2017 (10) TMI 1563 - AT - Insolvency and Bankruptcy

Transfer of pending proceedings of Winding up - inability to pay debts - Rule 5 of Companies (Transfer of Pending Proceedings) Rules 2016 - HELD THAT - In view of the fact that as per the requirement the respondent has not submitted the information as required for admission of application under section 9 before the Adjudicating Authority it is held that in terms of rule 5 and in absence of non-supply of requisite information s in terms of the rule aforesaid the application cannot be treated as an application under section 9 for initiation of corporate insolvency resolution process of the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Transfer of winding up petition under Companies Act, 1956 to Adjudicating Authority under Insolvency and Bankruptcy Code, 2016; Admittance of the case under section 9 of the I & B Code; Compliance with Companies (Transfer of Pending Proceedings) Rules, 2016; Validity of the order passed by the Adjudicating Authority; Requirement of submission of information under rule 5 for admission of application under section 9; Consequences of non-supply of requisite information; Setting aside the impugned order and dismissing the respondent's application.

Analysis:
The respondent filed a winding-up petition under sections 433 and 434 of the Companies Act, 1956, which was transferred to the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority treated the petition as an application under section 9 of the I & B Code, admitted the case, declared moratorium, and called for names from the Insolvency and Bankruptcy Board of India, leading to the impugned order dated 17th August, 2017.

The appellant contended that no notice under section 8 was issued, Form 5 was not served, and no application under section 9 or Form 5 was filed before the Adjudicating Authority. The respondent, while denying certain averments, failed to provide the necessary information for admission under section 9, as required by rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016.

The Tribunal found that due to the respondent's failure to submit the required information, the application could not be considered as an application under section 9 for initiating the corporate insolvency resolution process of the appellant. Consequently, the impugned order was set aside, and all related actions, including the appointment of an interim resolution professional and freezing of accounts, were deemed illegal and dismissed.

As a result of the Tribunal's decision, the appellant company was released from legal constraints and permitted to operate independently through its Board of directors. The Adjudicating Authority was directed to determine the fee of the interim resolution professional, to be paid by the appellant. The appeal was allowed with the mentioned observations and directions, with no costs imposed on either party.