An applicant seeking to withdraw an insolvency petition can do so provided it is supported by 90% voting share of the committee of creditors (CoC), the National Company Law Appellate Tribunal (NCLAT) has observed in the Sterling Biotech matter.
The NCLT Mumbai on May 8 rejected the plea of employees of Sterling Biotech to stay the liquidation order on the ground that the promoters, not eligible to file the resolution plan under Section 29A, cannot file an application to wrest back control of the company under Section 12A of the Insolvency and Bankruptcy Code (IBC).
While Section 29A bars an errant promoter to bid for the defaulting firm, Section 12 A allows withdrawal of application made by the applicant with the approval of 90% voting share of the CoC.
“From Section 12A and the decision of the Hon’ble Supreme Court in ‘Swiss Ribbons Pvt. Ltd. & Anr.’ (supra), it is clear that the promoters/shareholders are entitled to settle the matter in terms of Section 12A, and in such case, it is always open to an applicant to withdraw the application,” observed the NCLAT.
The NCLAT also said if the promoter pays the amount in his/her individual capacity and not from the account/assets of the ‘corporate debtor’ and satisfies all the stakeholders, taking back of the company could not be restrained.
The NCLAT said in so far as the assets of the ‘corporate debtor’ is concerned, if it is based on the proceeds of crime, it is always open to the Enforcement Directorate to seize the assets of the ‘corporate debtor’ and act in accordance with the Prevention of Money Laundering Act (PMLA) 2002.
The appellate tribunal said setting aside of the NCLT order will not amount to interference with any of the order passed by the Enforcement Directorate with regard to the assets of the corporate debtor and the proceedings under the PMLA will continue against the corporate debtor etc. in accordance with law. In the Sterling Biotech case, the CIRP was initiated following an application filed by Andhra Bank under Section 7.
Source- Financial Express.