In a notable order passed recently, the Supreme Court permitted the withdrawal of Corporate Insolvency Resolution Process(CIRP) even after the Resolution Professional issued invitation for expression of interest from resolution applicants to submit resolution plans under Regulation 36A of CIRP Regulations 2016.
As per Regulation 30A, withdrawal of insolvency application has to be sought before the issue of invitation for expression of interest under Regulation 36A.
This case Brilliant Alloys Pvt Ltd v S Rajagopal, arose out of proceedings in NCLT Chennai bench. In the CIRP before Chennai bench, the corporate debtor, financial creditor and the operational creditor entered into a settlement. Based on the settlement, the corporate debtor submitted application for withdrawal.
Relying on Regulation 30A, the bench refused to permit withdrawal of application on the ground that Resolution Professional has already issued invitation of expression of interest.
In appeal, the SC bench of Justices R F Nariman and Navin Sinha held that Regulation 30A has to be read subject to Section 12A of IBC, which does not impose the condition that withdrawal application has to be filed before the invitation of expression of interest. The bench said :
According to us, this Regulation has to be read along with the main provision Section 12A which contains no such stipulation. Accordingly, this stipulation can only be construed as directory depending on the facts of each case.
Hence, the Court allowed the settlement between the parties, and annulled the proceedings.
Last week, NCLT Mumbai bench permitted a corporate debtor to withdraw CIRP at the stage when resolution plan was pending approval of the NCLT, after acceptance by CoC. The Mumbai bench took into account the offer of one-time settlement made by the corporate debtor to the financial creditor, which was more economical than the resolution plan.