ABHISHEK SINGHversusHUHTAMAKI PPL LTD. & ANR.

596                       [2023]
               SUPREME COURT     4 S.C.R. 596
                              REPORTS                       [2023] 4 S.C.R.


A                             ABHISHEK SINGH
                                       v.
                      HUHTAMAKI PPL LTD. & ANR.
                       (Civil Appeal No(s). 2241 of 2023)
B                              MARCH 28, 2023
                 [B. R. GAVAI AND VIKRAM NATH, JJ.]
             Insolvency and Bankruptcy Code, 2016: ss.9 and 12A –
      Interpretation of s. 12A and Regn 30A – Withdrawal of application
      of Corporate Insolvency Resolution Process-CIRP before the
C
      constitution of Committee of Creditors-CoC – Validity of – Held:
      s.12A permits withdrawal of applications admitted u/ss. 7, 9 and 10
      – s. 12A does not debar entertaining applications for withdrawal
      even before constitution of CoC – Application u/s. 12A cannot be
      said to be kept pending for constitution of CoC, even where such
D     application was filed before the constitution of CoC – Furthermore,
      Regn 30A clearly provided for withdrawal applications being
      entertained before constitution of CoC – It does not in anyway
      conflicts or is in violation of s.12A – There is no inconsistency in
      the two provisions – It only furthers the cause introduced vide s.12A
      – On facts, petition u/s.9 filed by Operational Creditor-OC before
E
      NCLT for its outstanding amount against the Corporate Debtor-
      CD – Petition admitted and CIRP initiated – Within two days of
      admission order, OCs and CD entered into a settlement for payment
      of the amount even before constitution of CoC – After receipt of the
      settlement amount, OC filed application u/s.12A and Interim
F     Resolution Professional filed an application u/Regn 30A seeking
      withdrawal of CIRP against the CD – However, the NCLT rejected
      the withdrawal application – Said order cannot be sustained – NCLT
      erred in taking a contrary view – At the time when the application
      for withdrawal of the proceedings was filed the CoC was not
      constituted as such there could not have been any other concerned
G
      parties except the OC, CD and IRP – It was only because of the
      delay caused by the NCLT in disposing of the applications u/s. 12A
      and Regn 30A that large number of creditors filed their claims –
      Inherent powers are to be invoked in order to meet the ends of
      justice which the NCLT failed to invoke – Thus, application filed u/
H     Regn 30A allowed and application u/s. 9 filed by the OCs stands
                                        596
    ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                           597


withdrawn – Insolvency and Bankruptcy Board of India (Insolvency          A
Resolution Process for Corporate Persons) Regulations, 2018 –
Regn. 30 A.
      Allowing the appeal, the Court
      HELD: 1.1 Plea of alternative remedy is a self-imposed
restriction by the superior Courts and is never an absolute bar           B
unless barred by the statute. Further, in the present case, this
Court had entertained the SLP in 2021 itself and had granted an
order of status quo on 20.04.2021. Substantial time has passed
since then. As such this Court is not inclined to entertain the
said objection relating to availability of alternative remedy of filing   C
the appeal before the NCLT. IBC provides a statutory timeframe
for disposal of matters. Further, such matters being commercial
in nature keeping these matters pending for long, frustrates the
very object of IBC. [Para 25][609-E-G]
       1.2 The intervenors have vehemently contended that after           D
01.03.2021, once the NCLT has admitted the petition and had
issued restraint order, section 14 of IBC had come into play; the
transactions made in the accounts of the CD would be unlawful
and illegal as such payment of the settlement amount from the
funds of the CD transferred to the account of the suspended
Director after 01.03.2021 ought to be rejected and no discretion          E
should be exercised permitting withdrawal of the proceedings.
Even the NCLT was not satisfied with the submission of the IRP
and has not approved the same. Secondly, even if there was any
transaction from the account of the CD, the same may at best be
held to be a wrongful transaction and in any other proceedings            F
where CIRP is initiated the amount so transferred could be
recovered under section 66 of IBC by the IRP or the RP subject
to establishing that the said transactions would be hit by the said
provision. [Para 26][609-G-H; 610-A-C]
       1.3 Other creditors would have their own right to avail such       G
legal remedies as may be available to them under law with respect
to their claims. The rights of the creditors for their respective
claims do not get whittled down or adversely affected if the
settlement with the OC in the instant case is accepted and the
proceedings allowed to be withdrawn. [Para 27][610-D]
                                                                          H
598           SUPREME COURT REPORTS                      [2023] 4 S.C.R.


