2019 (4) TMI 1909 - AT - Insolvency and Bankruptcy

Permission for withdrawal of application - the terms of settlement reached finality and implemented on 20th February 2019 - HELD THAT - The present case is covered by the decision of Honble Supreme Court in Swiss Ribbons Pvt. Ltd. Anr. Vs. Union of India Ors. 2019 (1) TMI 1508 - SUPREME COURT and the Adjudicating Authority should have exercised its inherent power and closed the application under Section 7. Mr. Arvind Sinha Advocate wants to file an intervention application on behalf of one of the Financial Creditor. However in view of the settlement reached such prayer is not allowed. If any Financial Creditor wants to file claim against the Corporate Debtor he may move before the appropriate forum for appropriate relief. The impugned order dated 13th March 2019 is set aside and the prayer made on behalf of the Financial Creditor Oriental Bank of Commerce is accepted and Financial Creditor is allowed to withdraw its application under Section 7 which stands disposed of as withdrawn. Application dismissed as withdrawn.

Summary

Issues Involved:
1. Applicability of judgment in Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India and Ors.
2. Settlement between Corporate Debtor and Financial Creditor.
3. Constitution of Committee of Creditors.
4. Exercise of inherent power by Adjudicating Authority.
5. Intervention application by Financial Creditor.
6. Withdrawal of application under Section 7.
7. Setting aside of impugned order and related actions.
8. Declaration of illegality of certain orders.
9. Release of Corporate Debtor from moratorium.

Analysis:

1. The appeal in this case was filed against an order passed by the Adjudicating Authority, where it was contended that the judgment in Swiss Ribbons Pvt. Ltd. case was not applicable to the present application. The Appellant argued that a settlement had been reached between the Corporate Debtor and the Financial Creditor before the constitution of the Committee of Creditors. The Adjudicating Authority dismissed the application, but the Appellant sought an order based on the observations of the Supreme Court in the Swiss Ribbons case.

2. The settlement between the Corporate Debtor and the Financial Creditor was confirmed during the proceedings. The Financial Creditor accepted that the terms of settlement had been finalized and implemented before the constitution of the Committee of Creditors. This settlement was a crucial aspect considered by the Adjudicating Authority in its decision.

3. The constitution of the Committee of Creditors on 1st March, 2019, was a pivotal event in this case. The timing of the settlement in relation to the formation of the Committee of Creditors played a significant role in determining the maintainability of the application under Section 7.

4. The Adjudicating Authority was expected to exercise its inherent power and close the application under Section 7 in light of the settlement between the parties and the precedents set by the Supreme Court in the Swiss Ribbons case. The Authority's failure to do so was a central issue raised in the appeal.

5. An intervention application by another Financial Creditor was disallowed due to the settlement reached between the parties. The settlement had a bearing on the rights of other creditors to intervene in the proceedings, emphasizing the impact of such agreements on the course of insolvency proceedings.

6. The Financial Creditor, Oriental Bank of Commerce, was allowed to withdraw its application under Section 7 in light of the settlement and the subsequent developments. The withdrawal of the application marked a significant step towards resolving the insolvency matter outside the formal insolvency process.

7. The Appellate Tribunal set aside the impugned order of the Adjudicating Authority and allowed the Financial Creditor to withdraw its application under Section 7. This decision had far-reaching implications, leading to the closure of the proceedings and the release of the Corporate Debtor from the constraints imposed by the insolvency process.

8. The Tribunal declared certain orders, including the appointment of the Resolution Professional and the actions taken thereafter, as illegal. The Corporate Debtor was granted the freedom to operate independently through its Board of Directors, signaling a definitive conclusion to the insolvency proceedings in this case.

9. The appeal was allowed with specific observations and directives, but no costs were awarded. The judgment provided a comprehensive resolution to the issues raised, emphasizing the importance of settlements and the exercise of judicial discretion in insolvency matters.