2021 (1) TMI 1131 - AT - Insolvency and Bankruptcy

Admission of application filed under Section 9 of the Insolvency and Bankruptcy Code 2016 is set aside - CoC not constituted - rejection on the ground that a settlement has been arrived at between the Respondent No.1- Creditor and the Corporate Debtor - HELD THAT - Keeping in view the dictum of the Hon ble Apex Court in Swiss Ribbons and Ors. V. Union of India Ors 2019 (1) TMI 1508 - SUPREME COURT the Corporate Debtor may avail the opportunity of seeking exit from Corporate Insolvency Resolution Process (CIRP) at the stage of pre-constitution of COC but whether the same takes care of interest of all the stakeholders involved and can be permitted is a decision to be taken by the Adjudicating Authority on the peculiar facts of the case. It would therefore be appropriate for the Appellant to approach the Adjudicating Authority to seek exit from CIRP by filing the terms of settlement and the Adjudicating Authority will have to pass the appropriate order. Since it is submitted by learned counsel for the Appellant that the Adjudicating Authority could not be accessed due to holidays it is deemed appropriate to dispose off this appeal with direction to Appellant to approach the Adjudicating Authority for seeking exit after filing Settlement Terms before it. To enable the Appellant to seek such exit we direct that the COC shall not be constituted for one week from today.

Summary

Issues: Setting aside of order of admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to settlement between Creditor and Corporate Debtor; Non-constitution of Committee of Creditors (CoC) and its implications on Corporate Insolvency Resolution Process (CIRP).

In the judgment delivered by the National Company Law Appellate Tribunal, the main issue revolved around the setting aside of the order of admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to a settlement reached between the Creditor and the Corporate Debtor. The Appellant argued that the settlement occurred after the admission order, which should not invalidate the admission. The Tribunal emphasized that the absence of a settlement before the admission does not inherently make the admission order flawed. Furthermore, it was highlighted that the Committee of Creditors (CoC) had not been constituted yet, as confirmed by the Interim Resolution Professional (IRP). Referring to the Supreme Court's decision in "Swiss Ribbons and Ors. v. Union of India & Ors.", the Tribunal noted that the Corporate Debtor could seek exit from the Corporate Insolvency Resolution Process (CIRP) before the CoC formation. However, the decision to allow such exit needed to consider the interests of all stakeholders and be determined by the Adjudicating Authority based on the specific case facts.

Given the Appellant's difficulty in accessing the Adjudicating Authority due to holidays, the Tribunal directed the Appellant to approach the Adjudicating Authority for seeking exit by submitting the settlement terms. The Tribunal ordered that the CoC should not be constituted for a week to facilitate this process. The Respondent was granted the liberty to oppose the motion if legally permissible. The Tribunal stressed the importance of communicating a copy of the order promptly to the Adjudicating Authority to ensure compliance and further actions in the matter.