A           1.4 Any amount spent by the IRP legally admissible to him
      could always be recovered in the same proceedings and the NCLT
      or the Adjudicating Authority would be well within its power to
      get the same cleared under Clause 7 of Regulation 30A of IBBI
      Regulations. [Para 28]
B            1.5 The NCLT committed an error in holding that the
      Regulation 30A would have no binding effect. This would amount
      to defeating the very purpose of substituting Regulation 30A in
      IBBI Regulations on 25.07.2019 after the judgment of Swiss
      Ribbons’s case which was dated 25.01.2019. Section 12A of IBC
      permits the withdrawal of applications admitted under sections
C     7, 9, and 10 of IBC. The withdrawal of such an application is with
      the approval of 90 percent voting of the CoC. Section 12A did
      not provide particularly for a situation wherein the CoC has not
      been constituted but, the Court held that Section 12A does not
      debar entertaining applications for withdrawal of CIRP even prior
D     to the Constitution of CoC. Therefore, the application u/s 12 A
      for withdrawal cannot be said to be kept pending for the
      constitution of the CoC, even where such an application was filed
      before the constitution of the CoC. The substituted Regulation
      30A of IBC as it stands today clearly provided for withdrawal
      applications being entertained before the constitution of CoC. It
E     does not in any way conflicts or is in violation of section 12A of
      IBC. There is no inconsistency in the two provisions. It only
      furthers the cause introduced vide section 12A of IBC. NCLT
      fell in error in taking a contrary view. [Paras 34 and 35][612-F-G;
      613-A-C]
F           1.6 From a perusal of the order of the NCLT it appears that
      it was annoyed with the conduct of CD and its counsel. NCLT has
      recorded its displeasure and annoyance at a couple of places
      referring to the conduct of the CD and its counsel before the
      NCLAT, and maybe for this reason, the NCLT passed the
G     impugned order ignoring the observation in the NCLAT order
      dated 26.03.2021 which had specifically expressed that the
      Adjudicating Authority (NCLT) would pass orders on the
      withdrawal application without standing on technicalities. [Para
      39][614-E-F]

H
    ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                       599


       1.7 At the time when the application for withdrawal of the     A
proceedings was filed the CoC was not constituted as such there
could not have been any other concerned parties except the OC,
CD and IRP. It was only because of the delay caused by the NCLT
in disposing of the applications under section 12A of IBC and
Regulation 30A that large number of creditors filed their claims.
                                                                      B
The inherent powers are to be invoked in order to meet the ends
of justice which, in our opinion, the NCLT failed to invoke.
Regulation 30A of IBBI Regulations provide a complete
mechanism for dealing with the applications filed under such
provision. The issue raised by the IRP regarding its claim for
expenses is well taken care of under the said provision. Various      C
safeguards have been provided in Regulation 30A of IBBI
Regulations to be fulfilled by the OC which apparently have been
fulfilled as there is no complaint in that regard either by the IRP
nor it is apparent from the impugned order of the NCLT. Thus,
the objection raised by the IRP does not merit any consideration
                                                                      D
in this appeal. [Para 40, 41][614-G-H; 615-A-C]
       1.8 The impugned order of NCLT cannot be sustained and
is set aside. The application for withdrawal u/s 12A is allowed
along with the application under Regulation 30A of IBBI
Regulations. The Application u/s 9 of IBC filed by the OCs shall
stand withdrawn. [Para 43][615-D]                                     E

      Swiss Ribbons (P) Ltd. v. Union of India (2019) 4 SCC
      17 : [2019] 3 SCR 535; Kamal K.Singh v. Dinesh Gupta
      & Anr., dated 25.08.2021 in Civil Appeal No. 4993 of
      2021 – relied on.
                                                                      F
      Ashok G. Rajani v. Beacon Trusteeship Ltd.& Ors. (2022)
      SCC Online SC 1275; P. Mohanraj v. Shah Bros. ISPAT
      (P) Ltd. (2021) 6 SCC 258; Dena Bank (Now Bank of
      Baroda) v. Shivakumar Reddy & Anr. (2021) 10 SCC
      330; MSTC Limited v. Adhunik Metalliks Ltd. and others
      (2019) SCC Online NCLAT 146; Indian Overseas                    G
      Bank v. Mr. Dinkar T. Venkatsubramaniam, Resolution
      Professional for Amtek Auto Limited (2017) SCC
      Online NCLAT 584; Manoj K. Daga v. ISGEC Heavy
      Engineering Limited and others (2020) SCC Online
      NCLAT 869; Narayanamma and anr. v. Govindappa                   H
600               SUPREME COURT REPORTS                     [2023] 4 S.C.R.


A              and Ors. (2019) 19 SCC 42; Ram Saran Das v. CTO
               Calcutta & Anr. AIR 1962 SC 1362; Titaghur Paper
               Mills Co. Ltd. v. State of Orissa (1983) 2 SCC
               433:[1983] 2 SCR 743 – referred to.
                                Case Law Reference
B     [2019] 3 SCR 535                 relied on              Para 17
      (2021) 6 SCC 258                 referred to            Para 22
      (2021) 10 SCC 330                referred to            Para 22
      (2019) 19 SCC 42                 referred to            Para 22
C
      AIR 1962 SC 1362                 referred to            Para 22
      [1983] 2 SCR 743                 referred to            Para 22
            CIVIL APPELLATE JURISDICTION : Civil Appeal No.2241
      of 2023.
D         From the Judgment and Order dated 13.04.2021 of the National
      Company Law Tribunal in IA No.196 of 2021.
            Shyam Divan, Sr. Adv., Abhijit Sinha, Mahesh Agarwal, Nachiket
      Dave, Himanshu Satija, Ms. Swaroop George, E. C. Agrawala,
      Pradhuman Gohil, Mrs. Taruna Singh Gohil, Ms. Ranu Purohit, Alapati
E     Sahithya Krishna, Advs. for the Appellant.
            Tushar Mehta, S.G., Kanu Agrawal, Saurabh Roy, Ms. Deepabali
      Dutta, Ms. Ruchi Gour Narula, Arvind Kumar Sharma, Ms. Anannya
      Ghosh, Kinshuk Chatterjee, Anirudh Sanganeria, Shamik Shirishbhai
      Sanjanwala, Sameer Abhyankar, Sarthak Ghonkrokta, Sunil Fernandes,
F     Ms. Priyansha Sharma, Divyansh Tiwari, Advs. for the Respondents.
               The Judgment of the Court was delivered by
               VIKRAM NATH, J.
               Leave granted.
G            2. The appellant,a suspended Director of the Corporate
      Debtor1:Manpasand Beverages Ltd. (respondent 2),has filed this appeal
      assailing the correctness of the order dated 13.04.2021 passed by the
      National Company Law Tribunal2, Ahmedabad Bench at Ahmedabad in
      1
          In short “CD”
H     2
          In short, “NCLT”
     ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                             601
                  [VIKRAM NATH, J.]

