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2019 (3) TMI 957 - AT - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution Process - pre-existing disputes - HELD THAT - No reply-affidavit has been filed by the Operational Creditor against the statement made by the Appellant that there were pre-existing disputes intimated by letter dated 10.04.2017. Taking into consideration the aforesaid fact, that there were pre-existing disputes between the parties and the matter have been settled subsequently on 08.02.2018 and the Committee of Creditors have not yet been constituted, we set aside the impugned order dated 08.02.2019. In effect, order (s) passed by AA appointing 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 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 the Respondent under Section 9 of the I&B Code is dismissed.
Issues: Application under Section 9 of Insolvency & Bankruptcy Code for Corporate Insolvency Resolution Process, Settlement agreement between parties, Pre-existing disputes, Constitution of Committee of Creditors, Legality of orders passed by Adjudicating Authority.
Analysis: The judgment pertains to an appeal filed by the Director/Shareholders of a company, the Corporate Debtor, against the admission of an application under Section 9 of the Insolvency & Bankruptcy Code by the Adjudicating Authority. The application was filed by the Operational Creditor, 'Agarwal Industries Pvt. Ltd.', seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, 'Amit Feeds Limited'. The appeal was heard by the National Company Law Appellate Tribunal. During the proceedings, it was brought to light that a settlement agreement had been reached between the parties on 08.02.2019, with a Demand Draft prepared for payment in favor of the Operational Creditor. The Constituted Attorney of the Operational Creditor acknowledged the settlement and confirmed that there were pre-existing disputes between the parties, which had been resolved through the settlement agreement. Notably, the Committee of Creditors had not been constituted at the time of the appeal. Considering the settlement reached between the parties and the absence of a constituted Committee of Creditors, the Appellate Tribunal set aside the impugned order dated 08.02.2019. Consequently, all orders passed by the Adjudicating Authority appointing an Interim Resolution Professional, declaring moratorium, freezing accounts, and other related actions were declared illegal and set aside. The application under Section 9 of the Insolvency & Bankruptcy Code was dismissed, and the Corporate Debtor was released from the proceedings to function independently through its Board of Directors. Furthermore, the Adjudicating Authority was directed to determine the fee of the Interim Resolution Professional, with the Corporate Debtor being responsible for payment for the period of their functioning. The appeal was allowed with the mentioned observations and directions, with no costs imposed on any party involved. The judgment thus concluded by closing the proceedings and granting relief to the Corporate Debtor to resume operations independently.
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