In the case of Brilliant Alloys Private Limited Vs. Mr. S. Rajagopal & Others [Special Leave to Appeal (C) No(s). 31557/2018], the Hon’ble Supreme Court allowed the withdrawal of the Corporate Insolvency Resolution Process (“CIRP”) application under the Insolvency and Bankruptcy Code, 2016 (“IBC”) after the issuance of the invitation for expression of interest. The appeal was preferred against the impugned judgment of NCLT, Chennai.

Herein, an application was filed by the Resolution Professional (“RP”) of the Corporate Debtor for withdrawal of the CIRP application before the NCLT on the ground that all the claims that had been raised by the Operational and Financial Creditors of the Corporate Debtor had been settled by the Corporate Debtor.

The application for withdrawal of the CIRP application was filed under Section 60 (5) of the Code before the NCLT, which confers a larger power to the NCLT to decide upon any CIRP application or related proceedings, initiated by or against the Corporate Debtor. The CIRP application was filed under Section 60(5) of the Code instead of Section 12A of the Code since the settling of accounts took place after the issuance of invitation for expression of interest under Regulation 36A of the CIRP Regulations.

Section 12A of the Code read with Regulation 30A of the CIRP Regulations unambiguously deals with the withdrawal of CIRP application after it has been accepted by the NCLT. Section 12A of the Code provides that the CIRP application can be withdrawn by the RP or the Corporate Debtor after admission or acceptance, if the withdrawal has been approved by ninety per cent (90%) voting share of the Committee of Creditors (“CoC”). Further, Regulation 30A of the CIRP Regulations imposes an additional condition on the withdrawal of the CIRP application. The condition imposed is that the CIRP application shall be filed before the issuance of invitation for expression of interest under Regulation 36A of the CIRP Regulations.

NCLT Chennai dismissed the withdrawal application on the ground that since Regulation 30A of the CIRP Regulations imposes a specific condition for the withdrawal application, i.e., it has to be filed before the invitation for expression of interest has been placed.

When the matter was heard by the Hon’ble Supreme Court, it set aside the order of the NCLT and held that Regulation 30A of the CIRP Regulations had to be read along with the main provision, which was Section 12A of the Code, which provides for no such additional condition nor specifies a particular time limit for withdrawal of application. The Hon’ble Supreme Court held that the additional condition provided under Regulation 30A of the CIRP Regulations can only be considered as directory in nature reliant on the facts.