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2022 (7) TMI 1124 - AT - Insolvency and BankruptcyValidity of order whereby application for initiation of CIRP was accepted - subsequent withdrawal of application - appellant submits that when both the Operational Creditor and Corporate Debtor has entered into Settlement and entire operational debt of Rs. 28,07,764/- was paid on 04th June, 2022, Form FA was submitted to the IRP on 08th June, 2022 and payment of entire fee and expenses of the IRP of Rs. 11,89,657/- having been paid on 10th June, 2022 through Demand Draft dated 10th June, 2022, IRP deliberately delayed in filing of the withdrawal Application to defeat the Settlement. HELD THAT - It is satisfying that the fact that between the period 01.11.2021 to 31.12.2021 payment of Rs. 40 Lakhs have been made by the Corporate Debtor to the Operational Creditor and Operational Creditor is continuing with the business relation, ought to have been taken into consideration by the Adjudicating Authority which fact clearly indicated that the Corporate Debtor is not insolvent. In any view of the matter, the Adjudicating Authority ought to have referred to directions of the Hon ble Supreme Court which directions permitted continuance of the project to secure the interest of the home-buyers and to ensure that home-buyers should get the flats. The Adjudicating Authority ought to have adverted to the said factors before proceeding to admit the Section 9 Application for an amount of Rs. 28,07,764/- which was the Operational Debt. The Order passed by the Adjudicating Authority admitting the Section 9 Application cannot be sustained. Settlement between the Corporate Debtor and the Operational Creditor - HELD THAT - The fact is not disputed that on 04th June, 2022, Operational Creditor and Corporate Debtor entered into Settlement and paid Operational Debt of Rs. 28,07,764/- through the Demand Draft to the Operational Creditor and Form FA was also handed over to the IRP on 08th June, 2022 by the Operational Creditor for filing an Application for withdrawal of Section 9 Application. On 08th June, 2022, IRP had informed his fee of Rs. 6 Lakhs and expenses of Rs. 5,89,657/- which was also paid through the Demand Draft dated 10th June, 2022. Suspended Directors of the Corporate Debtor having realized that IRP might delay in filing the Application, an Application under Rule 11 of NCLT Rules, 2016 was filed by the Suspended Directors of the Corporate Debtor which Application was also signed by the Corporate Debtor praying for withdrawal of the said Application. At the time of enactment of Insolvency and Bankruptcy Code, 2016, there was no provision akin to Section 12A it was only after the observations were made by the Hon ble Supreme Court of India in the matter of SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. 2019 (1) TMI 1508 - SUPREME COURT that Insolvency Application can be permitted to be withdrawn, Section 12A was inserted in the Code. The object and purpose of the IBC is the resolution of the Corporate Debtor and in the facts of the present case when in a Real Estate Project, Operational Creditor had filed the Application for amount of Rs. 28,07,764/- which amount was paid, what was the interest of the IRP to proceed with the constitution of CoC and proceed with the CIRP has not been explained. IRP wanted to continue with the CIRP even after Corporate Debtor and Operational Creditor has settled and Application is filed for withdrawal of the CIRP. We do not find the conduct of the IRP in consonance with the scheme of the Code. Present is the case where Insolvency and Bankruptcy Board of India may look into the matter and examine the conduct of the IRP. This Appeal deserves to be allowed.
Issues Involved:
1. Admission of Section 9 Application under Insolvency and Bankruptcy Code, 2016. 2. Settlement between Operational Creditor and Corporate Debtor. 3. Conduct of the Interim Resolution Professional (IRP). 4. Directions of the Supreme Court regarding the LA-Residentia Project. 5. Claims by Financial Creditors and their impleadment. Issue-wise Detailed Analysis: 1. Admission of Section 9 Application under Insolvency and Bankruptcy Code, 2016: The appeal challenges the order dated 25th May 2022, by the National Company Law Tribunal (NCLT), admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by an Operational Creditor against the Corporate Debtor. The Appellant, an association of flat buyers, contends that the NCLT should not have admitted the Section 9 application because the Corporate Debtor had continued business relations with the Operational Creditor and had made substantial payments amounting to Rs. 40 Lakhs between 01.11.2021 and 31.12.2021. Furthermore, the NCLT failed to consider the Supreme Court's orders dated 29th June 2021 and 20th May 2022, which directed the continuation of the LA-Residentia project. 2. Settlement between Operational Creditor and Corporate Debtor: The Corporate Debtor and the Operational Creditor had entered into a settlement on 4th June 2022, where the entire operational debt of Rs. 28,07,764/- was paid. Form FA for withdrawal of the Section 9 application was submitted to the IRP on 8th June 2022. Despite this, the IRP delayed filing the withdrawal application, which was only submitted on 15th June 2022. The Suspended Directors of the Corporate Debtor also filed an application under Rule 11 of NCLT Rules, 2016, for withdrawal of the insolvency application, which was listed but not heard due to the non-appearance of the IRP. 3. Conduct of the Interim Resolution Professional (IRP): The IRP's conduct was scrutinized for delaying the withdrawal application despite the settlement and full payment of his fees and expenses. The IRP constituted the Committee of Creditors (CoC) on 18th June 2022, after filing the withdrawal application on 15th June 2022. The Tribunal found the IRP's actions contrary to the statutory scheme of Section 12A and Regulation 30A of the IBC, indicating an intent to continue the Corporate Insolvency Resolution Process (CIRP) despite the settlement. The Tribunal suggested that the Insolvency and Bankruptcy Board of India (IBBI) examine the IRP's conduct. 4. Directions of the Supreme Court regarding the LA-Residentia Project: The Supreme Court had issued specific directions on 29th June 2021 and 20th May 2022, allowing the Corporate Debtor to continue the construction and development of the LA-Residentia project. The NCLT failed to consider these directions while admitting the Section 9 application. The Supreme Court's orders aimed to secure the interests of home-buyers and ensure the project's completion, which the NCLT overlooked. 5. Claims by Financial Creditors and their impleadment: Two financial creditors, M/s. Religare Housing Development Finance Corporation Limited and M/s. Religare Finvest Limited, filed applications for impleadment, claiming to be financial creditors of the Corporate Debtor. The Tribunal noted that these creditors could take recourse to legal measures to protect their interests but did not find it necessary to implead them in the appeal. The applications for impleadment were rejected. Conclusion: The appeal was allowed, and the NCLT's order dated 25th May 2022 admitting the Section 9 application was set aside. The Tribunal emphasized that the IRP's conduct was not in line with the statutory scheme and suggested that the IBBI examine the matter. The financial creditors' applications for impleadment were rejected, with the Tribunal noting that they could pursue other legal avenues to protect their interests.
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