Successful Appeal Invalidates Section 9 Application Due to Settled Dispute

The appeal against the admission of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was successful. The Tribunal found that a pre-existing dispute had been settled between the parties, rendering the Section 9 application not maintainable. Consequently, the initial order was set aside, and all actions by the Interim Resolution Professional and orders by the Adjudicating Authority were deemed illegal. The Corporate Debtor was allowed to operate independently, with the Board of Directors in charge, and the Interim Resolution Professional's fee was to be determined and paid by the Corporate Debtor for the period of functioning. The appeal was allowed, and Interlocutory Applications were disposed of with no costs awarded.

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Issues: Appeal against admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016; Pre-existence of dispute; Settlement between parties; Constitution of Committee of Creditors; Validity of orders passed by Adjudicating Authority.

The judgment pertains to an appeal filed by a Director and Shareholder against the order admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 by an Operational Creditor. The Appellant argued that there was a pre-existence of dispute, making the application under Section 9 not maintainable. However, it was revealed that the parties had settled the claim, and the Corporate Debtor had acknowledged no dues to the Operational Creditor due to unsuccessful services. The Interim Resolution Professional did not appear despite notice, and the Committee of Creditors was constituted post the notice issuance. The Tribunal, after considering the pre-existence of dispute and the settlement between parties, held the Section 9 application not maintainable and set aside the initial order. Consequently, all actions taken by the Interim Resolution Professional and orders passed by the Adjudicating Authority were declared illegal and dismissed. The Corporate Debtor was released to function independently through its Board of Directors, and the Adjudicating Authority was tasked with fixing the Interim Resolution Professional's fee, to be paid by the Corporate Debtor for the period of functioning. The appeal was allowed, and Interlocutory Applications were disposed of accordingly, with no order as to costs.

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