2019 (12) TMI 561 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Section 9 of the Insolvency and Bankruptcy Code, 2016 - Appellant is negotiating for settlement with the 'Operational Creditor' and no 'Committee of Creditors' has been constituted - HELD THAT - Taking into consideration the fact that the 'Committee of Creditors' has not been constituted and the parties have already reached the settlement in the light of the decision of the Hon'ble Supreme Court in Swiss Ribbons (P.) Ltd. v. Union of India 2019 (1) TMI 1508 - SUPREME COURT and being satisfied, we exercise inherent power under Rule 11 of the National Company Law Appellate Tribunal, 2016 and allow the Respondent-'Operational Creditor' to withdraw the application under Section 9. The impugned order dated 6th March, 2019 admitting the application under Section 9 stands set aside. The 'Terms of Settlement' should be treated to be a decision and decree of this Appellate Tribunal - Moratorium rejected - application preferred by Respondent under Section 9 of the 'I B Code' is dismissed. Learned Adjudicating Authority will now close the proceeding.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Negotiation and settlement between the parties.
3. Non-constitution of the Committee of Creditors.
4. Terms of Settlement and its implications.
5. Withdrawal of the application under Section 9.
6. Setting aside the order of admission by the Adjudicating Authority.
7. Compliance with the Terms of Settlement and consequences of default.

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The Respondent, Hubergroup India Pvt. Ltd., filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, for initiating the Corporate Insolvency Resolution Process (CIRP) against Shreemataji Graphics Pvt. Ltd. (Corporate Debtor). The application was admitted by the National Company Law Tribunal (NCLT), Mumbai Bench, on 6th March 2019.

2. Negotiation and Settlement Between the Parties:
On 10th May 2019, the Appellant's counsel informed that negotiations for settlement with the Operational Creditor were ongoing and that no Committee of Creditors had been constituted. By 16th July 2019, the parties had reached a settlement, and the Terms of Settlement were filed.

3. Non-constitution of the Committee of Creditors:
The Interim Resolution Professional (IRP) confirmed that no Committee of Creditors had been constituted. The Terms of Settlement were reached on 15th July 2019, and the Corporate Debtor agreed to pay the admitted dues within the specified time frame.

4. Terms of Settlement and Its Implications:
The Settlement Agreement dated 15th July 2019 outlined the payment schedule and conditions. The Corporate Debtor agreed to pay a total of ?1,20,04,280 in twelve installments, with specific dates and amounts detailed in the agreement. The agreement also included provisions for default, stating that if the Corporate Debtor defaulted on three consecutive payments, the total debt claimed in the Company Petition would be revived, and the Respondent could initiate a fresh Insolvency Application or approach the NCLT and NCLAT under Section 425 of the Companies Act, 2013.

5. Withdrawal of the Application Under Section 9:
In light of the settlement and the fact that the Committee of Creditors had not been constituted, the Tribunal allowed the Respondent-Operational Creditor to withdraw the application under Section 9, exercising inherent power under Rule 11 of the National Company Law Appellate Tribunal, 2016.

6. Setting Aside the Order of Admission by the Adjudicating Authority:
The impugned order dated 6th March 2019, admitting the application under Section 9, was set aside. The Terms of Settlement were treated as a decision and decree of the Appellate Tribunal. The Appellant, all Shareholders, Promoters, Directors, and Officers of the Corporate Debtor were directed to comply with the Terms of Settlement.

7. Compliance with the Terms of Settlement and Consequences of Default:
The Tribunal emphasized that failure to comply with the Terms of Settlement would allow the Operational Creditor or the IRP to request the revival of the CIRP and initiate Contempt Proceedings against the Appellant and other responsible parties. The Corporate Debtor was released from all legal rigour and allowed to function independently through its Board of Directors immediately.

Conclusion:
The appeal was allowed, and the application under Section 9 was dismissed. The order appointing the IRP, declaring moratorium, freezing of accounts, and all related actions were declared illegal and set aside. The Corporate Debtor was released from the CIRP, and the IRP was to be paid as per the Settlement Agreement. There was no order as to costs.