I.A. No.196 of 2021 arising out of C.P.(I.B.) No.503 of 2019 rejecting       A
the application of the appellant under section 12A of Insolvency and
Bankruptcy Code, 20163 for withdrawal of the Corporate Insolvency
Resolution Process4.
      3. CD is in the business of manufacturing and distribution of fruit
beverages. It has approximately 700 employees and a turnover of              B
Rs.984.96 Crores in the Financial Year 2018-2019. The Operational
Creditor5Huhtamaki PPL Ltd.(respondent No.1) used to supply packaging
material to the CD.
     4. The OCs filed a petition under section 9 of IBC before the
NCLT, stating a total outstanding amount of Rs.1,31,00,825/- against the     C
CD. This was registered as CP (IB) No. 503 of 2019.
       5. The NCLT by order dated 01.03.2021 passed an order admitting
the petition and initiating CIRP. Two days thereafter i.e. 03.03.2021, the
OCs and the CD entered into a settlement wherein the CD was required
to pay an amount of Rs.95.72 lakhs. The above settlement was arrived         D
at even before the Committee of Creditors6 could be constituted.
       6. On 4th March, 2021, the OCs received Rs.50 Lakhs and again
     th
on 8 March, 2021, it received the balance amount of Rs.45.72 lakhs.
Thus, the total amount to be paid as per the settlement, was paid to the
OCs. The Interim Resolution Professional7 on 10th March, 2021 moved          E
an application under Regulation 30A of the Insolvency and Bankruptcy
Board of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 20188 seeking withdrawal of CIRP against the CD. Along
with it the application of OCs dated 09.03.2021 was also attached which
was moved under section 12A of IBC. The application for withdrawal
was registered as IA No. 196 of 2021.                                        F
      7. In the meantime, an appeal was preferred against the admission
order dated 01.03.2021 before the National Company Law Appellate
Tribunal9 apparently on the ground that section 9 of IBC petition was not
maintainable as there was a pre-existing dispute. On 26.03.2021, the
3
  In short, “IBC”
                                                                             G
4
  In short, “CIRP”
5
  In short “OC”
6
  In short “CoC”
7
  In short “IRP”
8
  In short “IBBI Regulations”
9
  In short “NCLAT”                                                           H
602            SUPREME COURT REPORTS                          [2023] 4 S.C.R.


A     appeal was withdrawn before the NCLAT with liberty to apply for revival
      of the appeal in case the settlement failed. The NCLAT while allowing
      the withdrawal of the appeal granted stay of formation of CoC. The said
      order dated 26.03.2021 is reproduced below:
            “Mr. Vikram Nankani, Advocate appears for the Appellant. He
B           submits that Respondent No.1 – Operational Creditor filed CP
            (IB) No.503/9/NCLT/AHM/2019 before Adjudicating Authority
            (NCLT Ahmedabad Bench, Court No.1). The Application was
            filed under section 9 of Insolvency and Bankruptcy Code, 2016
            (IBC in short) against the Respondent No.2 M/s.Manpasand
            Beverages Ltd. the Corporate Debtor. Appellant is the Director
C           of the Suspended Board of the Corporate Debtor. Respondent
            No.3 is Interim Resolution Professional.
            2. Learned counsel for the Appellant submits that the Application
            was admitted by the Impugned Order and Appeal is filed. It is
            stated that thereafter the Appellant has settled the claim of
D           Operational Creditor and the Operational Creditor has filed
            Application for withdrawal copy of which is at Page 348 and
            even the IRP has filed Application before the Adjudicating Authority
            copy of which is at page 368. The Application for withdrawal
            under section 12A of IBC has been filed through IRP. Mr. Salil
E           Thakore, Advocate agrees with the Learned Counsel for the
            Appellant that there has been a settlement and accordingly
            Application under section 12A of IBC has ben filed. The Learned
            Counsel for IRP however states that the money has been paid
            violating moratorium which the IRP has reported to the
            Adjudicating Authority.
F           3. Mr. Hitesh Buch, PCS also agrees that settlement has taken
            place.
            4. Learned counsel for the Appellant submits that considering these
            facts, the Appeal may be allowed to be withdrawn with liberty to
            seek restoration in case the effort with regard tosection 12 A of
G           IBC runs into difficulty. The Learned Counsel for IRP accepts
            that Committee of Creditors (CoC in short) has not been
            constituted.
            5. The learned counsel for the Appellant submits that he is making
            request for withdrawal of the Appeal under instructions from the
H           Appellant.
        ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                           603
                     [VIKRAM NATH, J.]

