2017 (7) TMI 1452 - AT - Insolvency and Bankruptcy

Application admitted u/s 9 of IBC admitted and moratorium declared - Negotiation with the settlement of dispute - HELD THAT - The appellant submits that the appellant is negotiating with the respondent to settle the dispute. However, that cannot be a ground to interfere with the impugned order in absence of any illegality. Learned counsel appearing on behalf of the Operational Creditor next contended that the parties have, in fact, settled the dispute and payment has been made. However, it is not in dispute that the settlement has been made after admission of the application under Section 9 of the I B Code, 2016. In view of Rule 8 of Insolvency Bankruptcy (Adjudicating Authority) Rules, 2016, it was open to the Operational Creditor to withdraw the application under Section 9 before its admission but once it was admitted, it cannot be withdrawn even by the Operational Creditor, as other creditors are entitled to raise claim pursuant to public announcement under Section 15 read with Section 18 of the I B Code, 2016. The appeal cannot be allowed. The prayer as made is accordingly rejected.

Summary

Issues: Challenge to order admitting application under Section 9 of the Insolvency and Bankruptcy Code, 2016; Settlement between the parties after admission of the application; Withdrawal of application under Section 9; Rights of other creditors.

Analysis:

The judgment by the National Company Law Appellate Tribunal, New Delhi, involved a challenge to an order passed by the Adjudicating Authority admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The appellant sought to interfere with the impugned order on the grounds of negotiating a settlement with the respondent. However, the Tribunal held that negotiation alone cannot be a basis for interference unless there is illegality involved. The Operational Creditor contended that a settlement had been reached post the admission of the application, but the Tribunal highlighted that as per Rule 8 of the Insolvency & Bankruptcy (Adjudicating Authority) Rules, 2016, once an application is admitted, it cannot be withdrawn, even by the Operational Creditor, as other creditors have the right to raise claims following the public announcement.

The Tribunal, based on the above reasons and the lack of merit in the appeal, rejected the prayer made by the appellant. However, it clarified that the impugned order would not hinder the appellant from satisfying and settling the claims of other creditors. If the appellant does so, the Insolvency Resolution Professional will inform the Adjudicating Authority for the closure of the resolution process. In such a scenario, the Adjudicating Authority may consider the case before the completion of the resolution process and close the matter accordingly. The appeal was dismissed with the mentioned observation, and no costs were awarded in this case.