2017 (12) TMI 1104 - AT - Insolvency and Bankruptcy

Corporate insolvency procedure - maintainability of application for procedure - Held that - From the record we find that a sub-contract works agreement was reached between the parties. The scheduled completion date in relation to works of agreement dated 19th April, 2011 was 31st December, 2012. According to appellant, the respondent/applicant failed and ignored to complete the agreement works by that date. The respondent/applicant continued the works till May, 2014 and executed only 78% of the agreement value of works and had wilfully abandoned the works w.e.f May, 2014. From the aforesaid fact not disputed by respondent, it is clear that there was a dispute in existence prior to issuance of demand notice under sub-section (1) of Section 8 of the I&B Code and for that the application under Section 9 of the I&B Code was not maintainable. Prima facie, we are of the opinion that as the I&B Code do not empower the Adjudicating Authority to suggest any name or appoint any Interim Resolution Professional /Resolution Professional of its own choice. However, as we find that the parties have settled the dispute and initiation of Resolution process under section 9 of the I&B Code was not maintainable, in view of existence of dispute, we leave the question open as to whether the Adjudicating Authority has power to appoint any person of its own choice or not which will be decided in an appropriate case.

Issues:
1. Applicability of Section 9 of the Insolvency and Bankruptcy Code, 2016
2. Appointment of an 'Interim Resolution Professional'
3. Existence of a dispute prior to the demand notice under Section 8 of the Insolvency and Bankruptcy Code
4. Authority of the Adjudicating Authority to appoint a Resolution Professional of its own choice
5. Settlement between the parties

Analysis:
1. The appeal was filed against an order admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, by the Adjudicating Authority. The order included the appointment of an 'Interim Resolution Professional' and the initiation of the 'Corporate Insolvency Resolution Process.'

2. The appellant argued that a dispute existed before the demand notice under Section 8 of the Insolvency and Bankruptcy Code was issued. The Adjudicating Authority appointed an 'Interim Resolution Professional' without a suggestion from the 'Operational Creditor' or the Board, raising questions about the authority's power to make such appointments.

3. The respondent accepted that the 'Interim Resolution Professional' was not appointed based on their suggestion. It was revealed that the parties had reached a settlement in writing, which they considered binding.

4. A sub-contract works agreement was discussed, indicating that the respondent failed to complete the works as per the agreement terms. The appellant claimed that the respondent abandoned the works willfully, leading to a dispute existing before the demand notice was issued.

5. The Appellate Tribunal found that the application under Section 9 was not maintainable due to the existence of a dispute before the demand notice. The parties had settled the dispute, rendering the initiation of the Resolution process unnecessary. The Tribunal held that the Adjudicating Authority did not have the power to appoint an 'Interim Resolution Professional' of its own choice.

6. Consequently, the impugned order admitting the application under Section 9 was set aside. All orders related to the appointment of the 'Interim Resolution Professional,' declaration of moratorium, freezing of accounts, and other actions were declared illegal and dismissed. The appellant company was released from the legal constraints and allowed to function independently.

7. The 'Interim Resolution Professional' could not function due to an interim stay order, eliminating the need for payment. The appeal was allowed, and the Interlocutory Application was disposed of with no costs awarded in the case.

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