2020 (2) TMI 1328 - AT - Insolvency and Bankruptcy

Settlement reached in insolvency case, Appellant's appeal on limitation addressed through process

Dhiraj Prabhu Versus Rajeev Shetty and Ors.

The Tribunal accepted the settlement reached between the parties, allowing the Respondent to withdraw the Section 9 application under the Insolvency and ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - time limitation - HELD THAT:- As we find that the parties have been negotiating and almost reached a final settlement and on merit the Appellant has also raised certain issues, taking into consideration that the 'Corporate Debtor' is an Infrastructure Housing Company on which a large number of allottees are dependant and if the 'Corporate Debtor' goes on 'Corporate Insolvency Resolution Process', then it may delay the completion, we in exercise of powers conferred under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 accept the settlement reached between the parties and allow Mr. Rajeev Shetty to withdraw the application under Section 9. The Appellant is directed to comply with the Terms of Settlement dated 5th February, 2020, as recorded in the Indian Non-Judicial paper on 5th February, 2020. The Appellant will ensure that the cheques are encashed. On failure, this Appellate Tribunal may initiate Contempt Proceeding against Mr. Dhiraj Prabhu and may also direct to re-initiate the 'Corporate Insolvency Resolution Process'. This order is passed in the presence of Mr. Dhiraj Prabhu, who is present in person. It will also be open to the Appellant to prepone the payment by way of Draft and may take back the post-dated cheques. The 'Corporate Debtor'- 'M/s. Skyline Construction & Housing Pvt. Ltd.' is released from the rigours of 'Corporate Insolvency Resolution Process'. The 'Interim Resolution Professional' will handover the records and assets of the 'Corporate Debtor' to the Promoters - Appeal allowed. Issues:1. Application under Section 9 of the Insolvency and Bankruptcy Code, 2019 filed by the Respondent.2. Appeal by the Appellant on the ground of limitation for the Section 9 application.3. Claim of 'Leave Travel Allowance', 'Leave Encashment', and 'Bonus' by the Respondent.4. Settlement reached between the parties.5. Constitution of the Committee of Creditors.6. Exercise of inherent powers under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016.7. Acceptance of settlement and withdrawal of application under Section 9.8. Payment of fees to the Interim Resolution Professional.9. Payment towards Corporate Insolvency Resolution Process Cost.10. Setting aside of the impugned order and release of the Corporate Debtor from Corporate Insolvency Resolution Process.Analysis:1. The Respondent, an Associate Vice President of the Corporate Debtor, initially filed an Application under Section 9 of the Insolvency and Bankruptcy Code, 2019, which was withdrawn upon objection. A subsequent application was filed after a Demand Notice under Section 8(1), admitted by the Adjudicating Authority in November 2019.2. The Appellant, a Promoter of the Corporate Debtor, appealed on the grounds of the Section 9 application being time-barred, raising issues related to the Respondent's claim of 'Leave Travel Allowance', 'Leave Encashment', and 'Bonus'.3. During proceedings, the Appellant argued that the Respondent did not qualify as an 'Operational Creditor' under the I&B Code due to the nature of the claimed allowances, asserting that the application was also barred by limitation.4. Subsequently, the parties reached a settlement, leading to the vacation of an interim order and the constitution of the Committee of Creditors, with the settlement agreement formalized on a stamp paper.5. Citing the Supreme Court decision in 'Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors.', the Tribunal invoked Rule 11 to accept the settlement, allowing the Respondent to withdraw the Section 9 application, considering the potential impact on the completion of the Corporate Debtor's projects.6. The Tribunal directed the Appellant to comply with the terms of the settlement, ensuring the encashment of cheques, with a warning of contempt proceedings in case of non-compliance and the possibility of re-initiating the Corporate Insolvency Resolution Process.7. Fees for the Interim Resolution Professional were assessed, along with costs for the Corporate Insolvency Resolution Process, to be paid by the Appellant within a specified timeline, with provisions for additional expenses.8. The impugned order was set aside, releasing the Corporate Debtor from the Corporate Insolvency Resolution Process, with instructions for the handover of records and assets to the Promoters, concluding the appeal without costs.