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2024 (10) TMI 826 - AT - IBCDismissal of application filed by the Appellant, under Rule 11 of the NCLT Rules, 2016 for revival of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - seeking revival on the ground that Corporate Debtor has failed to abide by the terms of the settlement - failure of the Interim Resolution Professional (IRP) to disclose claims - HELD THAT - The admitted facts of this case are that the application under Section 12A was filed by the IRP at the instance of the OC. It is also an admitted fact that the Adjudicating Authority allowed the application bearing 6271 of 2022 after confirming from the IRP that he has not received any claim from any claimant and no claim is outstanding. The IRP has also confirmed that he has not constituted the CoC till date whereas it is also a fact that the last date for the submission of claim was 23.12.2022 and the claim was submitted by the Appellant on 21.12.2022 and the order was passed on 22.12.2022 on the application bearing 6271 of 2022. There is not even an iota of a doubt that the Adjudicating Authority has been grossly misled by the IRP at the time when the order was passed on 22.12.2022 but instead of rectifying its mistake and or to undo the injustice caused to the Appellant, the Adjudicating Authority has dismissed the application bearing 226 of 2023 holding that it could not find any justifiable reason to allow the prayer made in the application and rather in the entire impugned order expressed its anguish and dissatisfaction about the working of the IRP and repeatedly cautioned him to be careful while exercise of his functions and discharging his duties. The filing of application under Section 7 by the Appellant is in no way causes any hindrance in maintaining the present application by the Appellant because the said application has been filed in terms of the order passed in the application bearing 6271 of 2022. If the misrepresentation/concealment of any fact by the IRP to the Adjudicating Authority is considered lightly by relegating the Financial Creditor to any other remedy as it happened in the present case, to take his other remedy in accordance with law then it would be giving a premium to the statutory authority for his lapses and unprofessional act and conduct. Thus, it is a fit case for interference by this Court in this appeal and thus, the appeal is allowed.
Issues Involved:
1. Revival of Corporate Insolvency Resolution Process (CIRP). 2. Alleged failure of the Interim Resolution Professional (IRP) to disclose claims. 3. Misleading of the Adjudicating Authority. 4. The legal implications of withdrawal of CIRP under Section 12A. 5. The rights of the Financial Creditor vis-`a-vis the Operational Creditor. Issue-wise Detailed Analysis: 1. Revival of Corporate Insolvency Resolution Process (CIRP): The appeal arose from the dismissal of an application seeking the revival of the CIRP against the Corporate Debtor. Initially, the CIRP was withdrawn following a settlement between the Operational Creditor and the Corporate Debtor. However, the Operational Creditor later sought revival on the grounds that the Corporate Debtor failed to abide by the settlement terms. The Adjudicating Authority allowed the revival, directing the Resolution Professional (RP) to continue the CIRP. 2. Alleged Failure of the Interim Resolution Professional (IRP) to Disclose Claims: The Appellant, a Financial Creditor, alleged that the IRP failed to disclose its claim submitted before the deadline. The IRP admitted to erroneously informing the Adjudicating Authority that no claims were received, which led to the withdrawal of the CIRP. This concealment was pivotal in the Appellant's argument for the revival of the CIRP. 3. Misleading of the Adjudicating Authority: The Appellant contended that the IRP's misrepresentation misled the Adjudicating Authority into allowing the withdrawal of the CIRP. The IRP admitted to an error in communication, which resulted in the Authority's belief that no claims were outstanding. The Appellant argued that this misrepresentation invalidated the withdrawal order. 4. Legal Implications of Withdrawal of CIRP under Section 12A: The withdrawal of the CIRP was initially permitted under Section 12A, based on a settlement agreement. However, the Appellant argued that the withdrawal was obtained through misleading information, which should render it void. The Tribunal noted that once the CIRP is initiated, it becomes a proceeding in rem, requiring consideration of all creditors' claims. 5. Rights of the Financial Creditor vis-`a-vis the Operational Creditor: The Appellant, as a Financial Creditor, argued that it was unjustly prejudiced by the settlement favoring the Operational Creditor, who received payment from the Corporate Debtor. The Appellant claimed that the settlement was made at the expense of its rights, as the CIRP is a collective process involving all creditors. The Tribunal recognized this prejudice and emphasized the need for equitable treatment of creditors. Conclusion: The Tribunal found merit in the Appellant's arguments, particularly concerning the IRP's failure to disclose the claim and the subsequent misleading of the Adjudicating Authority. It highlighted the collective nature of CIRP proceedings and the necessity for transparency and fairness in handling creditors' claims. Consequently, the Tribunal allowed the appeal, set aside the impugned order, and directed that the CIRP be revived, ensuring that the Financial Creditor's rights are duly considered.
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