TMI Blog2021 (9) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. Before a CoC is constituted, a party can approach the Adjudicating Authority directly and the Adjudicating Authority may in exercise of its powers under Section 12A of the IBC r/w Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 allow or disallow an application for withdrawal or settlement - after constitution of CoC the Adjudicating Authority cannot set aside even ex-parte admission order and in such a situation the Corporate Debtor has to file the Appeal under Section 61 of the IBC. In the present case, the Application under Section 9 was admitted on 27.05.2020 and the Appellant (Corporate Debtor) has filed the Application for setting aside the ex-parte admission order on 06.11.2020 whereas the CoC has been constituted thereafter on 20.11.2020. In such a situation before constitution of CoC the Ld. Adjudicating Authority can consider the Application for setting aside ex-parte admission order but aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention to approach the Adjudicating Authority for setting aside the ex-parte order. The Appellant (Corporate Debtor) on 19.11.2020 again sent an email to the IRP requesting to hold back on the proceedings during pendency of the Application I.A. No. 780 of 2020. On the date of Application I.A. No. 780 of 2020 the Committee of Creditors (CoC) was not constituted. On 15.12.2020 the IRP was directed to file Reply of the said Application within two weeks. The IRP instead of filing his reply and awaiting the outcome of the Application proceeded with unnecessary haste in constituting the CoC during the pendency of the Application. The IRP issued notice on 13.11.2020 and kept the first meeting on 20.11.2020 despite being informed that the matter was already settled on 19.11.2020. The Application was kept pending for long period by the Adjudicating Authority and ultimately by the impugned order dated 23.03.2021 the Adjudicating Authority has disposed of the Application with the following order: Application is filed for setting aside ex-parte order. However, at this stage we are unable to use our power under Rule 49 of NCLT, Rules so belatedly. Matter stands adjourned to 27.04.202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the Appellant further submitted that this Appellate Tribunal in the case of Mr. Anmol Takriwal (Shareholder of Corporate Debtor) Vs. M/s Auxichem Anr. CA (AT) (Ins) No. 570 of 2018 held that since the notice was not served upon the Corporate Debtor, the ex-pare order is liable to be set aside. It is also submitted that the IRP has incorrectly added the Union Bank of India which is nothing but a lender to M/s Jay Agro, a sister concern of the Corporate Debtor. The Appellant was only a guarantor in the financial transaction between the M/s Jay Agro and the Union Bank of India. The Hon ble Supreme Court in Civil Appeal Nos. 8512-8527 of 2019, in IRP for Jaypee Infratech Vs. Axis Bank Ltd. has held that a third-party security is not a financial debt. 9. Lastly, it is submitted that the ex-parte order of admission to initiate CIRP is harsh order. This order would result in serious and grave consequences since the Corporate Debtor is a going concern. Thus, the impugned order may be set aside. 10. The Respondent No. 1 (Operational Creditor) present in person on 28.06.2021 and submitted that he has filed the Reply Affidavit in response to the Appeal. However, such Reply Af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CLT Rules 2016 can set aside the ex-parte order for initiating a Corporate Insolvency Resolution Process under Section 9 of the IBC. 15. So far as the service of notice on Appellant (Corporate Debtor) is concerned, Ld. Counsel for the Appellant has produced the order sheet of the Ld. Adjudicating Authority dated 09.01.2019 in which it is mentioned that the notice sent to the Appellant returned with postal remarks as left. In the order sheets date dated 17.07.2019 and 09.10.2019 it is mentioned that the Respondent No. 1 Operational Creditor (Petitioner) is directed to inform the date of hearing to the Corporate Debtor. There is nothing on record that the notice has been duly served on the Appellant (Corporate Debtor). 16. Admittedly, the Ld. Adjudicating Authority has vide order dated 27.05.2020 admitted the application under Section 9 of the IBC filed by the Operational Creditor Respondent No. 1 and the Appellant has filed the Application for setting aside the ex-parte order on 06.11.2020 under Section 424 (1) of the Act r/w Rule 11 of NCLT Rules, 2016 stating that the Corporate Debtor has not received the notice. It is also an admitted fact that CoC has been constituted on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch proceeding is in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. Before a CoC is constituted, a party can approach the Adjudicating Authority directly and the Adjudicating Authority may in exercise of its powers under Section 12A of the IBC r/w Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 allow or disallow an application for withdrawal or settlement. Similarly, before constitution of CoC if the Adjudicating Authority is satisfied that the notice was not duly served on the Corporate Debtor the Adjudicating Authority may make an order for setting aside the ex-parte order for initiating CIRP upon such terms as it thinks fit. However, after constitution of CoC the Adjudicating Authority cannot set aside even ex-parte admission order and in such a situation the Corporate Debtor has to file the Appeal under Section 61 of the IBC. 21. Now, we have considered the facts of this case, the Application under Section 9 was admitted on 27.05.2020 and the Ap ..... 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