondents: Mr. Vishranth, Advocate, and Mr. Gautam S. Raman, Advocate