       6. Considering the objects of IBC, we have no reason to doubt          A
       that the Adjudicating Authority without standing on technicalities
       would pass appropriate Orders, if settlement has taken place
       between the Original Operational Creditor and Corporate Debtor
       and CoC is not yet constituted.
       7(A) For reasons stated above, the Appeal is permitted to be           B
       withdrawn with liberty to seek restoration of the Appeal in case
       at any future time the effort to settle in terms of section 12A of
       IBC runs into difficulty and does not happen.
       7(B) Till the Adjudicating Authority decides Application under
       section 12 A of IBC which is stated to have already been filed,
       CoC may not be constituted.                                            C
       The Appeal is disposed with observations and directions as above.”
       8. NCLT by the impugned judgment and order dated 13.04.2021
rejected the settlement application and fixed the matter for disposal of
the application under Regulation 30A of IBBI Regulations after hearing
all creditors.                                                                D
       9. Subsequent to the above order of NCLT dated 13.04.2021, the
IRP constituted the CoC on 15.04.2021. The appellant preferred the
SLP on 19.04.2021. This Court vide order dated 20.04.2021 while issuing
notice, directed the parties to maintain status quo.
       10. It would be pertinent to mention here that primary opposition      E
is by the IRP by way of an intervention application. The OC is not
opposing the appeal in as much as it had already received the full amount
as per the settlement dated 03.03.2021.Further, three other applications
for intervention/impleadment have been filed by creditors of the CD,
who allegedly had raised their claims before the IRP.                         F
       11. Before proceeding any further, the relevant statutory provisions
may be noticed.
       12. Rule 11 of The National Company Law Tribunal Rules, 201610
confer inherent powers on the NCLT to pass appropriate orders for
meeting the ends of justice or to prevent abuse of the process of the         G
Tribunal. The said rule is reproduced hereunder:
       “11. Inherent powers- Nothing in these rules shall be deemed
       to limit or otherwise affect the inherent powers of the Tribunal to

10
     In short “the NCLT Rules”
                                                                              H
604            SUPREME COURT REPORTS                          [2023] 4 S.C.R.


A            make such orders as may be necessary for meeting the ends of
             justice or to prevent abuse of the process of the Tribunal.”
             13. Section 12A of IBC which was inserted w.e.f. 06.06.2018
      permits withdrawal of applications admitted under sections 7, 9 or 10 of
      IBC, with the approval of 90 percent voting share of the CoC in such
B     manner as may be specified. The said provision is reproduced below:
             “12A. Withdrawal of application admitted under section 7,9
             or 10 – The Adjudicating Authority may allow the withdrawal of
             application admitted under section 7 or section 9 or section 10, on
             an application made by the applicant with the approval of ninety
             per cent voting share of the committee of creditors, in such manner
C            as may be specified.”
             14. Regulation 30A of IBBI Regulations was introduced after
      insertion of section 12A in IBC. It provided the mechanism of dealing
      with applications filed for withdrawal. Later on, itwas substituted by
      notification dated 25.07.2019 in IBBI Regulations. According to the said
D     provision, withdrawal under section 12A of IBC could be moved before
      Adjudicating Authority by the applicant through IRP before constitution
      of the CoC and in case the CoC has been constituted, then also by the
      applicant through IRP or the RP.However, the applicant would be required
      to justify the withdrawal by giving reasons. It further provides the
E     procedure for dealing with such an application. Regulation 30A of IBBI
      Regulations,as it stands today, is reproduced hereunder:
             “30A. Withdrawal of application. (1) An application for
             withdrawal under section 12A may be made to the Adjudicating
             Authority –
                 (a) before the constitution of the committee, by the applicant
F
                 through the interim resolution professional;
                 (b) after the constitution of the committee, by the applicant
                 through the interim resolution professional or the resolution
                 professional, as the case may be:
             Provided that where the application is made under clause (b) after
G
             the issue of invitation for expression of interest under regulation
             36A, the applicant shall state the reasons justifying withdrawal
             after issue of such invitation.
             (2) The application under sub-regulation (1) shall be made in Form-
             FA of the Schedule accompanied by a bank guarantee-
H
    ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                                  605
                 [VIKRAM NATH, J.]

      (a) towards estimated expenses incurred on or by the interim               A
      resolution professional for purposes of regulation 33, till the date
      of filing of the application under clause (a) of sub-regulation (1);
      or
      (b) towards estimated expenses incurred for purposes of clauses
      (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the   B
      application under clause (b) of sub-regulation (1).
      (3) Where an application for withdrawal is under clause (a) of
      sub-regulation (1), the interim resolution professional shall submit
      the application to the Adjudicating Authority on behalf of the
      applicant, within three days of its receipt.                               C
      (4) Where an application for withdrawal is under clause (b) of
      sub-regulation (1), the committee shall consider the application,
      within seven days of its receipt.
      (5) Where the application referred to in sub-regulation (4) is
      approved by the committee with ninety percent voting share, the            D
      resolution professional shall submit such application along with
      the approval of the committee, to the Adjudicating Authority on
      behalf of the applicant, within three days of such approval.
      (6) The Adjudicating Authority may, by order, approve the
      application submitted under sub-regulation (3) or (5).                     E
      (7) Where the application is approved under sub-regulation (6),
      the applicant shall deposit an amount, towards the actual expenses
      incurred for the purposes referred to in clause (a) or clause (b) of
      sub-regulation (2) till the date of approval by the Adjudicating
      Authority, as determined by the interim resolution professional or         F
      resolution professional, as the case may be, within three days of
      such approval, in the bank account of the corporate debtor, failing
      which the bank guarantee received under sub-regulation (2) shall
      be invoked, without prejudice to any other action permissible
      against the applicant under the Code. “
                                                                                 G
      15. NCLT, in the impugned order while rejecting I.A.No.196 of
2021 filed by the OCs, recorded the following findings:
      i.     The facts relating to the settlement and the fulfilment of
             the terms of the settlement are not disputed;
                                                                                 H
606                SUPREME COURT REPORTS                        [2023] 4 S.C.R.


