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Go First: Legal experts say can withdraw proposal till CoC is formed, as CEO insists ‘promoters committed’
- The NCLT move is viewed as the current promoters' inability to run the company. However, Khona has stated that they did not file for bankruptcy but for a 'resolution process' and to ‘protect our assets’
New Delhi/Mumbai: The decision of low-frills airline Go First to move to the National Company Law Tribunal (NCLT) on Tuesday has two unique characteristics. One, it's the first large conglomerate to move the bankruptcy court, and the other is that the airline's CEO, Kaushik Khona, insisted that the promoters remain committed.
The NCLT move is viewed as the current promoters' inability to run the company. However, Khona has stated that they did not file for bankruptcy but for a 'resolution process' and to "protect our assets."
“We have not filed for bankruptcy, we are filing for a resolution process... by making an application under sector-10... we have moved to NCLT to find out if we can protect our assets and resume operations under the act. The purpose of the application is for resolution,” Khona said in an interview to a television channel.
“Promoters are still committed... we are ready to restart operations as soon as we have a moratorium available,” he added.
While Khona’s statements may bewilder many, it is worth mentioning that he was ‘registered as Insolvency Professional with IBBI (Insolvency & Bankruptcy Board of India)’ between December 2018 and August 2020, according to his Linkedin profile.
This has raised a key question on whether a company, which has filed for bankruptcy, withdraws its application even after submission by the NCLT. Legal experts, Mint spoke to, say that the proposal can be withdrawn before the Committee of Creditors (CoC) is constituted, which may take three to four weeks post the acceptance by the NCLT.
“Withdrawal of insolvency filing can be done at any time prior to admission with permission of NCLT. Once admitted withdrawal is under Sec 12A of IBC read with Regulation 30A of CIRP regulations pre and post CoC constitution. Post CoC Constitution, it will require approval by 90 percent of CoC,” said Piyush Mishra, Partner at Luthra & Luthra Partners.
Another lawyer added that there is a procedure available for withdrawal of an IBC application, which is simpler till the time CoC is not formed.
“If the application has not yet been admitted by NCLT, then the petitioner is free to withdraw the same anytime. Even if the petition is admitted but a committee of creditors has not yet been formed, the IBC application can still be withdrawn by the applicant by approaching the NCLT. However, if the COC has been formed already, then withdrawal of such application will need consent of 90% of financial creditors. Withdrawing the IBC application doesn’t happen very often unless the creditors and the debtor company have entered into any settlement or there is a potential investor or buyer to support the proposal put up by the company,” said Ashish Pyasi Associate Partner at Dhir and Dhir Associates.
While a voluntary insolvency application can be withdrawn by the company before admission, it gets a bit tricky after the tribunal admits it. There are two scenarios applicable to withdrawal after admission, involving Section 12A of the insolvency code. In cases where a committee of creditors (CoC) has not been constituted, the company has to apply through the interim resolution professional (IRP), seeking withdrawal.
“Since this is a voluntary insolvency application, Go Air can withdraw it any time before admission. However, once admitted and the committee of creditors (CoC) is formed, withdrawal is only possible under Section 12A of the Insolvency and Bankruptcy Code which requires 90% of the CoC members by vote share approving it,” said Anindya Mazumdar, Partner, Singhania & Co.
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Business NewsCompaniesNewsGo First: Legal experts say can withdraw proposal till CoC is formed, as CEO insists ‘promoters committed’
First Published:3 May 2023, 09:32 PM IST
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