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Synopsis

The National Company Law Appellate Tribunal has recently observed that the Adjudicating Authority-NCLT cannot reject an application under Section 12A seeking the withdrawal of the Corporate Insolvency Resolution Process (CIRP) once the Committee of Creditors (CoC) has approved the resolution by a voting share of more than 90%.

“It must be borne in mind that the jurisdiction of an Adjudicating Authority/Tribunal u/s 12 of the Code is very much limited. In reality, where ‘CoC’, had approved with more than 90% of voting share, it is not open to an Adjudicating Authority/Tribunal in law to reject the ‘Application,” the NCLAT said.

The National Company Law Appellate Tribunal (NCLAT) bench in Chennai, consisting of Justice M Venugopal and Technical Member Shreesha Merla, was hearing an appeal challenging the order of the National Company Law Tribunal (NCLT) that had approved the application for the withdrawal of the Corporate Insolvency Resolution Process (CIRP) under Section 12A.

Section 12A of the Insolvency and Bankruptcy Code states,

12A. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be prescribed.

The application for the withdrawal of the Corporate Insolvency Resolution Process (CIRP) was approved by the National Company Law Tribunal (NCLT) after the corporate debtor had reached a settlement with the operational creditors.

The appellant argued that the NCLT had allowed the withdrawal application without giving proper consideration to legal points and facts.

Furthermore, it was contended that the NCLT did not adhere to the principles of natural justice and passed the order in a mechanical manner without providing a detailed recording of the objections raised by the appellant.

The NCLAT rejected the contentions of the appellant and while referring to a Supreme Court’s judgement in Vallal RCK V M/s. Siva Industries and Holdings said that,

“‘Tribunals’ should not interfere with the Commercial wisdom of the Committee of Creditors, agreeing to the settlement Plan submitted by the Corporate Debtor, once it got the approval of ‘Committee of Creditors’, with more than 90% voting in its favour,” the order reads.

Therefore, the NCLAT proceeded to uphold the order of the NCLT and rejected the appeal.

Advocate A.G. Sathyanarayana appeared for the appellant.

Advocate Vishranth appeared for the suspended director of the corporate debtor.

Case title: Ms Mayuras Industrial Services vs S R Shriraam Shekher