Orders u/s 12A and CIRP Plea u/s 7 Was to be Set Aside as Withdrawal of Sec. 9 Plea Was Detrimental to the Interest of Creditors | NCLAT

Case Details: Sintex Plastics Technology Ltd. v. Mahatva Plastic Products and Building Materials (P.) Ltd. - [2023] 154 taxmann.com 229 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson & Dr Alok Srivastava, Technical Member
  • Arvind Kumar Gupta, Ms Henna George & Ms Shivani Sharma, Advs. for the Appellant.
  • Arun Kathpalia, Sr. Adv., Aman Raj Gandhi, Parth Bose, Pranay Tuteja, Samar S. Kachwaha, Ms Shivangi Nanda, Ms Kavita Vinayak & Ms Rini Mehra, Advs. for the Respondent.

Facts of the Case

In the instant case, an Operational Creditor filed a section 9 application against the Corporate Debtor before the NCLT and same was admitted. Since, the Corporate Debtor and Operational Creditor entered into a settlement, application filed for withdrawal of section 9 application was allowed by NCLT and CIRP was closed.

Later, an appeal was filed by the financial creditor challenging said withdrawal application and a stay was granted with direction to IRP to continue managing affairs of Corporate Debtor.

Consequently, the SBI being lead bank of lenders consortium withdrew an amount from trust and retention account of corporate debtor without approval and knowledge of IRP.

Subsequently, the Financial Creditor filed a section 7 application against the Corporate Debtor and same was admitted by NCLT. The Instant appeals were filed against orders allowing withdrawal of section 9 application as well as order allowing application filed by Financial Creditor under section 7.

Also, it was noted that if section 9 application was allowed to be closed, some creditors might have withdrawn amounts or received payments from Corporate Debtor as SBI had, which would have been detrimental to interest of other creditors having large claim pending against Corporate Debtor.

NCLAT Held

Therefore, the NCLAT held that the CIRP initiated under section 9 was to be allowed to continue and run its due course, which would have allowed adequate and proper insolvency resolution of Corporate Debtor and impugned orders were to be set aside.

List of Cases Reviewed

• • Sintex Plastics Technology Ltd. v. Zielem Industries (P.) Ltd. [2021] 128 taxmann.com 79 (NCLT – Ahd.)
  • Order passed by NCLT in CP(IB) No. 276/7/NCLT/AHM/2020, dated 19-7-2021 (para 25) reversed.
  • Anuj Tejpal v. Rakesh Yadav [2021] 129 taxmann.com 296 (NCLT – New Delhi) (para 20)
  • Ashok G. Rajani v. Beacon Trusteeship. Ltd. [2022] 142 taxmann.com 465/174 SCL 350 (SC) (para 21) distinguished.

List of Cases Referred to

• • Ashok G. Rajani v. Beacon Trusteeship. Ltd. [2022] 142 taxmann.com 465/174 SCL 350 (SC) (para 12)
  • Anuj Tejpal v. Rakesh Yadav [2021] 129 taxmann.com 296 (NCLT – New Delhi) (para 12)
  • Insolvency and Bankruptcy Board of India v. State Bank of India [2022] 145 taxmann.com 522/[2023] 176 SCL 97 (Delhi) (para 13).