VALLAL RCK versus M/S SIVA INDUSTRIES AND HOLDINGS LIMITED AND OTHERS

Citation: [2022] 7 S.C.R. 577 · Decided: 03-06-2022 · Supreme Court of India · Bench: BHUSHAN RAMKRISHNA GAVAI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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VALLAL RCK
v.
   M/S SIVA INDUSTRIES AND HOLDINGS
LIMITED AND OTHERS
(Civil Appeal Nos. 1811-1812 of 2022)
JUNE 03, 2022
[B. R. GAVAI AND HIMA KOHLI, JJ.]
Insolvency and Bankruptcy Code, 2016: s. 12A – Withdrawal
of application admitted u/s. 7 – On facts, application u/s. 12A r/w
Regulation 30A for withdrawal of application filed u/s. 7, in view
of settlement plan submitted by the promoter of the Corporate Debtor,
being approved by 94.23% of the voting shares of the Committee of
Creditors – NCLT and NCLAT rejected the application – On appeal,
held: When 90% and more of the creditors, in their wisdom after
due deliberations, find that it would be in the interest of all the
stake-holders to permit settlement and withdraw CIRP, the
adjudicating authority or the appellate authority cannot sit in an
appeal over the commercial wisdom of CoC – Interference would
be warranted only when the adjudicating authority or the appellate
authority finds the decision of the CoC to be wholly capricious,
arbitrary, irrational and de hors the provisions of the statute or the
Rules – In the instant case, the decision of the COC was taken after
due deliberations of pros and cons of the settlement plan and took
the decision exercising their commercial wisdom – Thus, interference
of the NCLT and the NCLAT not justified – Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 – Regulation 30A.
Allowing the appeals, the Court
HELD: 1.1 Section 12A of the IBC was brought in the
statute book vide Insolvency and Bankruptcy Code (Second
Amendment) Act, 2018 (Act No. 26 of 2018). The Statement of
Objects and Reasons of the Act No. 26 of 2018 would reveal that
after the IBC was enacted in 2016, it had emerged that further
fine tuning of the IBC would be required. The Government
therefore constituted an Insolvency Law Committee to review
the functioning and implementation of the IBC. The SOR would
[2022] 7 S.C.R. 577
577
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SUPREME COURT REPORTS
[2022] 7 S.C.R.
further reveal that the recommendations of the said Committee
were examined by the Government and it was accordingly decided
to amend the IBC. One of the amendments proposed was for
making a provision for withdrawal of application for initiation of
CIRP admitted by Adjudicating Authority. It was recommended
that such an exit should be allowed provided the CoC approves
such action by 90% voting share. [Para 12][584-C-F]
1.2 Section 12A of the IBC was brought in the statute book
on the basis of the said Committee’s Report. Though by the
Amendment Act No. 26 of 2018, the voting share of 75% of CoC
for approval of the Resolution Plan was brought down to 66%,
Section 12A of the IBC which was brought in the statute book by
the same amendment, requires the voting share of 90% of CoC
for approval of withdrawal of CIRP. It could thus clearly be seen
that a more stringent provision has been made insofar as
withdrawal of CIRP is concerned. [Para 16][586-E-F]
1.3 A perusal of the Regulation 30A would reveal that where
an application for withdrawal under Section 12A of the IBC is
made after the constitution of the Committee, the same has to be
made through the interim resolution professional or the resolution
professional, as the case may be. The application has to be made
in Form-FA. It further provides that when an application is made
after the issue of invitation for expression of interest under
Regulation 36A, the applicant is required to state the reasons
justifying withdrawal of the same. The RP is required to place
such an application for consideration before the Committee. Only
after such an application is approved by the Committee with 90%
voting share, the RP shall submit the same along with the approval
of the Committee to the adjudicating authority. It could thus be
seen that a detailed procedure is prescribed under Regulation
30A of the 2016 Regulations as well. [Para 18][588-C-D]
1.4 If the CoC arbitrarily rejects a just settlement and/or
withdrawal claim, the NCLT and thereafter the NCLAT can always
set aside such decision under the provisions of the IBC. [Para
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1.5 The commercial wisdom of the CoC has been given
paramount status without any judicial intervention for ensuring
completion of the stated processes within the timelines prescribed
by the IBC. There is an intrinsic assumption, that financial
creditors are fully informed about the viability of the corporate
de

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