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2020 (1) TMI 1330 - AT - Insolvency and BankruptcyDirection to IRP to constitute CoC - It is submitted that such direction itself made application under Rule 11 infructuous so that the parties cannot settle which is against the decision of the Hon ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. 2019 (1) TMI 1508 - SUPREME COURT . HELD THAT - Taking into consideration the fact that the Appellant has already settled the matter with the 2nd Respondent much prior to the constitution of the Committee of Creditors and two demand drafts have also been handed over on 9th January 2020 and the Interim Resolution Professional also accepted that the Committee of Creditors was not constituted by that date and the Application under Rule 11 of the NCLT Rules 2016 has been moved it is held that the Adjudicating Authority without disposing of the Application filed under Rule 11 of the NCLT Rules 2016 has no jurisdiction to defer the matter and direct the Interim Resolution Professional to constitute the Committee of Creditors to render Application filed under Rule 11 as infructuous - If the Adjudicating Authority (National Company Law Tribunal) is of the view that the Application under Rule 11 is fit to be rejected and only after rejecting the same it could have directed the Interim Resolution Professional to constitute the Committee of Creditors . The impugned order is dated 18th December 2019 and within a month i.e. prior to the constitution of the Committee of Creditors on 9th January 2020 the demand drafts had been prepared and handed over. For the said reason it is a fit case to entertain the Application under Rule 11 of the NCLT Rules 2016 and to allow the same. Application disposed as withdrawn.
Issues:
Application under Section 9 of the Insolvency and Bankruptcy Code, 2016; Settlement between parties prior to the constitution of the Committee of Creditors; Application for withdrawal under Rule 11 of the NCLT Rules, 2016; Jurisdiction of the Adjudicating Authority; Barred claims and limitation; Intervention by Asset Reconstruction Company; Setting aside of impugned order of admission; Payment of fees and costs to the Interim Resolution Professional; Disposal of the application under Section 9; Release of the Respondent Company from legal constraints; Independence of the Respondent Company; Effect on pending application under Section 7 by Asset Reconstruction Company; Settlement between Corporate Debtor and Asset Reconstruction Company. Analysis: The judgment by the National Company Law Appellate Tribunal in this case involved several critical issues. Firstly, the Appellant, an Operational Creditor, had filed an Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor. However, the matter was settled between the parties before the constitution of the Committee of Creditors, with the Operational Creditor claiming that the settlement amount had been paid. This raised questions about the need for further proceedings. Moreover, an Application for withdrawal under Rule 11 of the NCLT Rules, 2016 was also made by the Operational Creditor, but the Adjudicating Authority's direction to constitute the Committee of Creditors complicated the settlement process. The jurisdictional aspect was crucial here, with the Tribunal emphasizing that the Adjudicating Authority should have first disposed of the Rule 11 application before directing the constitution of the Committee of Creditors. Another significant issue was the consideration of claims by the Asset Reconstruction Company, which had filed an application under Section 7 of the I&B Code against the Corporate Debtor. The Tribunal noted the pendency of this matter and highlighted the need for a separate case for Rule 11 application. The judgment ultimately set aside the impugned order of admission and allowed the Operational Creditor to withdraw its application. In terms of financial obligations, the judgment mandated the Corporate Debtor to pay fees and costs to the Interim Resolution Professional, taking into account the amount already paid by the Operational Creditor. The Respondent Company was released from legal constraints, allowed to operate independently through its Board of Directors, and the pending application under Section 7 by the Asset Reconstruction Company was to be decided independently. Overall, the judgment addressed various legal intricacies, including settlement procedures, jurisdictional boundaries, limitation issues, and the rights and obligations of the parties involved, providing a comprehensive resolution to the complex insolvency matter at hand.
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