LexGLAS TRUST COMPANY LLC versus BYJU RAVEENDRAN & ORS.
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[2024] 10 S.C.R. 1802 : 2024 INSC 811 GLAS Trust Company LLC v. BYJU Raveendran & Ors. (Civil Appeal No. 9986 of 2024 ) 23 October 2024 [Dr Dhananjaya Y Chandrachud,* CJI, J.B. Pardiwala and Manoj Misra, JJ.] Issue for Consideration Whether the appellant, who was not a party to the settlement between the second respondent-BCCI (Operational Creditor) and the Corporate Debtor, has locus in the proceedings before this Court; whether the NCLAT erred in invoking its inherent powers under Rule 11 of the NCLAT Rules 2016 in the presence of a prescribed procedure for withdrawal of Corporate Insolvency Resolution Process (CIRP) and settlement of claims between parties; and without prejudice to the above, whether the NCLAT adequately addressed the objections raised by the appellant, while exercising its discretionary power under Rule 11 of the NCLAT Rules 2016. Headnotes† Insolvency and Bankruptcy Code, 2016 – s.62 – Appeal to Supreme Court – “any person aggrieved” – Appellant claiming to be a Financial Creditor, if falls within the ambit of the phrase “any person aggrieved” and has the locus standi to institute the present appeal: Held: Yes – Under Section 62 governing statutory appeals to the Supreme Court from the orders of the NCLAT, “any person” aggrieved by the order of the NCLAT may file an appeal before the Supreme Court – Section 61 which provides for appeals to NCLAT from orders of the NCLT uses similar language – The use of the phrase “any person aggrieved” indicates that there is no rigid locus requirement to institute an appeal challenging an order of the NCLT, before the NCLAT or an order of the NCLAT, before this Court – Any person who is aggrieved by the order may * Author [2024] 10 S.C.R. 1803 GLAS Trust Company LLC v. BYJU Raveendran & Ors. institute an appeal, and nothing in the provision restricts the phrase to only the applicant creditor and the corporate debtor – Once the CIRP is initiated, the proceedings are no longer restricted to the individual applicant creditor and the corporate debtor but rather become collective proceedings (in rem), where all creditors, such as the appellant, are necessary stakeholders – Appellant is not an unrelated party to the CIRP, but is an entity whose claims had been verified by the IRP. [Paras 75, 76] Insolvency and Bankruptcy Code, 2016 – s.12A – National Company Law Appellate Tribunal Rules, 2016 – r.11 – CIRP Regulations 2016 – Regulation 30A – Second respondent-BCCI (an Operational Creditor had executed the ‘Team Sponsor Agreement’ with the Corporate Debtor-third respondent) filed application under Section 9 of the IBC, w.r.t an operational debt of approx. Rs.158 crore payable by the third respondent under the aforesaid Agreement – Petition admitted by NCLT, CIRP initiated against third respondent – Invoking inherent powers under Rule 11, NCLAT approved a settlement between the parties and set aside the order of NCLT – When the settlement was sought by the first respondent (former director of the Corporate Debtor) before NCLAT, the Section 9 petition had already been admitted and the Section 7 petition had also been disposed of on that basis – However, admittedly, the CoC had not been constituted – NCLAT stayed the formation of the CoC: Held: In such cases, the legal framework mandates that an (i) application for withdrawal be moved; (ii) the application has to be moved through the IRP; and (iii) it be placed before the NCLT for approval – None of these requirements were met – Despite grave deviations, NCLAT still proceeded with approving the settlement and setting aside the CIRP by invoking its inherent power under Rule 11 – Recourse to Rule 11 was not warranted – ‘Inherent powers’ cannot be used to subvert legal provisions, which exhaustively provide for a procedure – To permit the NCLAT to circumvent this detailed procedure by invoking its inherent powers under Rule 11 would be contrary to the carefully crafted procedure for withdrawal – NCLAT provided no reasons for deviating from this procedure or the urgency to approve the settlement without following the procedure – The correct course of action by the NCLAT would have been to stay the constitution of the CoC and 1804 [2024] 10 S.C.R. Digital Supreme Court Reports direct the parties to follow the course of action in Section 12A read with Regulation 30A of the CIRP Regulations 2016 – Even if the procedural infirmity is kept aside, once the CIR
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