A           ii.      The suspended directors of the CD despite the moratorium
                     having commenced with effect from 01.03.2021 have not
                     only made transactions of deposit but also withdrawal from
                     the account of the CD. They have thus violated the
                     directions contained in the admission order dated 01.03.2021;
B           iii.     Although the IRP had made submissions that the suspended
                     director having transferred huge amount from the account
                     of the company to his personal account and from there
                     having made the payment to the OC under the settlement
                     but the same was not conclusively proved;
C           iv.      The suspended director and their counsel made frivolous
                     arguments before the NCLT which were contrary to record
                     in order to obtain favourable orders;
            v.       As many as 35 claims of creditors both operational and
                     financial have been filed in the meantime. As such
D                    withdrawal of the proceedings would adversely affect their
                     rights;
            vi.      The proceedings once admitted and IRP having initiated,
                     such proceedings are in rem and all stake holders can
                     participate in the proceedings with their respective claims;
E                    and
            vii.     Regulation 30A of IBBI Regulations was not binding upon
                     it and such provision would not be of any help to the CD or
                     its suspended Directors;
            16. Heard learned counsel for the parties and perused the material
F     on record.
             17. Shri Shyam Divan, learned senior counsel appearing for the
      appellant referring to statutory provisions like section 12A of IBC,
      Regulation 30A of IBBI Regulations and alsoto Rule 11 of the NCLT
      Rules, 2016 submitted that such provisions clearly permit settlement
G     between the creditor and the debtor and withdrawal of proceedings prior
      to the constitution of CoC. According to him, once the settlement was
      arrived at and acted upon prior to the constitution of CoC, the NCLT
      committed a grave error in not allowing the withdrawal of the proceedings.
      He has placed reliance on a number of orders/judgments passed by this
      Court exercising powers under Article 142 of the Constitution allowing
H
        ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                         607
                     [VIKRAM NATH, J.]

withdrawal of such petitions where settlement had been arrived at and       A
also certain orders passed by NCLAT permitting withdrawal before
constitution of CoC.Reliance was also placed upon a judgment of this
Court in the case of Swiss Ribbons (P) Ltd. V. Union of India11
dated 25.01.2019 whereafter the Central Government vide Notification
dated 25th July, 2019 inserted Regulation 30A in IBBI Regulations which
                                                                            B
permitted withdrawal of petitions before constitution of CoC.
      18. Further submission advanced by Mr.Divan is to the effect
that NCLT was swayed by the fact that there were several other creditors
who had raised their claims against the CD and as such without hearing
such creditors, permission of withdrawal would not be proper. This,
according to the learned senior counsel, was an error committed by the      C
NCLT inasmuch as these third party claims could not have been taken
into consideration nor they should have weighed with the NCLT in
forming its opinion. Once the CoC had not been constituted the claims
of other creditors would not come into play to defeat the settlement
arrived at between the OC and the CD. In support of the said submission     D
he has placed reliance upon a judgment of this Court in the case of
Ashok G. Rajani v. Beacon Trusteeship Ltd.&Ors.12 Reliance is
also placed upon another order of this Court in the case of Kamal
K.Singh v. Dinesh Gupta & Anr., dated 25.08.2021 in Civil Appeal
No.4993 of 2021.
                                                                            E
       19. The next submission relates to the objection taken by the IRP
that the suspended Director had transferred huge amounts from the
account of the CD during the period of moratorium i.e. after 1 March,
2021 upto 18 March 2021 into his personal account as also other third
parties. Further the amount so transferred in the personal account of the
suspended Director was utilized in paying off the amount as per the         F
settlement to the OC. The submission made by learned senior Counsel
is to the effect that the NCLT itself recorded a finding that the above
objection taken by the IRP was not conclusively established. His
submission is that despite the said finding the NCLT was apparently
influenced by the objection taken by the IRP.                               G
       20. Lastly, it was submitted by Shri Divan, that the NCLT had no
jurisdiction to declare or hold that Regulation 30A of IBBI Regulations
was not binding on it; NCLT committed a grave errorof law in ignoring
11
     (2019) 4 SCC 17
12
     (2022) SCC Online SC 1275.                                             H
608            SUPREME COURT REPORTS                           [2023] 4 S.C.R.


