ASHOK G. RAJANI versus BEACON TRUSTEESHIP LTD. & ORS

Citation: [2022] 18 S.C.R. 133 · Decided: 22-09-2022 · Supreme Court of India · Bench: INDIRA BANERJEE · Disposal: Dismissed

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Judgment (excerpt)

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ASHOK G. RAJANI
v.
BEACON TRUSTEESHIP LTD. & ORS.
(Civil Appeal No. 4911 of 2021)
SEPTEMBER 22, 2022
[INDIRA BANERJEE AND J.K. MAHESHWARI JJ.]
Insolvency and Bankruptcy Code, 2016 - Ss. 7, 12A, 62 –
Arbitration proceedings between corporate debtor and respondent
no. 1 to 3 were pending – Respondent nos.1 to 3 filed application
u/s.7 of IBC before the NCLT – Arbitrator passed award directing
corporate debtor to make payment – Parties arrived at a settlement
– NCLAT considering settlement granted interim stay of publication
u/s. 13 of the IBC – Parties filed application u/s. 12A of IBC before
the NCLT with the consent of IRP and the same was pending –
However, NCLAT staying the formation of CoC, permitted the IRP
to issue publication and also to handover all assets and proceed
with CIRP even though matter was settled between the parties – On
appeal, held: Section 12A of the IBC clearly permits withdrawal of
an application u/s. 7 of the IBC that has been admitted on an
application made by the applicant – Before the Committee of
Creditors is constituted, there is no bar to withdrawal by the
applicant of an application admitted u/s. 7 of the IBC – Settlement
cannot be stifled before the constitution of the CoC in anticipation
of claims against the corporate debtor from third persons – There is
no reason why the applicant for CIRP, should not be allowed to
withdraw its application once disputes have been settled – NCLT
directed to take up the settlement application.
Dismissing the appeal, the Court
HELD: 1. Section 12A of the IBC clearly permits withdrawal
of an application under Section 7 of the IBC that has been admitted
on an application made by the applicant. The question of approval
of the Committee of Creditors by the requisite percentage of
votes, can only arise after the Committee of Creditors is
constituted. Before the Committee of Creditors is constituted,
   [2022] 18 S.C.R. 133
133
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SUPREME COURT REPORTS
[2022] 18 S.C.R.
there is no bar to withdrawal by the applicant of an application
admitted under Section 7 of the IBC. [Para 24][139-D-E]
2. The object of the IBC is to consolidate and amend the
laws relating to reorganisation and insolvency resolution of
corporate persons, partnership firms and individuals in a time
bound manner for maximisation of value of assets of such persons,
to promote entrepreneurship, availability of credit and balance
of interests of all stakeholders including alteration in the order
of priority of payment of Government dues and to establish an
Insolvency and Bankruptcy Board of India and matters connected
therewith or thereto. An effective legal framework for timely
resolution of insolvency and bankruptcy would support
development of credit markets, encourage entrepreneurship,
improve business and facilitate more investments leading to
higher economic growth and development. [Para 26 & 27]
[139-H; 140-A-C]
3. A reading of the statement of objects and reasons with
the statutory Rule 11 of the NCLT Rules enables the NCLT to
pass orders for the ends of justice including order permitting an
applicant for CIRP to withdraw its application and to enable a
corporate body to carry on business with ease, free of any
impediment. Considering the investments made by the Corporate
Debtor and considering the number of people dependant on the
Corporate Debtor for their survival and livelihood, there is no
reason why the applicant for the CIRP, should not be allowed to
withdraw its application once its disputes have been settled.
[Para 28 & 29][140-C-E]
4. The settlement cannot be stifled before the constitution
of the Committee of Creditors in anticipation of claims against
the Corporate Debtor from third persons. The withdrawal of an
application for CIRP by the applicant would not prevent any other
financial creditor from taking recourse to a proceeding under
IBC. The urgency to abide by the timelines for completion of the
resolution process is not a reason to stifle the settlement.
[Para 30][140-E-F]
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5. The application for settlement under Section 12A of the
IBC is pending before the Adjudicating Authority (NCLT). The
NCLAT has stayed the constitution of the Committee of Creditors.
The order impugned is only an interim order which does not call
for interference. In an appeal under Section 62 of the IBC, there
is no question of law which requires determination by this Court.
The appeal is, accordingly, dismissed. The NCLT is directed to
tak

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