2018 (10) TMI 1909 - AT - Insolvency and Bankruptcy

Winding up of company - Section 433-434 of the Companies Act, 1956 - HELD THAT - It is clear that only after completion of ten days and if the matter has not been settled, an application under Section 9 in Form-5 can be filed. Any application under Section 9 preferred before the completion of 10 days cannot be entertained and admitted by the Adjudicating Authority. Application under Section 9, therefore, being not maintainable on the date the application under Section 9 was filed, the impugned order dated 17th May, 2018 cannot be sustained - it is made clear that the transfer of petition be abated in terms of Rule 5. The order(s) passed by Adjudicating Authority appointing Interim Resolution Professional , declaring moratorium, freezing of account and all other order(s) passed by Adjudicating Authority pursuant to impugned order and action, if any, taken by the Interim Resolution Professional , including the advertisement, if any, published in the newspaper calling for applications and all such orders and actions are declared illegal and are set aside. The application preferred by Respondent is dismissed as abated. Appeal disposed off.

Summary

Issues:
1. Application under Section 433-434 of the Companies Act, 1956 for winding up.
2. Conversion of application into an application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
3. Challenge to the order of admission, moratorium, and appointment of Interim Resolution Professional.
4. Existence of a dispute regarding the debt.
5. Compliance with Section 9 of the I&B Code.
6. Entertainability of the application under Section 9 before the completion of ten days.
7. Setting aside the impugned order and abatement of the transfer of petition.
8. Declaration of illegal actions and orders, release of the Corporate Debtor, and closure of proceedings.
9. Fixing the fee of the Interim Resolution Professional.
10. Permission for both parties to file a fresh application or negotiate for settlement.

Analysis:
1. The Respondent filed an application under Section 433-434 of the Companies Act, 1956 for winding up of the Corporate Debtor due to a debt. The case was transferred to the Adjudicating Authority under the I&B Code, and the Respondent sought to convert it into an application under Section 9 of the I&B Code for the initiation of the Corporate Insolvency Resolution Process.

2. The Adjudicating Authority admitted the application, imposed a moratorium, and appointed an Interim Resolution Professional. The Director of the Corporate Debtor challenged this order, citing the issuance of notice under Section 8(1) on the same date as the filing of Form-5 and highlighting the existence of a dispute regarding the debt.

3. Section 9 of the I&B Code outlines the process for initiating a corporate insolvency resolution process by an operational creditor. It mandates the completion of ten days from the notice demanding payment before filing an application under Section 9. Failure to adhere to this timeline renders the application not maintainable.

4. The Appellate Tribunal set aside the impugned order, abated the transfer of the petition, declared the actions and orders illegal, released the Corporate Debtor, and directed the closure of proceedings. The Corporate Debtor was allowed to function independently, and the fee of the Interim Resolution Professional, if appointed, was to be fixed.

5. The Tribunal clarified that setting aside the previous order did not prevent either party from filing a fresh application under Section 9 after issuing the required notice or engaging in negotiations for settlement. The appeal was disposed of with no order as to costs, considering the circumstances of the case.