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NCLAT Upholds Impossibility of Section 12A Withdrawal During Liquidation and Exempts SCC Requirement for Pre-Amendment Liquidations

The NCLAT upheld the impossibility of withdrawing an application under Section 12A during liquidation and exempted the requirement for constituting a Stakeholders Consultation Committee (SCC) for liquidations commenced before the amendment.


The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka reviewed an appeal and observed that an application under Section 12A of the Insolvency and Bankruptcy Code for withdrawal of the Corporate Insolvency Resolution Process is not maintainable after the commencement of liquidation proceedings, and the Liquidator is not required to constitute a Stakeholders Consultation Committee (SCC) for liquidation processes that began before the relevant regulatory amendments.


The Appeals were filed by the Appellant contesting the Order dated May 31, 2024, issued by the National Company Law Tribunal (NCLT), Chandigarh Bench, which dismissed four applications related to the Corporate Insolvency Resolution Process (CIRP) of M/s. Hind Motors India Ltd. The CIRP for the Corporate Debtor began on March 9, 2017, under Section 10 of the Insolvency and Bankruptcy Code (IBC) and was followed by a Liquidation Order on September 12, 2017. The Liquidation process was challenged by the former Director, Mr. Ashish Mohan Gupta, whose appeal was dismissed on April 26, 2018. Subsequent attempts to halt the sale process through various applications, including those filed on May 24, 2021, and December 2, 2022, were also rejected by the NCLT.


The Appellant's request under Section 12A of the IBC, which seeks withdrawal of applications after the commencement of liquidation, was denied by the NCLT on the grounds that such a withdrawal is not permissible during liquidation. The NCLT noted that the application under Section 12A was made at the behest of Mr. Gupta and was ineligible due to his barred status under Section 29A of the IBC. Additionally, the NCLT observed that the Liquidator had already withdrawn a prior sale notice, making further challenges to the auction notices unjustified.


The Appellant's reliance on the judgment in V Navneetha Krishnan was found to be misplaced, as the NCLT's interpretation of the IBC and its regulations, including Regulation 2B and the amendments related to the Stakeholders Consultation Committee (SCC), affirmed that Section 12A does not apply once liquidation has commenced. The NCLAT upheld the NCLT's decision, concluding that the Appellant's submissions lacked merit and dismissed the appeals accordingly.

 

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