2021 (3) TMI 385 - SCH - Insolvency and Bankruptcy

Setting aside of order of NCLT by NCLAT - pre-existing disputes between the Respondent and the Appellant or not - HELD THAT - The direction is in the nature of costs of the proceedings under Section 7 of the IBC, which have been found to be unsustainable in law. The Respondent having succeeded, cannot be saddled with the costs of the Corporate Insolvency Resolution Process (CIRP) initiated at the behest of the Appellant or with the fees of the Interim Resolution Professional (IRP). The direction does not warrant interference in appeal. There are no grounds to interfere with the order dated 10th August, 2020 passed by the National Company Law Appellate Tribunal - appeal dismissed.

Summary

Issues:
- Appeal against NCLAT order allowing Company Appeal (AT) (Insolvency) No.212 of 2020.
- Dispute over pre-existing disputes between the parties.
- Challenge to the direction regarding CIRP costs and fees under Section 7 of the IBC.

Analysis:
1. The appeal before the Supreme Court was filed against the order of the National Company Law Appellate Tribunal (NCLAT) dated 10th August, 2020, which allowed the Company Appeal (AT) (Insolvency) No.212 of 2020 filed by the Respondent. The dispute arose from a petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal (NCLT) Hyderabad, where the claim of the Appellant was initially admitted by the NCLT on 9th January, 2020.

2. The Respondent challenged the NCLT order by filing an appeal before the NCLAT, which set aside the NCLT order based on the existence of pre-existing disputes between the parties. The NCLAT dismissed the application under Section 9 of the IBC, leading to the Appellant's challenge before the Supreme Court. The specific contention of the Appellant was against a direction in the NCLAT order related to the Corporate Insolvency Resolution Process (CIRP) costs and fees under Section 7 of the IBC.

3. The Supreme Court, after examining the arguments, found no grounds to interfere with the NCLAT order. The Court held that the direction regarding the CIRP costs and fees, which the Appellant sought to challenge, was unsustainable in law. It was determined that the Respondent, who had succeeded in the appeal, should not be burdened with the costs of the CIRP initiated by the Appellant or the fees of the Interim Resolution Professional (IRP). Therefore, the Court dismissed the Civil Appeal, upholding the NCLAT's decision.

In conclusion, the Supreme Court dismissed the appeal and upheld the NCLAT's decision regarding the pre-existing disputes between the parties and the direction on CIRP costs and fees. The judgment provides clarity on the legal principles governing such matters under the Insolvency and Bankruptcy Code, emphasizing the importance of fair allocation of costs in insolvency proceedings.