In an insolvency petition filed by the corporate debtor seeking insolvency, the National Company Law Tribunal, Mumbai Bench permitted the withdrawal of the petition along with costs on the corporate debtor as the OTS offer by the ex-director of the corporate debtor was better that the resolution plan under consideration and pending for approval by the NCTL. During the pendency of the application, the following issues were framed for adjudication by MK Shrawat, Judicial Member:
- Whether an Applicant who has filed an Application/Petition u/s 10 of the IBC is entitled to withdraw its own petition u/s 12A of IBC 2016.
- Whether a Resolution Applicant who has submitted a Resolution Plan which was approved with majority vote by CoC can be allowed to withdraw the said Resolution Plan which is under consideration for approval before the NCLT?
- Whether ex-director of the Corporate Debtor, which is under Insolvency can offer One Time Settlement (OTS) with the Financial Creditor/Creditors if qualified u/s 29A of the Insolvency Code 2016?
In this case, SBM Paper Mills, the corporate debtor had filed an application under Section 10 of the IBC in respect of its default to the loan provided by Allahabad Bank i.e. the ‘Financial Creditor’. The application was subsequently admitted and placed before the Committee of Creditors (CoC). However, one of the directors of the corporate debtor approached the financial creditor with a one-time settlement offer which was accepted accordingly amidst strong objection by the Resolution Professional as such withdrawal was contradictory to the provisions of the Insolvency Code.
The NCLT held that as the one-time settlement was in favor of the financial creditor as regards to the amount stated in the Resolution Plan submitted for consideration, the withdrawal was justified as it was not merely a withdrawal but was coupled with a proposal of one-time settlement.
The Tribunal further observed that the IBC is not meant to be used as a tool for deferment of payment of liabilities and as such imposed a cost of Rs. 5 Lakhs on the Corporate Debtor payable to the MCA/NCLT. The Tribunal also directed the Resolution Professional to retain an amount of Rs. 25 Lakhs out of the total earnest money of Rs. 50 Lakhs deposited by the Corporate Debtor due to the deprivation of the right of other competitors to participate in the Resolution Plan as a result of the withdrawal of the resolution plan.
Image Link: https://bit.ly/2sNr9Lz