Article

Withdrawal of corporate insolvency proceeding even prior to formation of committee of creditors

By Abhilasha Jha

The article in this issue of Corporate Amicus discusses a recent decision of the Hon’ble Supreme Court establishing that a plea for the withdrawal of the Corporate Insolvency Resolution Process (‘CIRP’) can be allowed by the adjudicating authority even prior to the establishment of the committee of creditors (‘CoC’). The article in this regard notes that the Apex Court has held that Section 12A of the Insolvency and Bankruptcy Code does not explicitly prohibit the consideration of applications for withdrawal before the constitution of the CoC, and that the NCLT possess inherent powers under Rule 11 of the NCLT Rules to either permit or reject an application for withdrawal of the CIRP even prior to the formation of the CoC. The author observes that the Supreme Court has not only addressed the existing gap in Section 12A of the IBC by affirming that IBC proceeding can be withdrawn prior to constitution of CoC even if CIRP is initiated, but it has also recognized the obligatory status of Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons), 2016.

Notifications and Circulars

• Business Responsibility Sustainability Report (BRSR) Core framework for assurance and ESG disclosures for the value chain introduced
• Regulatory framework for sponsors of a mutual fund notified
• SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 amended for timely disclosure of material events
• Food Safety and Standards (Advertising and Claims) Second Amendment Regulations, 2022 - Date of enforcement extended
• SEBI (Ombudsman) (Repeal) Regulations, 2023 notified
• SEBI (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023 notified to introduce Dispute Resolution clause in many Regulations

Ratio decidendi

• Liquidation - Section 327(7) of Companies Act, 2013, which declares Sections 326 and 327 inapplicable in cases of liquidation under IBC, is constitutionally valid - Supreme Court
• Arbitration - Order passed under Section 16 can be challenged under Section 34 only after the final award is passed - Same cannot be challenged under Article 227 unless there are exceptional circumstances - Calcutta High Court
• Arbitration - ‘Counter balancing’ not achieved when a party is allowed to choose only one arbitrator from a restrictive panel provided by the opposite party while the remaining (2/3rd) members are appointed by the party providing the panel itself - Delhi High Court

News Nuggets

• Insolvency - Limitation for appeal - Exclusion of holidays can be allowed only from 30-day limitation period and not from subsequent 15-day period under IBC Section 61(2)
• Liquidation - Notice period of at least 30 days to be given in case of e-auction of corporate debtor’s assets though provision for same absent in IBBI Liquidation Regulations
• Arbitration - Plea of presence of tripartite agreement when not correct
• Arbitration - Venue to be considered as seat of arbitration in absence of significant contrary indicia in agreement
• Ambiguity in the law governing arbitration agreement would not render arbitration agreement invalid
• Arbitral Tribunal’s finding of existence of an arbitration agreement when cannot be interfered
• Insolvency - No provision for constitution of Committee of Creditors (CoC) in case of a single operational creditor