IBC | Section 12A Application Not Mandatory If No Other Creditors Are Involved & Settlement Is Reached: NCLAT New Delhi

The National Company Law Appellate Tribunal, Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson), Barun Mitral (Member-Technical), and Arun Baroka (Member-Technical), disposed of an appeal while holding that if no other claims have been received in the Corporate Insolvency Resolution Process (CIRP) and a full settlement has been reached between the parties, then it is not mandatory to file a Section 12A application under the IBC. Exercising its inherent power, the tribunal closed the CIRP proceedings. Background The appeal was filed by the corporate debtor, challenging the order passed by the Adjudicating Authority admitting the Section 7 application filed by the Financial Corporation. The appellant contended that the CIRP application was admitted without giving sufficient opportunity to the corporate debtor to present its defence. Also, the application seeking the modification of the order was pending before the adjudicating authority. Contention of the Parties The appellant contended that it was not given ample opportunity to provide its defence before the adjudicating authority. Furthermore, in furtherance of admitting the Section 7 application, the resolution professional has invited claims, but no claims have been received except the financial creditor's one. The counsel for the appellant argued that since no other claims have been received, hence, there is no necessity for the financial creditor to file a Section 12A application, which shall only be a formality, as the financial creditor has already been settled. While placing reliance on the Hon'ble Supreme Court's ruling in the case of GLAS Trust Company LLC Vs. BYJU Raveendran & Ors. in Civil Appeal No. 9986 of 2024 the appellant highlighted that in appropriate cases inherent power can be exercised to close the proceedings. NCLAT's Judgments Relying on the GLAS Trust Company LLC Vs. BYJU Raveendran & Ors. in Civil Appeal No. 9986 of 2024 judgment of the Hon'ble Supreme Court, the tribunal invoked its inherent power to close the proceedings. The tribunal observed that since no other claim has been received apart from that of the financial creditor's one and a full settlement has been reached between the parties, filing of a Section 12A application under the IBC, 2016 is not mandatory. The tribunal observed that in view of the settlement between the parties brought on record the proceedings of insolvency against the Corporate Debtor need to be closed. The tribunal lastly ordered the financial creditor as well as the corporate debtor to jointly share the expenses of the IRP. Case Title: Sachin Malde v. Hemant Nanji Chheda & Anr. Case Number: Company Appeal (AT) (Insolvency) No. 123 of 2024 For Applicant: Mr. Krishnendu Datta, Sr. Advocate with Mr. Anish Agarwal, Mr. Tejas Agarwal and Mr. Pratik Chakma, Advocates For Respondent: Mr. Rishi Kumar Singh Gautam, Advocate for R-2. Mr. Kartik Pandey, Advocate for R-1 Bench: Justice Ashok Bhushan (Chairperson), Barun Mitral (Member-Technical), and Arun Baroka (Member-Technical) Order Date: 02/04/2025 Click Here To Read/Download The Order

IBC | Section 12A Application Not Mandatory If No Other Creditors Are Involved & Settlement Is Reached: NCLAT New Delhi

Mohd.Rehan Ali

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