A     the said provision. According to him, it was beyond the power of the
      NCLT to have discarded a statutory provision.
             21.Based on the above points it was submitted that the appeal
      deserves to be allowed, the impugned order of the NCLT be set aside
      and the withdrawal of the proceedings be allowed.
B            22. On the other hand, the IRP and other interveners have strongly
      opposed the appeal. The submissions advanced on their behalf are the
      same as were raised before the NCLT which had found favour therein
      resulting into the passing of the impugned order. In effect they supported
      the findings of the NCLT.Additionally, it has been objected on their behalf
      that the appellant ought to have availed alternative remedy by filing an
C     appeal before the NCLAT. The IRP has also raised the issue regarding
      non-clearance of his funds with respect to the expenditure incurred by
      him. In support of the submissions, reliance is placed upon the following
      judgments:
             (1) P. Mohanrajv. Shah Bros. ISPAT (P) Ltd.13
D            (2) Swiss Ribbons Private Limited &Anr. v. Union of India
                    &Ors. (supra)
             (3) Dena Bank (Now Bank of Baroda) v. Shivakumar
                    Reddy &Anr.14
             (4) MSTC Limited v. AdhunikMetalliks Ltd. and
E                   others 15;
             (5) Indian Overseas Bank v. Mr. Dinkar T.
                    Venkatsubramaniam, Resolution Professional for
                    Amtek Auto Limited16;
             (6) Manoj K. Daga v. ISGEC Heavy Engineering Limited
F                   and others17;
             (7) Narayanamma and anr. v. Govindappa and Ors.18
             (8) Ram Saran Das v. CTO Calcutta &Anr.19
            (9)    Titaghur Paper Mills Co. Ltd. v. State of Orissa20
      13
G        (2021) 6 SCC 258
      14
         (2021) 10 SCC 330
      15
         (2019) SCC Online NCLAT 146
      16
         (2017) SCC Online NCLAT 584
      17
         (2020) SCC Online NCLAT 869
      18
         (2019) 19 SCC 42
      19
         AIR 1962 SC 1362
H     20
         (1983) 2 SCC 433
     ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                              609
                  [VIKRAM NATH, J.]

      23. The facts as stated above are not disputed. The application         A
had been filed prior to the constitution of the CoC. The settlement had
been arrived at within two days of the admission order. The payment as
per the settlement had been made within the next five days i.e. in a
weeks’ time from the date of admission. The application for withdrawal
was filed on the 10th day. The NCLT ought to have immediately taken
                                                                              B
the decision on the application. Once the parties had settled the dispute
even before the CoC had been constituted, the application ought to have
been allowed then and there rather than await the other creditors to
jump into the fray and allow the IRP to proceed further.
       24. On behalf of the appellant number of orders of this Court
have been relied upon wherein the power under Article 142 of the              C
Constitution was exercised to approve the settlement and permit
withdrawal of cases wherein CIRP had been initiated. We could have
also done the same which would have been an easy way out but
considering the order passed by the NCLT rejecting the application for
withdrawal and further the IRP and three other OCs having filed               D
intervention applications, we are embarking upon to decide the issues
raised and as to what should be the course adopted by NCLT in dealing
with withdrawal matters before the constitution of CoC. We take up the
issues one by one.
      Alternative Remedy                                                      E
        25. Plea of alternative remedy is a self-imposed restriction by the
superior Courts and is never an absolute bar unless barred by the statute.
Further, in the present case, this Court had entertained the SLP in 2021
itself and had granted an order of status quo on 20.04.2021.Substantial
time has passed since then.As such we are not inclined to entertain the       F
said objection relating to availability of alternative remedy of filing the
appeal before the NCLT. We may also note here that IBC provides a
statutory timeframe for disposal of matters. Further, such matters being
commercial in nature keeping these matters pending for long, frustrates
the very object of IBC.
                                                                              G
      Violation of the Moratorium
       26. The intervenors have vehemently contended that after
01.03.2021, once the NCLT has admitted the petition and had issued
restraint order, section 14 of IBC had come into play; the transactions
made in the accounts of the CD would be unlawful and illegal as such
                                                                              H
610             SUPREME COURT REPORTS                           [2023] 4 S.C.R.


A     payment of the settlement amount from the funds of the CD transferred
      to the account of the suspended Director after 01.03.2021 oughtto be
      rejected and no discretion should be exercised permitting withdrawal of
      the proceedings. In this respect, it would suffice to state that even the
      NCLT was not satisfied with the said submission of the IRP and has not
      approved the same. Secondly, even if there was any transaction from
B
      the account of the CD, the same may at best be held to be a wrongful
      transaction and in any other proceedings where CIRP is initiated the
      amount so transferred could be recovered under section 66 of IBC by
      the IRP or the RP subject to establishing that the said transactions would
      be hit by the said provision.
C           Multiple claims of OCs
             27. With respect to the said objection, it only needs to be mentioned
      that other creditors would have their own right to avail such legal remedies
      as may be available to them under law with respect to their claims. The
      rights of the creditors for their respective claims do not get whittled
D     down or adversely affected if the settlement with the OC in the present
      case is accepted and the proceedings allowed to be withdrawn.
            Claims for expenses for IRP
            28. Any amount spent by the IRP legally admissible to him could
E     always be recovered in the same proceedings and the NCLT or the
      Adjudicating Authority would be well within its power to get the same
      cleared under Clause 7 of Regulation 30A of IBBI Regulations.
            Judgments relied upon:
            29. In the facts and circumstances of the present case and for the
F     discussion made above none of the judgments relied upon by the
      intervenors are of any help to the intervenors. Briefly the same are
      discussed hereinafter.
             30. The interveners have relied upon P.Mohanraj (supra), Swiss
      Ribbons (supra), Dena Bank (supra), MSTC Limited (supra), Indian
G     Overseas Bank (supra) and Manok K. Daga (supra), for the proposition
      that settlement would be in violation of moratorium as payments have
      been made after transferring money from the CD account after initiation
      of CIRP. As already recorded above, we have held that firstly, the NCLT
      itself was not satisfied that moratorium had been violated and even if it
      had been violated, at best it would amount to a wrongful trading/transaction
H
     ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                              611
                  [VIKRAM NATH, J.]

