The Supreme Court said on Wednesday that the main purpose of the Insolvency and Bankruptcy Code (IBC) is to revive the debtor business and turn it into a going concern and that everything must be done to relaunch it , liquidation being the last resort.
The highest court dismissed an appeal filed by a former employee of a Chennai hotel who was aggrieved by the resolution passed by the Creditors Committee (CoC) for the withdrawal of the Corporate Insolvency Resolution Proceedings (CIRP ) and challenged the NCLT order authorizing the withdrawal. of this CIRP with regard to the debtor company (hotel).
On September 13, a bench of two judges of the highest court ruled that the resolution plan approved by the CoC submitted to the National Company Law Tribunal (NCLT) could not be amended or withdrawn as this would create another level of negotiations, which will be completely unregulated. by statute.
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He had stated that a submitted resolution plan is binding and irrevocable between the CoC and the successful resolution requester in terms of the provisions of the IBC and the CIRP Rules.
A bench of Judges LN Rao, BR Gavai and BV Nagarathna, while referring to Article 12A of the IBC, stated that under this provision the Competent Authority (NCLT) has the right to withdraw the application allowed under Article 7 or Article 9 or Article 10 of the IBC, on a request made by the applicant with the approval of 90 per cent of the voting shares of the CoC.
âWe can see that one of the main objectives of the IBC is to ensure the relaunch of the Debtor Company and to make it a going concern. All efforts must first be made to rekindle the concern and make it a business continuity, liquidation being the last resort, âsaid the judiciary, in its verdict on a batch of pleas against the NCLAT order.
The highest court declared that in the present case it is not disputed that the resolution of the CoC approving the withdrawal of the CIRP procedure was supported by the required majority vote. “The NCLT, after considering the resolution adopted by the CoC at its 8th meeting held on May 25, 2021, authorized the application filed by KN Rajakumar on June 4, 2021,” the judiciary said.
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He indicated that from the order of the NCLT dated June 4, 2021, it could be seen that the debtor company has already settled the problem with the former financial creditors, who resolved to withdraw the CIRP procedure and ” by virtue of the withdrawal of the CIRP procedure, the debtor company is now an active company.
The trial court noted that former employee D Ramjee, in accordance with assurance given to NCLAT, an amount of 18.50,000 was paid in arrears of wages by the debtor company.
“We find that the empty NCLT order dated July 6, 2021, adopted in the motion … filed by Dr. Ramjee, correctly held that as of the date of the order dated June 4, 2021 , after the withdrawal of the CIRP procedure, the powers and management of the debtor company were handed over to the directors of the debtor company and from that date, Resolution Professional and CoC in relation to the debtor company had become functus officio, âhe said. The court of first instance noted that the debtor company was incorporated under the provisions of the Companies Act 1956 on September 9, 1960.
She had started various businesses like sugar, distillery, flour mill, chemical unit, finance company, four star hotel, etc. in Chennai, but to date it only owns one hotel in Chennai. He said the debtor company’s hotel business had been closed for more than 7 years.