2017 (9) TMI 1447 - AT - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - eligible outstanding debt - Held that - Insolvency Resolution Process is not a recovery proceeding to recover the dues of the creditors. I & B Code, 2016 is an Act relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons and to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including the Government dues. Such being the object of the I & B Code 2016, if the interest of all the stakeholders are balanced and satisfied then to promote entrepreneurship and to ensure that the company continue to function as on going concern, it is desirable to close such proceeding without delay and going into technical rigour of one or other provisions, which are all otherwise futile for all purpose. In the circumstances, instead of interfering with the impugned order, we remit the case to the Adjudicating Authority for its satisfaction whether the interest of all stakeholders have been satisfied and whether one or other creditor has not raised any claim like Punjab National Bank, alter giving notice to individual claimant and taking into consideration of the Insolvency Resolution plan and report of the Insolvency Resolution Professional as may be prepared, the Adjudicating Authority may close the proceedings. Hope and trust that all the formalities will be completed by group of Financial Creditors and Insolvency Resolution Professional expeditiously and the Adjudicating Authority will pass appropriate order, in accordance with law after notice of hearing the parties

Summary

Issues Involved:
1. Admission of the application under Section 9 of the Insolvency and Bankruptcy Code (I&B Code), 2016.
2. Rejection of the withdrawal application post-admission.
3. Compliance with natural justice principles.
4. Satisfaction of creditors' claims and settlement.
5. Role and duties of the Insolvency Resolution Professional (IRP).
6. Formation and functioning of the Committee of Creditors (CoC).
7. Approval and implementation of the resolution plan.
8. Interpretation and application of relevant I&B Code provisions.

Detailed Analysis:

1. Admission of the application under Section 9 of the I&B Code, 2016:
The Respondent, an Operational Creditor, filed an application under Section 9 of the I&B Code for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Adjudicating Authority (Kolkata Bench) admitted the application on 20th April 2017, ordered the publication of notice, and declared a moratorium.

2. Rejection of the withdrawal application post-admission:
The Corporate Debtor, upon learning about the admission order, settled the disputes with the Operational Creditor and other creditors and filed an interlocutory application for withdrawal of the petition. The Adjudicating Authority rejected this application on 29th May 2017, citing that post-admission, withdrawal of the petition is not permissible under Rule 8 of the I&B Code (Application to Adjudicating Authority) Rules 2016.

3. Compliance with natural justice principles:
The appellant argued that the application was admitted without notice to the Corporate Debtor, violating natural justice principles. The order dated 20th April 2017 recorded the appearance of the applicant/respondent but made no reference to the Corporate Debtor's appearance.

4. Satisfaction of creditors' claims and settlement:
The IRP confirmed that the claims of all creditors had been paid, and the Punjab National Bank (PNB) had not declared their account as a Non-Performing Asset (NPA). The account remained standard, and payments were made from it.

5. Role and duties of the Insolvency Resolution Professional (IRP):
The IRP issued a public announcement as required under Section 15 of the I&B Code and Regulation 6(2)(b)(i) of the Insolvency Resolution Process for Corporate Persons Regulations, 2016. Claims from two creditors were received, and meetings of the CoC were held. Progress reports were submitted to the National Company Law Tribunal (NCLT).

6. Formation and functioning of the Committee of Creditors (CoC):
As per Section 21 of the I&B Code, the IRP constituted a CoC comprising the financial creditors. Meetings were conducted, and the CoC's decisions were made by a vote of not less than seventy-five percent of the voting share of the financial creditors.

7. Approval and implementation of the resolution plan:
The resolution plan must comply with Section 30 of the I&B Code, ensuring payment of insolvency resolution process costs, repayment of operational creditors' debts, management of the corporate debtor's affairs, and adherence to legal provisions. The Adjudicating Authority, upon satisfaction, may approve the resolution plan under Section 31, binding all stakeholders.

8. Interpretation and application of relevant I&B Code provisions:
The Tribunal emphasized that the I&B Code aims for reorganization and insolvency resolution in a time-bound manner to maximize asset value and balance stakeholders' interests. The Tribunal remitted the case to the Adjudicating Authority to verify if all stakeholders' interests were satisfied and if no creditor raised any claims. The Adjudicating Authority was directed to expedite the resolution process and close proceedings if satisfied.

Conclusion:
The appeal was disposed of with directions to the Adjudicating Authority to ensure all stakeholders' interests were met and to close proceedings if no claims were pending. The Tribunal highlighted the importance of balancing stakeholders' interests and promoting entrepreneurship under the I&B Code. No order as to costs was made.