2019 (3) TMI 150 - AT - Insolvency and Bankruptcy

Corporate insolvency process - pre-existence dispute - HELD THAT - From the record, we find that demand notice under Section 8(1) of the I&B Code was issued by the Respondents on 23rd October, 2017, but much prior to the same an e-mail was sent by the Respondent on 5th May, 2017 which was brought to the notice of the Adjudicating Authority. In view of such e-mail addressed by the Respondent demanding commission from the tenderer enquiry was made. E-mail dated 5th May, 2017 was enclosed as Annexure B , but in spite of the same, the Adjudicating Authority admitted the application under Section 9, without looking into the pre-existence dispute relating to such demand of commission and the question whether demand of commission was justified or not; cannot be decided by the Adjudicating Authority or by this Appellate Tribunal, we are of the opinion it was not a fit case for admission.

Summary

Issues:
Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 despite pre-existing dispute, settlement between parties, demand of commission, legality of orders passed by Adjudicating Authority, appointment of Interim Resolution Professional.

Analysis:

The appeal was filed by the Director of a Corporate Debtor against the order passed by the Adjudicating Authority admitting the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Appellant contended that there was a pre-existing dispute which was not considered by the Adjudicating Authority. It was also brought to light that the parties had settled the claim. On the other hand, the Respondent informed that a settlement had been reached, and the Resolution Process had progressed with Resolution Plans submitted by different Resolution Applicants.

The record revealed that a demand notice under Section 8(1) of the I&B Code was issued by the Respondent, but an email sent by the Respondent prior to the notice was not considered by the Adjudicating Authority. The email indicated a demand for commission from a tenderer, raising questions about the justification of the demand. The Appellate Tribunal opined that the pre-existence dispute regarding the demand for commission was not adequately examined before admitting the application under Section 9.

Consequently, the impugned order of the Adjudicating Authority was set aside by the Appellate Tribunal. The settlement between the parties was recognized, and the parties were directed to act in accordance with the settlement terms. All orders passed by the Adjudicating Authority, including the appointment of the Interim Resolution Professional and actions taken, 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.

The Adjudicating Authority was tasked with determining the fee of the Interim Resolution Professional, to be paid by the Corporate Debtor for the period of their functioning. The appeal was allowed with the above observations, and no costs were awarded in the circumstances of the case.