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2023 (1) TMI 1106 - AT - Insolvency and BankruptcyRecall of order - power to review - CIRP initiated - Corporate Debtor failed to make repayment of its dues - Operational Creditors - HELD THAT - It is clear that the Corporate Debtor had appeared on both the dates and that the copy of the Petition and the supporting documents were served on them on 02.11.2022, hence the Adjudicating Authority had closed the opportunity to file the Counter; the matter was posted For Hearing on 05.12.2022 and thereafter on 05.01.2023, the CIRP was initiated. When the matter came up For Hearing on 05.12.2022, the Corporate Debtor could have been present and submitted his arguments. Though, his right to file the Counter was closed, he was not set Ex Parte as on the date 21.11.2022 and therefore he could have appeared on 05.12.2022 when the matter was posted For Final Hearing and having been present as on 11.12.2022, the Counsel was very much aware that the matter was posted For Hearing on 05.12.2022. Though, the Adjudicating Authority does not have the Power of Review it can, based on the facts and circumstances of the case, Recall the Order - In the instant case, this Tribunal, sitting in Appeal, does not find any tangible / substantial grounds to interfere with the impugned order. The Appellant, has challenged the Admission Order, dated 05.01.2023 on merits, on the ground that there was an Arbitration Clause, in the C F Agreement, and that the Respondent, ought to have invoked this Clause. There is no embargo on the Operational Creditor, to file a Section 9 Petition, under I B Code, 2016, even if there is an Arbitration Clause, in the Agreement. The scope and objective of the Code is Resolution, and not a Recovery Mode / Forum - In the instant case, the Adjudicating Authority, based on the material on record, had arrived at a conclusion that there were recurring defaults on behalf of the Corporate Debtor and that the Operational Creditor, has requested for full and final payment of the outstanding dues. This Tribunal, does not find any illegality or infirmity, in the Order dated 05.01.2023, passed by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench I), in petition, and this Appeal is dismissed.
Issues:
1. Admission of Section 9 Application under the Insolvency and Bankruptcy Code, 2016. 2. Fair opportunity to file a counter by the Corporate Debtor. 3. Invocation of an Arbitration Clause in the Agreement. 4. Legality of the Admission Order dated 05.01.2023. Analysis: Issue 1: Admission of Section 9 Application The Appellant, a Suspended Director of the Corporate Debtor, appealed against the Order admitting the Section 9 Application under the Insolvency and Bankruptcy Code. The Adjudicating Authority found the operational debt due and payable by the Corporate Debtor as established based on the CFA Agreement, invoices, and non-payment by the Corporate Debtor. The Tribunal upheld the Authority's decision, dismissing the appeal. Issue 2: Fair Opportunity to File a Counter The Corporate Debtor contended that they were not given a fair opportunity to file a counter as the Petition copy was received late, leading to an ex parte Order. The Tribunal examined the Orders of 28.10.2022 and 21.11.2022, where the Corporate Debtor had appeared, but the opportunity to file a counter was closed due to non-compliance. The Tribunal found no grounds to interfere with the impugned order, emphasizing the importance of timely participation. Issue 3: Invocation of Arbitration Clause The Appellant argued that the Respondent should have invoked the Arbitration Clause in the CFA Agreement before filing the Section 9 Petition. The Tribunal clarified that the Code's objective is resolution, not recovery, and an Arbitration Clause does not bar an Operational Creditor from filing a Section 9 Petition. The Authority had noted recurring defaults by the Corporate Debtor, justifying the admission of the Application. Issue 4: Legality of the Admission Order The Tribunal upheld the legality of the Admission Order dated 05.01.2023, emphasizing the recurring defaults by the Corporate Debtor and the Operational Creditor's request for outstanding dues. Despite the Corporate Debtor's responses and requests, the dues were not paid, leading to the initiation of the Corporate Insolvency Resolution Process. The Tribunal found no illegality or infirmity in the Order and dismissed the appeal. In conclusion, the Tribunal affirmed the Adjudicating Authority's decision to admit the Section 9 Application, highlighting the importance of timely participation and the Code's objective of resolution. The appeal was dismissed, and no costs were awarded, with any pending Interlocutory Applications closed.
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