2019 (6) TMI 1632 - AT - Insolvency and Bankruptcy

Appeal allowed, insolvency order set aside. Corporate Insolvency Resolution Process revived if settlement terms not met. Corporate Debtor released.

The appeal was allowed, setting aside the order admitting the insolvency application under Section 7 of the Insolvency and Bankruptcy Code. The ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - compliance with the terms of settlement or not - existence of debt and dispute or not - HELD THAT:- Mr. Kapil Arora and rest of the Allottees are allowed to withdraw the application under Section 7 of the 'I&B Code' with liberty to pray for revival and continuation of 'Corporate Insolvency Resolution Process' against the 'Corporate Debtor' - 'Morpheus Developers Private Limited' if the Terms of Settlement' is violated; in case the Terms of Settlement' is not complied with in its letter and spirit and it will also be open to file a petition for contempt proceedings and for action in accordance with law against the Directors of the 'Corporate Debtor'. Fee of the 'Interim Resolution Process/Resolution Process and cost of resolution process - HELD THAT:- The matter is remitted to the Adjudicating Authority, Principal Bench, New Delhi to determine the claim and fix the fee payable to the 'Interim Resolution Professional' and present 'Resolution Professional' and resolution cost payable to one or other IRP/RP. On such determination, the amount is to be paid by the 'Corporate Debtor' - 'Morpheus Developers Private Limited' within the period as may be prescribed by the Adjudicating Authority. Appeal allowed by way of remand. Issues Involved:1. Admission of insolvency application under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Settlement agreement between the parties.3. Withdrawal of insolvency application.4. Compliance with terms of settlement.5. Determination of fees and costs for the Interim Resolution Professional (IRP) and Resolution Professional (RP).Detailed Analysis:1. Admission of Insolvency Application:The initial issue involved the admission of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by 'Mr. Kapil Arora' against 'Morpheus Developers Private Limited' (Corporate Debtor). The National Company Law Tribunal (NCLT), Principal Bench, New Delhi, admitted the application on 12th February 2019, initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.2. Settlement Agreement Between the Parties:During the pendency of the appeal, the parties were allowed to settle the matter. The Appellant and Mr. Kapil Arora entered into a 'Settlement Agreement' dated 20th May 2019, wherein the Appellant agreed to pay a sum of Rs. 50,00,000/- as the outstanding principal amount and Rs. 87,50,000/- as interest and compensation. The settlement terms included issuing post-dated cheques, securing payments with residential flats, and ensuring the execution of Builder Buyer Agreements.3. Withdrawal of Insolvency Application:A subsequent 'Settlement Agreement' dated 30th May 2019 was reached between 'Morpheus Developers Private Limited' and the flat buyers (holding 82% share of the Committee of Creditors). An application under Section 12A of the IBC was filed for the withdrawal of the insolvency application. The agreement outlined the construction schedule, payment plans, and the formation of a Buyer Committee for reviewing financial data and construction progress.4. Compliance with Terms of Settlement:The Tribunal considered the settlement terms and allowed the withdrawal of the application under Section 7 of the IBC, with liberty to revive and continue the CIRP if the terms of the settlement were violated. The Tribunal emphasized that non-compliance would permit the parties to seek revival of insolvency proceedings and take legal action, including contempt proceedings, against the Directors of the Corporate Debtor.5. Determination of Fees and Costs for IRP and RP:The Tribunal remitted the matter to the Adjudicating Authority, Principal Bench, New Delhi, to determine the fees payable to the Interim Resolution Professional (IRP) and the present Resolution Professional (RP), as well as the resolution process costs. The Corporate Debtor was directed to pay the determined amount within the period prescribed by the Adjudicating Authority.Conclusion:The appeal was allowed, setting aside the impugned order dated 12th February 2019. The application under Section 7 of the IBC was disposed of as withdrawn with the liberty to revive the CIRP in case of non-compliance with the settlement terms. The Corporate Debtor was released from the insolvency proceedings and allowed to function independently through its Board of Directors. The Adjudicating Authority was tasked with determining the fees and costs for the IRP and RP. The appeal concluded with no costs.