2019 (10) TMI 56 - AT - Insolvency and Bankruptcy

Maintainability of application - Initiation of CIRP - Corporate Debtor - pre-existing dispute or not - section 9 of the Insolvency and Bankruptcy Code 2016 - HELD THAT - The Appellant and the Corporate Debtor will jointly directed to pay a sum of Rs. 3 Lakhs in favour of the Resolution Professional Mr. Naren Sheth within 3 weeks failing which it will be open to the Interim Resolution Professional to bring this to the notice of the Appellate Tribunal or for recall of this order. In effect order (s) passed by Ld. Adjudicating Authority appointing Interim Resolution Professional declaring moratorium and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action taken by the Resolution Professional are set aside - Appeal allowed.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process based on a plea of pre-existing dispute.

Analysis:
The appeal was filed against the order to initiate Corporate Insolvency Resolution Process against the Corporate Debtor. The proceeding was initiated by an Operational Creditor under the Insolvency and Bankruptcy Code, 2016 (I&B Code). The Appellant claimed a pre-existing dispute, which was not acknowledged due to lack of evidence.

During the hearing, evidence in the form of emails was presented to support the existence of a pre-existing dispute regarding the supply of goods. It was revealed that the parties had settled the matter, with 50% of the payment already received by the 1st Respondent. The Committee of Creditors had not been constituted at that time.

The Resolution Professional informed the Tribunal about the expenses incurred and the fee entitlement. After negotiations, a settlement was reached, and the impugned order was set aside. The 1st Respondent was allowed to withdraw the application under Section 9 of the I&B Code, and the proceedings before the Adjudicating Authority were closed.

Both the Appellant and the Corporate Debtor were directed to jointly pay a sum to the Resolution Professional within a specified time frame. Consequently, all orders appointing the Interim Resolution Professional, declaring moratorium, and other related actions were set aside. The Respondent Company was released from the legal constraints and permitted to operate independently through its Board of Directors immediately.

In conclusion, the appeal was allowed with the mentioned observations and directions, without any costs imposed.