2020 (7) TMI 768 - AT - Insolvency and Bankruptcy

Maintainability of application under Section 7 of the I B Code - settlement process at pre-admission stage - HELD THAT - It is manifestly clear that the application under Section 7 of the I B Code came to be disposed of at the pre-admission stage and no order of admission or rejection of application was passed by the Adjudicating Authority keeping in view the nature of claims which admittedly were relatable to a Housing Project. The Adjudicating Authority appears to have been influenced by the fact that claims of the maximum number of stakeholders have been settled which included some claims settled at pre-admission stage before the Adjudicating Authority. In so far as the remaining claims were concerned, the Adjudicating Authority allowed a definite time frame viz. 3 months giving liberty to the claimant(s) whose claims would remain unsettled after expiry of the given time frame, to come back and re-agitate the matter. It cannot be said that the impugned order is of such a nature which is prejudicial to the rights and interests of any of the stakeholders. The claimant(s) who may be dissatisfied or whose claims remain unsettled during the given time frame can approach the Adjudicating Authority who has not shut its doors. Assailing of the impugned order in appeal would not be the appropriate course - bearing in mind that the settlement process set in motion at the pre-admission stage is supported by the Consent Terms filed by some of the stakeholders, though it may not be all encompassing, this appeal would not lie. Appeal is not maintainable - appeal dismissed.

Summary

Issues: Disposal of Company Petition based on Joint Consent Terms, Settlement of claims by Corporate Debtor, Timeframe for settlement of remaining claims, Pre-admission stage disposal of application under Section 7 of I&B Code, Impact of COVID-19 lockdown on business operations, Maintaining primacy of resolving disputes in Housing Projects.

Analysis:
1. The Appellants, claiming to be Financial Creditors as lenders of the Corporate Debtor, appealed against the order of the Adjudicating Authority disposing of the Company Petition based on Joint Consent Terms filed by the parties. The Authority directed the Corporate Debtor to settle remaining claims within three months and allowed aggrieved parties to approach again if dissatisfied with the settlement process.

2. The Adjudicating Authority observed that the Housing Project matter involved stakeholders like Allottees and Investors. It noted that 140 Investors' claims were settled, 13 Petitioners' claims were resolved, 40 were in the process of settlement, and 39 remained pending. The Authority directed the Corporate Debtor to expedite settlement within three months, giving liberty to unsatisfied claimants to re-agitate the matter.

3. The application under Section 7 of the I&B Code was disposed of at the pre-admission stage due to the nature of claims related to the Housing Project. The Authority allowed a three-month timeframe for settlement, emphasizing the seriousness of the settlement process and the option for unsatisfied claimants to return for resolution.

4. The judgment highlighted that the impugned order did not prejudice any stakeholder's rights and interests. It emphasized that the Adjudicating Authority remained open for claimants whose claims were unsettled after the given timeframe, indicating that appealing the order would not be appropriate.

5. Acknowledging the impact of the COVID-19 lockdown on business operations, the judgment recognized the need for flexibility in adhering to timelines set by the impugned order. It stressed the importance of prioritizing the resolution of disputes in Housing Projects and avoiding pushing the Corporate Debtor into liquidation as a last resort.

6. Ultimately, the appeal was deemed not maintainable as the settlement process initiated at the pre-admission stage was supported by Consent Terms, and no legal infirmity was found in the impugned order. The dismissal of the appeal did not prevent the Appellants from approaching the Adjudicating Authority as per the order if their claims remained unsettled by the Corporate Debtor.