2017 (11) TMI 699 - AT - Companies Law

Adjudicating Authority appointing any Interim Resolution Professional or declaring moratorium, freezing the account - condonation of delay - Held that - Order(s), if any, passed by learned Adjudicating Authority appointing any Interim Resolution Professional or declaring moratorium, freezing the account and all other order(s) passed by Adjudicating Authority pursuant to impugned order dated 28th April, 2017 and action, if any, taken by the Interim Resolution Professional , including the advertisement, if any, published in the newspaper calling for applications etc. and all such orders and actions are declared illegal and are set aside. The application preferred by the respondent under Section 9 of the I&B Code, 2016 is dismissed. Learned Adjudicating Authority will now close the proceeding. The appellant company is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect. Learned Adjudicating Authority will fix the fee of Interim Resolution Professional , if appointed, and the appellant will pay the fees of the Interim Resolution Professional , for the period he has functioned as per their settlements. The appeal is allowed with the aforesaid observations and directions.

Issues:
1. Condonation of delay in filing appeal due to lack of notice to the Corporate Debtor.
2. Violation of natural justice in passing the impugned order.
3. Settlement of dispute between the parties.
4. Declaration of impugned order as illegal and setting aside all related actions.
5. Dismissal of the application under Section 9 of the I&B Code, 2016.
6. Release of the appellant company from legal restrictions and permission to function independently.
7. Payment of fees to the Interim Resolution Professional.
8. No order as to costs in the appeal.
9. Permission for other creditors to approach the appropriate forum.

Analysis:
1. The judgment deals with an application for condonation of delay in filing an appeal due to the appellant, a Corporate Debtor, not receiving notice of the impugned order dated 28th April, 2017. The delay was explained as the appellant only becoming aware of the order on 20th July, 2017, through the Interim Resolution Professional, and filing the appeal on 26th July, 2017. The respondent, an Operational Creditor, did not dispute the lack of notice to the Corporate Debtor.

2. The judgment highlights the violation of rules of natural justice as the impugned order was passed without notice to the Corporate Debtor. Despite the settlement of the dispute between the parties, it was acknowledged that the impugned order was issued in contravention of the principles of natural justice, leading to its setting aside.

3. All actions and orders stemming from the impugned order, including the appointment of the Interim Resolution Professional, declaration of moratorium, and any steps taken by the Professional, were declared illegal and set aside. The application under Section 9 of the I&B Code, 2016, was dismissed, and the Adjudicating Authority was directed to close the proceedings.

4. The appellant company was granted relief from legal constraints and permitted to operate independently through its Board of Directors immediately. The fees of the Interim Resolution Professional, if appointed, were to be determined by the Adjudicating Authority, and the appellant was directed to pay the fees as per the settlements reached.

5. The appeal was allowed with the specified observations and directions, and no costs were awarded in the circumstances of the case. However, it was clarified that the impugned order would not prevent other Financial Creditors or Operational Creditors from seeking recourse before the appropriate forum, ensuring the rights of other creditors were preserved.

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