Back
D. Y. CHANDRACHUD, J. B. PARDIWALA, MANOJ MISRA
GLAS Trust Company LLC – Appellant
Versus
BYJU Raveendran – Respondent
What is the locus of a financial creditor who is not a party to a settlement in challenging NCLAT approval of CIRP withdrawal? (!) Whether NCLAT can invoke inherent powers under Rule 11 of NCLAT Rules for CIRP withdrawal when a prescribed procedure exists under Section 12A IBC and Regulation 30A? (!) (!) Whether NCLAT adequately addressed objections to settlement while exercising inherent powers under Rule 11? (!)
Key Points: - Supreme Court allowed appeal by GLAS Trust Company LLC against NCLAT judgment approving settlement between BCCI (operational creditor) and Think & Learn Pvt Ltd (corporate debtor) without following Section 12A IBC and Regulation 30A procedure (!) (!) - NCLT admitted BCCI's Section 9 petition on 16 July 2024 initiating CIRP against corporate debtor; appellant's Section 7 petition disposed with liberty to file claims or revive (!) (!) - NCLAT approved settlement on 2 August 2024 using Rule 11 inherent powers before CoC constitution, setting aside NCLT order despite appellant's objections on fund source and preferential payment (!) (!) (!) - Once CIRP initiated post-admission, proceedings become collective/in rem; all creditors are stakeholders, management vests in IRP (!) (!) - Section 12A IBC and Regulation 30A provide exhaustive procedure for CIRP withdrawal post-admission, both before/after CoC constitution; inherent powers under Rule 11 cannot circumvent this (!) (!) (!) - Appellant has locus as "person aggrieved" under Section 62 IBC to challenge NCLAT order; not restricted to applicant creditor (!) (!) - NCLAT erred by approving settlement without formal application through IRP to NCLT, summarily dismissing appellant's objections on fund source without evidence analysis (!) (!) - Supreme Court set aside NCLAT judgment; directed Rs 158 crore in escrow to CoC; parties may seek withdrawal per legal framework (!) (!) - Evolution of framework: Section 12A/Reg 30A introduced post-ILC recommendations to reduce reliance on inherent powers/Art 142 for post-admission withdrawals (!) (!) (!)
JUDGMENT :
Dr Dhananjaya Y. Chandrachud, CJI.
| Table of Contents |
| A. Background |
| i. Parties before this Court |
| ii. Proceedings before the US Courts |
| iii. Insolvency proceedings against the first respondent |
| iv. Settlement between the parties and proceedings before the NCLAT 9 |
| v. Impugned Judgement |
| vi. Proceedings before this Court and the Delaware Court |
| B. Issues |
| C. Submissions |
| D. Legal Background |
| i. Legal context and fundamental principles |
| a. General principles underlying the IBC |
| b. Nature of the proceedings after admission of the application |
| ii. Legal framework for withdrawal and settlement of claims |
| a. Evolution of the legal framework |
| b. Insights from the evolution of the legal framework |
| iii. Scope of ‘Inherent Powers’ under Rule 11 |
| E. Application to the instant case |
| i. Locus of the appellant before this Court |
| ii. Approach of the NCLAT in the Impugned Judgement |
| iii. Decisions of this Court cited in the Impugned Judgement |
| F. Conclusion |
1. This appeal arises from a judgment of the National Company Law Appellate Tribunal, Chennai1[“NCLAT”] dated 2 August 2024. 2[“Impugned Judgement”] T
The court ruled that the NCLAT erred in approving a settlement without adhering to the procedural requirements of the Insolvency and Bankruptcy Code, emphasizing the collective nature of insolvency p....
(1) Plea of alternative remedy is a self-imposed restriction by superior Courts and is never an absolute bar unless barred by statute.(2) Application under Section 12A of Insolvency and Bankruptcy Co....
Corporate Insolvency Resolution Process (CIRP) – Settlement cannot be stifled before constitution of Committee of Creditors in anticipation of claims against Corporate Debtor from third persons – Wit....
Corporate Insolvency Resolution Process – Adjudicating authority (NCLT) or appellate authority (NCLAT) can sit in appeal over commercial wisdom of Committee of Creditors (“CoC”) – There is need for m....
Settlements in corporate insolvency must involve the Committee of Creditors, ensuring collective engagement and consideration of all stakeholder rights.
The NCLT has the inherent power to restore a petition that has been withdrawn with its permission, and this power is derived from Rule 11 of the NCLT Rules and the residuary jurisdiction conferred on....
(1) Approval of resolution plan – If a claim is submitted by an operational creditor claiming itself as a financial creditor, claim would have to be accorded due consideration in category to which it....
(1) Corporate Insolvency Resolution Process – Timeline starts ticking only from date of admission of application for initiation of CIRP and not from date of filing the same – There is no fixed time l....
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
