Impugned Insolvency Order Set Aside for Violation of Natural Justice Principles

The impugned order under Section 7 of the Insolvency and Bankruptcy Code was declared illegal due to a violation of natural justice principles and contrary to a previous Appellate Tribunal decision. The appellant, a solvent company willing to pay dues, offered a settlement to clear the sum with interest. The financial creditor accepted the offer, leading to the setting aside of the order, release of the appellant from legal constraints, and permission for independent company functioning. The judgment highlighted the necessity of following natural justice rules and ensuring fair proceedings under the I&B Code to protect the rights of all parties involved.

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Issues involved:
Violation of principles of natural justice in passing the order under Section 7 of the Insolvency and Bankruptcy Code, 2016 without prior notice to the corporate debtor. Appellant's contention of being a solvent company and willing to pay the dues. Settlement offer by the appellant to pay the entire sum along with interest. Acceptance by the financial creditor to settle the dispute. Impugned order declared illegal due to violation of natural justice rules and contrary to previous Appellate Tribunal decision. Directions to set aside the impugned order, release the appellant from legal constraints, and allow the company to function independently.

Analysis:
The appeal was filed by the corporate debtor against the order passed by the Adjudicating Authority for the initiation of insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016. The appellant argued that the order was passed without giving any notice, violating the principles of natural justice. Reference was made to a previous judgment by the Appellate Tribunal emphasizing the need to follow natural justice rules while passing orders under the I&B Code. The appellant claimed solvency and expressed willingness to pay the dues, highlighting past repayments and a settlement offer to clear the entire sum with interest, subject to TDS deduction.

The respondent, a financial creditor, acknowledged the absence of notice before admitting the application and expressed no objection to settling the dispute with the appellant. Considering the violation of natural justice rules and the earlier Appellate Tribunal decision, the impugned order was set aside, declaring all subsequent actions illegal. The Interim Resolution Professional's appointment, moratorium declaration, freezing of accounts, and other orders were deemed void. The Adjudicating Authority was directed to close the proceedings, releasing the appellant from legal constraints and allowing independent functioning through its Board of Directors.

Following the judgment, the appellant provided two account payee cheques to the respondent as full and final payment of the debt with interest. The appeal was disposed of with these actions. The Adjudicating Authority was tasked with determining the fee of the Interim Resolution Professional, to be paid by the financial creditor for the period of service. The judgment emphasized the importance of adhering to natural justice principles and ensuring fair proceedings under the I&B Code, ultimately protecting the rights and interests of all parties involved.

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