Every attempt has to be first made to revive the concern and make it a going concern, liquidation being the last resort, the Supreme Court observed while upholding NCLT order permitting withdrawal of Corporate Insolvency Resolution Process.
The bench of Justices L Nageswara Rao, BR Gavai and BV Nagarathna observed that an adjudicating authority under Insolvency and Bankruptcy Code can allow withdrawal of CIRP proceedings on an application made by the applicant with the approval of 90% voting share of the Committee of Creditors.
In this case, an ex employee of M/s Aruna Hotels Ltd. (Corporate Debtor') had challenged the resolution passed in the 8th Committee of Creditors permitting withdrawal of Corporate Insolvency Resolution Process in respect of the Corporate Debtor; and the order passed by the Adjudicating Authority/NCLT thereby closing the proceedings.
Though the appellant raised various contentions, the court observed that the same have become academic. It is a settled principle of law that the Court should not go into the academic issues and seek to interpret the provisions of law when it is not necessary for deciding the issues in the appeal(s)., the court said. In this regard, the court referred to judgments in Vidya Charan Shukla v. Purshottam Lal Kaushik and K.I. Shephard and others v. Union of India.
Referring to Section 12A of the IBC, the bench observed:
It could thus be seen that the Adjudicating Authority is entitled to withdraw the application admitted under Section 7 or Section 9 or Section 10, on an application made by the applicant with the approval of 90% voting share of the CoC.. It is not in dispute that the resolution of CoC approving withdrawal of CIRP proceedings was supported by the requisite voting majority. [Para 12-14]
The court noted that the Corporate Debtor has already settled the issue with the erstwhile financial creditors, who have resolved to withdraw the CIRP proceedings and by virtue of withdrawal of CIRP proceedings, the Corporate Debtor now is a going concern. Referring to Ghanashyam Mishra and Sons Private Limitedv. Edelweiss Asset Reconstruction Company Limited
16. It could thus be seen that one of the principal objects of the IBC is providing for revival of the Corporate Debtor and to make it a going concern. Every attempt has to be first made to revive the concern and make it a going concern, liquidation being the last resort.
Case: K.N. Rajakumar Vs. V. Nagarajan
Citation: LL 2021 SC 459
Case no.: CA 1792 OF 2021
Coram: L Nageswara Rao, BR Gavai and BV Nagarathna
Counsel: Sr. Adv Ritin Rai for appellant, Sr. Adv K.V. Viswanathan, Adv Mohan Chevanan for respondents