2019 (11) TMI 773 - AT - Insolvency and Bankruptcy

Admissibility for appeal - initiation of CIRP - Corporate Debtor failed to pay outstanding debt - Section 9 of the Insolvency and Bankruptcy Code, 2016 - principles of natural justice - HELD THAT - The Respondent Corporate Debtor has also not disputed that no notice was issued or served by Operational Creditor or the Adjudicating Authority before admission of the application under Section 9. The impugned order also shows that the ex-parte order was passed by the Adjudicating Authority. As the impugned order dated 6th March, 2019 has been passed in violation of the rules of natural justice , we set-aside the order - However, the matter is not remitted to the Adjudicating Authority as in the meantime the Appellant has settled the matter with the Respondent. However, this will not come in the way of the other creditors to move before appropriate Forum, if any amount is due from the Corporate Debtor . Appeal allowed.

Summary

Issues:
Challenge to admission of insolvency application under Section 9 of the Insolvency and Bankruptcy Code, 2016 without notice to Corporate Debtor; Settlement between parties; Violation of natural justice in passing ex-parte order; Setting aside order and releasing Corporate Debtor from moratorium; Decision on fee and cost of Resolution Professional.

Analysis:
The judgment by the National Company Law Appellate Tribunal, New Delhi involved the challenge to an order admitting an insolvency application under Section 9 of the Insolvency and Bankruptcy Code, 2016 without serving notice to the Corporate Debtor. The Appellant, a shareholder of the Corporate Debtor, contested the order on grounds of lack of notice. It was revealed that the order was passed ex-parte without following the principles of natural justice, leading to a violation of procedural rules.

The parties later reached a settlement, resulting in a Settlement Deed being executed and submitted to the Tribunal. Despite the absence of the Resolution Professional during the proceedings, it was acknowledged that the matter had been resolved between the parties. The Tribunal observed that the impugned order was indeed passed in contravention of natural justice principles and subsequently set aside the order. However, the matter was not remitted back to the Adjudicating Authority due to the settlement between the parties.

Consequently, the Tribunal nullified all orders appointing the Interim Resolution Professional, declaring moratorium, and any actions taken by the Resolution Professional. The insolvency application under Section 9 of the I&B Code was disposed of as withdrawn, and the Corporate Debtor was released from the legal constraints, allowing it to function independently through its Board of Directors immediately. The Tribunal directed the Adjudicating Authority to determine the fee and costs incurred by the Resolution Professional, which the Corporate Debtor was required to pay within two weeks from the decision.

In conclusion, the appeal was allowed with specific observations and directions outlined by the Tribunal, emphasizing the importance of adhering to natural justice principles in insolvency proceedings while ensuring the resolution of disputes through settlements where possible.