Tribunal Upholds Application Under Insolvency Code Despite Settlement Claims, Emphasizes Legal Procedures The National Company Law Appellate Tribunal, New Delhi, in a case involving an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, ...
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The National Company Law Appellate Tribunal, New Delhi, in a case involving an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, filed by an Operational Creditor against a Corporate Debtor, addressed issues related to settlement before the constitution of the Committee of Creditors. The Tribunal admitted the application despite claims of settlement, emphasizing the importance of following legal procedures and court decisions. The judgment underscores the significance of adherence to established legal precedents in insolvency proceedings.
Issues: Application under Section 9 of the Insolvency and Bankruptcy Code, 2016; Settlement between parties before the constitution of Committee of Creditors; Application for withdrawal under Rule 11 of the NCLAT Rules, 2016; Intention to move an application on behalf of a member of the Committee of Creditors; Acceptance of Demand Drafts by Operational Creditor but settlement not reached; Direction to constitute Committee of Creditors; Filing of reply affidavits by Respondents.
The judgment by the National Company Law Appellate Tribunal, New Delhi pertains to an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 filed by 'M/s. Tirupati Timber & Packaging Limited' as the Operational Creditor against 'M/s. Duncans Industries Limited' as the Corporate Debtor. The Adjudicating Authority admitted the application on 18th December, 2019. The Appellant claimed that the matter was settled with the Operational Creditor before the constitution of the Committee of Creditors, with more than the claimed amount being paid through Demand Drafts on 9th January, 2020. However, the Operational Creditor also filed an application for withdrawal under Rule 11 of the NCLAT Rules, 2016 on the same date, which was adjourned to 3rd March, 2020. The Appellant argued that the direction to constitute the Committee of Creditors made the withdrawal application infructuous, contrary to a decision of the Hon'ble Supreme Court.
Furthermore, an Advocate expressed the intention to move an application on behalf of Asset Reconstruction Company India Limited, a member of the Committee of Creditors, to determine if their claim is time-barred. The Operational Creditor acknowledged the receipt of Demand Drafts but stated that they were not encashed due to the lack of settlement. The Interim Resolution Professional confirmed the direction to constitute the Committee of Creditors on 14th January, 2020. The Tribunal allowed the Respondents two days to file reply affidavits along with Vakalatnama and intervention applications, scheduling the appeal for admission on 30th January, 2020, with a directive that the Committee of Creditors should not approve any Resolution Plan in the interim but proceed in accordance with the law.
This judgment highlights the complexities surrounding settlement agreements, withdrawal applications, and the constitution of the Committee of Creditors in insolvency proceedings, emphasizing the need for adherence to legal procedures and precedents set by higher courts.
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