Supreme Court allows withdrawal of SLP filed by corporate debtor

Case Details: Jayaswal Neco Industries Ltd. v. Reserve Bank of India [2022] 138 taxmann.com 220 (SC)

Judiciary and Counsel Details

• • Uday Umesh Lalit & S. Ravindra Bhat, JJ.

Facts of the Case

In the instant case, the petitioner filed a Special Leave Petition (‘SLP’) before the Supreme Court challenging the order dated 05.03.2018 passed by the Bombay High Court in a Writ Petition (Lodging) No. 56 of 2018. The Supreme Court Bench had heard the matter on 16.04.2018, whereby the notice was issued and status quo was ordered to be maintained by the parties.

During the period of Dec 2018 to June 2021, 11 out of 12 lenders of the Petitioners had assigned their debts to Assets Care & Reconstruction Enterprise Ltd. (‘ACRE’), while the 12 th lender entered into One Time Settlement with the petitioners. Consequently, ACRE became the only financial creditor.

Thereafter, ACRE and the petitioners entered into an arrangement wherein ACRE agreed to withdraw the proceedings filed under the Insolvency and Bankruptcy Code (‘IBC’) before the NCLT against the petitioners. In turn, the petitioners agreed to withdraw the instant Special Leave Petition.

In pursuance of such an arrangement, two interim applications were filed. One application was filed by the petitioner seeking withdrawal of the Special Leave Petition and another application was filed by ACRE seeking certain directions. However, RBI opposed both the applications and submitted that the matter was to be taken up for hearing on merits.

Further, the RBI submitted that the petitioners and ACRE have taken advantage of the order granting status quo and entered into an arrangement behind the back of the RBI. The Bench of the Supreme Court opined that though the submissions of RBI have force however, the applications for withdrawal of SLP and seeking directions were being allowed mainly because out of 11 lenders, who assigned the debts to ACRE, 9 lenders were the Public Sector Financial Corporations/Banks.

Supreme Court Held

The Supreme Court Bench also opined that if at this particular stage, the permission to withdraw the Special Leave Petition was not granted and the status quo was permitted to continued, it might lead to a situation where huge sums of money might be required to be refunded by such lenders.

The Supreme Court Bench allowed the petitioner’s application for withdrawal of the Special Leave Petition and the application filed by ACRE. A cost of Rs. 10,00,000/- was imposed on the petitioners, to be deposited with the Supreme Court Middle Income Group Legal Aid Society. Accordingly, the Special Leave Petition would stand dismissed as withdrawn after the amount gets deposited.