2019 (6) TMI 638 - AT - Insolvency and Bankruptcy

Admission of application - Section 9 of the Insolvency and Bankruptcy Code, 2016 - the total amount has been paid to the Operational Creditor and the Committee of Creditors has not yet been constituted - HELD THAT - The order (s), passed by the Adjudicating Authority appointing Interim Resolution Professional , declaring moratorium, freezing of account, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action, if any, 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 is dismissed. Learned Adjudicating Authority will now close the proceeding. The Corporate Debtor (company) is released from all the rigour of law and is allowed to function independently through its Board of Directors with immediate effect. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against the order admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016
- Constitution of Committee of Creditors
- Payment of dues to Operational Creditor
- Payment of Resolution Cost to Interim Resolution Professional
- Legal actions taken by Interim Resolution Professional
- Setting aside the impugned order and releasing the Corporate Debtor

Analysis:
1. The appeal was filed against the order passed by the Adjudicating Authority admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Appellant, a shareholder of the Corporate Debtor, contested the admission of the application and stated readiness to pay the total dues to the Operational Creditor. The Committee of Creditors had not been constituted at the time of the appeal.

2. The Appellant's counsel submitted a Demand Draft of ?66,87,540, which covered the total dues owed to the Operational Creditor. Subsequently, discussions revealed that the admitted claim by the Interim Resolution Professional was ?74,30,682, including interest, and an additional ?2 lakhs for Resolution Cost. The Interim Resolution Professional also claimed a fee for the working period.

3. The Appellant presented three Demand Drafts totaling ?76,30,682, which included the principal amount, interest, and the Resolution Cost paid on behalf of the Interim Resolution Professional. These were handed over to the Operational Creditor for onward transmission. Another Demand Draft for ?2,16,000 in the name of the Interim Resolution Professional was to be handed over later due to the absence of the professional.

4. As the total amount owed to the Operational Creditor was paid, and the Committee of Creditors had not been constituted, the impugned order admitting the application under Section 9 of the Insolvency and Bankruptcy Code was set aside. Consequently, all orders appointing the Interim Resolution Professional, declaring moratorium, freezing accounts, and any other actions taken were declared illegal and dismissed. The Corporate Debtor was released from the legal restrictions and allowed to function independently through its Board of Directors.

5. The appeal was allowed with the above observations, and no costs were awarded in the case. The Adjudicating Authority was directed to close the proceedings, thereby concluding the matter in favor of the Appellant.