2020 (2) TMI 1121 - AT - Insolvency and Bankruptcy

Application for withdrawal of application under Section 9 - CIRP process - constitution of Committee of Creditors - settlement agreement entered - HELD THAT - The parties having settled the matter on 30th October, 2019 i.e. before the constitution of Committee of Creditors and application having filed by 'M/s Syndicate Interglobe' (Operational Creditor) for withdrawal of application under section 9, the Adjudicating Authority instead of adjourning the matter should have passed appropriate order in exercise of power conferred under Rule 11 of the NCLT Rules, 2016. The Adjudicating Authority having failed to do so, we exercise inherent power conferred under Rule 11 of NCLAT Rules, 2016 and set aside the Corporate Insolvency Resolution Process initiated against 'M/s Global Fragrances (P.) Ltd.' (Corporate Debtor) by order dated 25th September, 2019 and allow the application filed by the Respondent - 'M/s Syndicate Interglobe' (Operational Creditor)for withdrawal of application under section 9. The Company Petition stands disposed of as withdrawn.

Summary

Issues:
Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 rejected by Adjudicating Authority - Settlement reached before constitution of Committee of Creditors - Application for withdrawal of application under Section 9 - Exercise of inherent power under Rule 11 of NCLAT Rules, 2016 - Disposal of Company Petition - Payment of fee and cost incurred during Corporate Insolvency Resolution Process.

Analysis:
The Respondent, an Operational Creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor. The application was rejected by the Adjudicating Authority, but a settlement was reached between the parties before the constitution of the Committee of Creditors. The Operational Creditor filed an application for withdrawal of the Section 9 application, which was adjourned by the Adjudicating Authority. The National Company Law Appellate Tribunal observed that since the matter was settled before the constitution of the Committee of Creditors, the Adjudicating Authority should have passed an appropriate order under Rule 11 of the NCLT Rules, 2016. Therefore, the NCLAT exercised its inherent power under Rule 11 of NCLAT Rules, 2016 to set aside the Corporate Insolvency Resolution Process initiated against the Corporate Debtor and allowed the Operational Creditor's application for withdrawal of the Section 9 application, disposing of the Company Petition. The Adjudicating Authority was directed to close the proceeding.

The Interim Resolution Professional incurred a fee and cost during the Corporate Insolvency Resolution Process, which was determined to be ?2.50 Lakhs. The Appellant agreed to pay this amount to the Interim Resolution Professional. The NCLAT directed the Appellant to pay the remaining amount to the Operational Creditor as per the Terms of Settlement and to also pay the fee of the Interim Resolution Professional along with the cost of CIRP amounting to ?2.50 Lakhs within three weeks. The appeal was allowed with the mentioned observations and directions, ensuring the settlement terms were fulfilled and the necessary payments were made.