2019 (12) TMI 1517 - AT - Insolvency and Bankruptcy

Appeal Successful, Settlement Reached in Corporate Insolvency Case

Janak Dhawan Versus Famous Innovations Digital Creative Pvt. Ltd. & Ors.

The appeal challenging the initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 was allowed. ... Maintainability of application - initiation of CIRP - Financial Creditors or Operational Creditors - pre-existing dispute or not - Appellant submits that already a Summary Suit has been filed by Ms. Rupa Gaur therefore no application under Section 9 of I&B Code is maintainable their being a pre-existing dispute - HELD THAT:- In view of the fact that the ‘Committee of Creditors’ have not been constituted, which is also accepted by Mr. Atul Tandon, Interim Resolution Professional and also has reached settlement with both the creditors, as discussed above and it is a going concern, we exercise power conferred to us under Rule 11 of NCLAT Rule, 2016 and set aside the impugned order dated 4th July, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench and dispose of the application under Section 9 filed by ‘M/s Famous Innovations Digital Creative Pvt. Ltd.’ (1st Respondent) as withdrawn. The Corporate Debtor - ‘M/s Famous Innovations Digital Creative Pvt. Ltd.’ is released from the rigour of Corporate Insolvency Resolution Process. The Appellant is directed to pay the rest of the amount to the Interim Resolution Professional within three weeks - Appeal allowed. Issues:1. Challenge to initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Settlement agreement between parties.3. Payment of fees to Interim Resolution Professional.4. Intervention request by an employee of the Corporate Debtor.5. Exercise of power under Rule 11 of NCLAT Rule, 2016.Analysis:1. The Appellant challenged the initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Appellant contended that the Respondent's claim did not fall under the definition of 'Operational Creditor' or 'Financial Creditor' as per the relevant sections of the Code. However, a settlement was reached between the parties, leading to the withdrawal of the application by the Operational Creditor. The Adjudicating Authority recalled an admission order against another Corporate Debtor due to the initiation of a similar process, which was deemed infructuous. A Memorandum of Understanding was entered into to prevent future insolvency resolution processes.2. The settlement agreement between the parties involved the Appellant making payments to the Operational Creditor as per the agreed terms. Demand Drafts and cheques were exchanged, and the settlement was formalized through an affidavit and the submission of relevant documents. The settlement led to the withdrawal of the application under Section 9 of the Code, and the Corporate Debtor was released from the insolvency resolution process.3. The Interim Resolution Professional claimed fees for services rendered, including monthly fees, publication costs, and legal fees. The Tribunal assessed the fee payable to the Professional, directing the Appellant to pay the remaining amount within a specified timeframe. The Professional was further instructed to hand over the assets and records of the Corporate Debtor to its Directors or Promoters.4. An intervention request was made on behalf of an employee of the Corporate Debtor seeking payment for services rendered. However, the Tribunal noted the existence of a pre-existing dispute through a Summary Suit filed by the employee and declined to determine the claim or counterclaim in the insolvency proceedings.5. The Tribunal, noting the absence of a Committee of Creditors and the settlements reached between the parties, exercised its power under Rule 11 of the NCLAT Rule, 2016. The impugned order was set aside, and the application under Section 9 was withdrawn, leading to the disposal of the Company Petition. The Corporate Debtor was released from the insolvency process, and the proceedings were closed by the Adjudicating Authority.In conclusion, the appeal was allowed with the stated observations and directions, emphasizing the settlements reached, payment obligations, and the release of the Corporate Debtor from insolvency proceedings.