and the same, if established, could always be recovered by the IRP or         A
the RP in appropriate proceedings for CIRP by other OCs under section
66 of IBC. However, the present settlement could not be stalled. Thus,
these cases are of no help to the intervenors.
       31. The case of Narayanamma and another (supra) has been
relied upon for the proposition that this Court would not put a seal on an    B
illegal act of the suspended Directors of the CD as they have transferred
funds out of CD’s account after application was admitted. Here also,
we may only add that as NCLT itself was not satisfied with such violation,
no benefit can be derived by the intervenors.
       32. Lastly, the intervenors have relied upon Ram Saran Das             C
(supra) and Titaghur Paper Mills (supra) for the proposition that the
appeal deserves to be dismissed as the appellant did not avail the
alternative remedy. This aspect also, for the reasons recorded above,
does not benefit the interveners in any way.
      Legality of the impugned order:                                         D
       33. Now coming to the legality and the correctness of the impugned
order passed by the NCLT in the present appeal.Majority of the findings
recorded in the impugned orders are already covered above.An important
issue remains to be considered is the finding recorded by the NCLT that
Regulation 30A of IBBI Regulations was not binding upon it and could          E
not be of any help to the CD or its suspended Directors. In this respect,
we may first refer to the judgment of this Court in the case of Swiss
Ribbons (supra). Section 12A of IBC permitted withdrawal of
applications admitted under sections 7, 9 or 10 of IBC.But the said
provision envisaged a situation where the withdrawal application would
be filed after the CoC has been constituted, as it requires approval of 90    F
per cent voting shares of CoC. There was no provision which would
deal with withdrawal of proceedings before constitution of CoC. Even
Regulation 30A, as it existed earlier, did not contemplate of consideration
of an application for withdrawal filed before constitution of CoC. This
issue was flagged by this Court in the case of Swiss Ribbons (supra)          G
in paragraph 82 thereof which is reproduced hereunder:
      “82. It is clear that once the Code gets triggered by admission of
      a creditor’s petition under Sections 7 to 9, the proceeding that is
      before the adjudicating authority, being a collective proceeding, is
      a proceeding in rem. Being a proceeding in rem, it is necessary
                                                                              H
612                SUPREME COURT REPORTS                           [2023] 4 S.C.R.


A               that the body which is to oversee the resolution process must be
                consulted before any individual corporate debtor is allowed to settle
                its claim. A question arises as to what is to happen before a
                Committee of Creditors is constituted (as per the timelines that
                are specified, a Committee of Creditors can be appointed at any
                time within 30 days from the date of appointment of the interim
B
                resolution professional). We make it clear that at any stage where
                the Committee of Creditors is not yet constituted, a party can
                approach NCLT directly, which Tribunal may, in exercise of its
                inherent powers under Rule 11 of NCLT Rules, 2016, allow or
                disallow an application for withdrawal or settlement. This will be
C               decided after hearing all the parties concerned and considering all
                relevant factors on the facts of each case.”
            This Court had required the NCLT to invoke its powers under
      Rule 11 of the NCLT Rules.
             34. It was after the observations made by this Court in the case
D     of Swiss Ribbons (supra), as noted above and also considering the
      aspect that large number of orders were being passed by this Court
      invoking Article 142 of the Constitution that IBBI Regulations which
      were framed by the Insolvency and Bankruptcy Board of India 21
      exercising powers conferred under sections 5, 7, 9, 14, 15, 17, 18, 21, 24,
E     25, 29, 30, 196, 208 read with section 240 substituted section 30A vide
      notification dated 25.07.2019. The Board was conferred with powers to
      frame regulations for various purposes referred to insection 240 of IBC
      and the other allied sections. These regulations maybe subordinate in
      character but would still carry a statutory flavor and would be binding on
      the NCLT. The NCLT committed an error in holding that Regulation
F     30A would have no binding effect. This would amount to defeating the
      very purpose of substituting Regulation 30A in IBBI Regulations on
      25.07.2019 after the judgment of Swiss Ribbons(supra) which was
      dated 25.01.2019.
            35. Section 12A of IBC permits withdrawal of applications admitted
G     under sections 7, 9 and 10 of IBC. It permits withdrawal of such
      applications with approval of 90 percent voting share of CoC in such
      manner as may be specified. The role of CoC and 90 percent of its
      voting share approving the said withdrawal would come into play only
      when CoC has been constituted. Section 12A did not specifically mention
      21
H          In short “IBBI”
     ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                               613
                  [VIKRAM NATH, J.]

