2018 (7) TMI 1689 - AT - Insolvency and Bankruptcy

Corporate insolvency proceedings - Held that - There is a dispute about invoices issued by the Operational Creditor, one to the Appellant (Corporate Debtor) and another to one M/s Pebble Bay Developers Pvt. Ltd. , which is sister concern of the Corporate Debtor, we are of the view that application under Section 9 was not maintainable. For the said reason we set aside the impugned order dated 26th April, 2018 passed by the Adjudicating Authority (National Company Law Tribunal) but we do not remit the case back to the Adjudicating Authority as settlement has been reached between the parties. In effect, order(s) passed by Ld. Adjudicating Authority appointing any Interim Resolution Professional , declaring moratorium, freezing of account, and all other order(s) passed by Adjudicating Authority pursuant to impugned order and action taken by the Interim Resolution Professional , including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by Respondent under Section 9 of the I&B Code, 2016 is dismissed. Learned Adjudicating Authority will now close the proceeding. The Corporate Debtor 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 , and the Corporate Debtor will pay the fees of the Interim Resolution Professional

Summary

Issues:
1. Dispute regarding the authenticity of the invoice on which the notice under Section 8(1) was issued.
2. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to the disputed invoices.
3. Settlement between the parties and its impact on the case.
4. Legality of the orders passed by the Adjudicating Authority and actions taken by the Interim Resolution Professional.

Analysis:
The appeal was filed by the Director of a Corporate Debtor against the order passed by the Adjudicating Authority admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 by an Operational Creditor. The dispute arose regarding the authenticity of the invoice on which the notice under Section 8(1) was issued, as two different invoices with the same number but issued to different companies were presented during the proceedings.

The Respondent claimed that the matter had been settled between the parties, but failed to provide a clear explanation for the discrepancy in the invoices. Due to the dispute over the invoices issued by the Operational Creditor to the Corporate Debtor and another company related to it, the Appellate Tribunal found the application under Section 9 not maintainable. Consequently, the impugned order was set aside, and the case was not remitted back to the Adjudicating Authority due to the settlement between the parties.

As a result of the decision, all orders passed by the Adjudicating Authority appointing an Interim Resolution Professional, declaring a moratorium, freezing accounts, and any other related actions were declared illegal and set aside. The application under Section 9 of the I&B Code was dismissed, and the Corporate Debtor was released from the legal constraints to function independently through its Board of Directors immediately. The Adjudicating Authority was tasked with fixing the fee of the Interim Resolution Professional, to be paid by the Corporate Debtor, with no additional costs imposed in the circumstances.

In conclusion, the appeal was allowed based on the aforementioned reasons, highlighting the importance of resolving disputes over invoices and the impact of settlements between parties on the maintainability of insolvency applications under the I&B Code.