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2022 (4) TMI 259 - AT - Insolvency and BankruptcySeeking direction to the Adjudicating Authority to adjudicate and dispose of the Applications - ex-parte order - advance copy of application not served to the appellant - HELD THAT - The main plea of the Respondent No.1 in I.A No. 368 of 2020 is that if the DRT decides the counter claim of the Corporate Debtor no distribution be permitted in the liquidation process. The pendency of the counter claim of the Corporate Debtor before the DRT cannot be ground to stay the distribution to the Financial Creditors as per the claim admitted by the Liquidator. Proceedings under the IBC are time bound proceedings which has an overriding effect by virtue of Section 238. In the facts of the present case, I.A No. 555 of 2020 filed by the Corporate Debtor for recall of the ex parte order ought to have been allowed by the Adjudicating Authority. The Adjudicating Authority has not decided the said I.A for more than period of one year and five months. In spite of two orders passed by this Tribunal and judgment of the Hon ble Supreme Court dated 26.11.2021 and 14.02.2022, we see no justification in continuing the interim order dated 09.09.2020 staying the distribution to the Financial Creditor in the liquidation process. By order of the Adjudicating Authority, the claim of the Financial Creditor to receive the disbursement has adversely affected and they are not able to receive the disbursement as per their claim. Regulation 43 amply take care of any excess amount to any stakeholders. We may also notice that in the Application I.A. No. 368 of 2020, the Respondent No.1 has challenged the acceptance of the claim of the Appellant by the Liquidator. On the other hand, the Respondent No.1 has refuted the locus of the Appellant to challenge the decision of the Liquidator accepting the claim. It has been submitted before us that hearing in Application I.A. No. 368 of 2020 has already been commenced before the Adjudicating Authority in which next date is 07.04.2022 - in this Appeal the only Application I.A No. 555 of 2020 needs to be finally decided by modifying interim order dated 09.09.2020. Thus, the order dated 09.09.2020 is modified to the above extent and the interim order is recalled/ vacated. It shall be open for the Adjudicating Authority to proceed with the Application I.A No. 368 of 2020 and pass final order on the said Application - Application allowed.
Issues Involved:
1. Delay in adjudicating applications I.A No. 368 of 2020 and I.A No. 555 of 2020. 2. Legitimacy of the ex-parte interim order dated 09.09.2020. 3. Locus standi of the Suspended Director to challenge the Liquidator's decisions. 4. Impact of pending counterclaims on liquidation proceedings. 5. Compliance with procedural rules regarding service of applications. Detailed Analysis: 1. Delay in Adjudicating Applications: The appeal was filed by Kotak Mahindra Bank Limited, a financial creditor, seeking direction for the adjudication of applications I.A No. 368 of 2020 and I.A No. 555 of 2020. The applications remained pending despite multiple hearings and directions from the appellate tribunal and the Supreme Court to expedite the process. The Supreme Court, in its order dated 26.11.2021, emphasized the need for expeditious resolution and allowed the appellate tribunal to withdraw the matter from the Chandigarh Bench if necessary. 2. Legitimacy of the Ex-Parte Interim Order: The ex-parte interim order dated 09.09.2020 directed the Liquidator to maintain status quo regarding the distribution of funds to financial creditors. Kotak Mahindra Bank filed I.A No. 555 of 2020 to recall this order. The appellate tribunal noted that the application was filed without serving a copy to the affected financial creditors, violating Rule 25(5) of the National Company Law Tribunal Rules, 2016. The tribunal found the ex-parte order unjustified and decided to vacate it. 3. Locus Standi of the Suspended Director: The Suspended Director of the Corporate Debtor filed I.A No. 368 of 2020 challenging the Liquidator's acceptance of claims from financial creditors. The tribunal observed that under Section 42 of the Insolvency and Bankruptcy Code, 2016, only creditors have the right to challenge the Liquidator's decisions. Thus, the Suspended Director lacked the locus standi to file the application. 4. Impact of Pending Counterclaims on Liquidation Proceedings: The Suspended Director argued that pending counterclaims before the Debt Recovery Tribunal (DRT) should halt the distribution of funds in the liquidation process. The appellate tribunal rejected this argument, stating that proceedings under the Insolvency and Bankruptcy Code are time-bound and have an overriding effect. The tribunal emphasized that liquidation proceedings cannot be dependent on other pending litigations. 5. Compliance with Procedural Rules: The appellate tribunal highlighted the failure to serve a copy of I.A No. 368 of 2020 to the financial creditors, as required by Rule 25(5) of the National Company Law Tribunal Rules, 2016. This procedural lapse further invalidated the ex-parte interim order dated 09.09.2020. Conclusion: The appellate tribunal allowed I.A No. 555 of 2020, vacating the interim order dated 09.09.2020, and directed the Adjudicating Authority to proceed with the hearing of I.A No. 368 of 2020 on its merits. The tribunal's observations were confined to the procedural aspects and did not express any final opinion on the merits of I.A No. 368 of 2020. The appeal was disposed of with specific directions to expedite the adjudication process.
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