withdrawal of such applications where CoC had not been constituted             A
but at the same time it does not debar entertaining applications for
withdrawal even before constitution of CoC. Therefore, the application
under section 12A for withdrawal cannot be said to be kept pending for
constitution of CoC, even where such application was filed before
constitution of CoC. The IBBI which had the power to frame Regulations
                                                                               B
wherever required and in particular section 240 of IBC for the subjects
covered therein had accordingly substituted Regulation 30A dealing with
the procedure for disposal of application for withdrawal filed under section
12A of IBC. The substituted Regulation 30A of IBC as it stands today
clearly provided for withdrawal applications being entertained before
constitution of CoC. It does not in any way conflicts or is in violation of    C
section 12A of IBC. There is no inconsistency in the two provisions. It
only furthers the cause introduced vide section 12A of IBC. Thus, NCLT
fell in error in taking a contrary view.
       36. In Kamal K. Singh (supra), relying upon paragraph 82 of the
report in the case of Swiss Ribbons (supra), the Supreme Court, which          D
was dealing with a similar situation where the settlement had been arrived
before constitution of CoC allowed the proceedings to be withdrawn
and held that the applications filed under Rule 11 of the NCLT Rules
would be maintainable and the OCs therein was justified in moving such
application.
                                                                               E
       37. In the case of Ashok G. Rajani (supra), the settlement had
been arrived at between the parties on 08.08.2021, after the NCLT had
admitted the application under section 7 of IBC vide order dated
03.08.2021. On appeal, the NCLAT vide order dated 18.08.2021 stayed
the formation of CoC but declined to exercise its powers under Rule 11
of the NCLAT Rules. The said order was challenged before this Court.           F
This Court in its order in paragraphs 29 and 30 gave reasons as to why
the applications for withdrawal cannot be stifled before the constitution
of CoC by third parties. The said paragraphs are reproduced below:
      “29. Considering the investments made by the Corporate Debtor
      and considering the number of people dependant on the Corporate          G
      Debtor for their survival and livelihood, there is no reason why
      the applicant for the CIRP, should not be allowed to withdraw its
      application once its disputes have been settled.
      30. The settlement cannot be stifled before the constitution of the
      Committee of Creditors in anticipation of claims against the             H
614             SUPREME COURT REPORTS                           [2023] 4 S.C.R.


A           Corporate Debtor from third persons. The withdrawal of an
            application for CIRP by the applicant would not prevent any other
            financial creditor from taking recourse to a proceeding under IBC.
            The urgency to abide by the timelines for completion of the
            resolution process is not a reason to stifle the settlement.”
B            38. This Court relying upon the order in the case of Kamal K.
      Singh (supra) issued directions in paragraph 32 to the NCLT to take up
      the settlement application and decide the same in the light of observations
      made therein. The said paragraph is reproduced hereunder:
            “32. The application for settlement under Section 12A of the IBC
C           is pending before the Adjudicating Authority (NCLT). The NCLAT
            has stayed the constitution of the Committee of Creditors. The
            order impugned is only an interim order which does not call for
            interference. In an appeal under Section 62 of the IBC, there is
            no question of law which requires determination by this Court.
            The appeal is, accordingly, dismissed. The NCLT is directed to
D           take up the settlement application and decide the same in the light
            of the observations made above.”
             39. One more aspect needs to be flagged here.From a perusal of
      the order of the NCLT it appears that it was annoyed with the conduct
      of CD and its counsel. NCLT has recorded its displeasure and annoyance
E     at a couple of places referring to the conduct of the CD and its counsel
      before the NCLAT, and maybe for this reason, the NCLT passed the
      impugned order ignoring the observation in the NCLAT order dated
      26.03.2021 which had specifically expressed that the Adjudicating
      Authority (NCLT) would pass orders on the withdrawal application
F     without standing on technicalities.
             40. Both the parties have relied upon paragraph 82 of the judgment
      in the case of Swiss Ribbons (supra). According to the appellant, the
      NCLT ought to have exercised its inherent powers under Rule 11 of the
      NCLT Rules whereas for the intervenors it is submitted that this Court
G     had observed that power under Rule 11 would be exercised after hearing
      all concerned parties. It may be noted that at the time when the application
      for withdrawal of the proceedings was filed the CoC was not constituted
      as such there could not have been any other concerned parties except
      the OC, CD and IRP. It was only because of the delay caused by the
      NCLT in disposing of the applications under section 12A of IBC and
H     Regulation 30A of IBBI Regulations that large number of creditors filed
     ABHISHEK SINGH v. HUHTAMAKI PPL LTD. & ANR.                              615
                  [VIKRAM NATH, J.]

their claims. The inherent powers are to be invoked in order to meet the      A
ends of justice which, in our opinion, the NCLT failed to invoke.
      41. Regulation 30A of IBBI Regulations provide a complete
mechanism for dealing with the applications filed under such provision.
The issue raised by the IRP regarding its claim for expenses is well
taken care of under the said provision. Various safeguards have been          B
provided in Regulation 30A ofIBBI Regulations to be fulfilled by the OC
which apparently have been fulfilled as there is no complaint in that
regard either by the IRP nor it is apparent from the impugned order of
the NCLT. Thus, the objection raised by the IRP does not merit any
consideration in this appeal.
                                                                              C
      42. For all the reasons recorded above, the impugned order of the
NCLT cannot be sustained. The application filed under Regulation 30A
of IBBI Regulations deserves to be allowed.
       43. Accordingly, the appeal is allowed and the impugned order of
NCLT is set aside. Further, the Application No. 196 of 2021 also deserves     D
to be allowed along with the application under Regulation 30A of IBBI
Regulations. The Application under section 9 of IBC filed by the OCs
shall stand withdrawn. It is further provided that any claim for expenses
incurred may be dealt with by the NCLT in accordance with law.
       44. We make it clear that any observations made in this judgment       E
will not,in any manner,affect the claim of other creditors of whatever
category and they would be free to raise their own independent claims
in appropriate proceedings which would be dealt with in accordance
with law.
       45. Pending applications, if any, are disposed of.                     F

Nidhi Jain                                                  Appeal allowed.
(Assisted by : Parth Goswami and Tamana, LCRAs)



                                                                              G




                                                                              H