Settlement before creditor committee allowed withdrawal of insolvency proceedings and payment of interim resolution professional costs.

Where the parties settled before constitution of the committee of creditors, the Appellate Tribunal invoked its inherent power under Rule 11 to set aside the insolvency admission order and permit withdrawal of the section 9 proceeding, with all consequential insolvency measures also falling away. The Tribunal also recognised that the interim resolution professional was entitled to reasonable fees and incidental expenses for work already done, and directed the corporate debtor to pay the quantified amount within the time fixed. On settlement, the insolvency process was terminated and the corporate debtor was restored to functioning through its board of directors.

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Issues: (i) Whether, on settlement between the parties, the corporate insolvency resolution process and the order initiating it could be set aside and the section 9 application withdrawn; (ii) whether the interim resolution professional was entitled to be paid his fees and expenses from the corporate debtor.

Issue (i): Whether, on settlement between the parties, the corporate insolvency resolution process and the order initiating it could be set aside and the section 9 application withdrawn.

Analysis: The settlement was accepted by the parties before constitution of the committee of creditors. In exercise of the inherent power under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016, the order initiating insolvency proceedings was liable to be set aside and the section 9 application treated as withdrawn. Consequential orders passed in the insolvency process could also not survive.

Conclusion: The issue was decided in favour of the appellant. The impugned insolvency order was set aside and the section 9 application stood disposed of as withdrawn.

Issue (ii): Whether the interim resolution professional was entitled to be paid his fees and expenses from the corporate debtor.

Analysis: The interim resolution professional had worked for 42 days and incurred costs towards fees and incidental expenses. The Tribunal assessed and fixed the total amount payable, directing payment by the corporate debtor within a stipulated time.

Conclusion: The issue was decided in favour of the interim resolution professional. The corporate debtor was directed to pay the quantified amount.

Final Conclusion: The insolvency proceedings were terminated on settlement, all consequential measures taken in pursuance of the admission order were annulled, and the corporate debtor was restored to functioning through its board of directors.

Ratio Decidendi: Where the parties settle before constitution of the committee of creditors, the appellate tribunal may invoke its inherent powers to set aside the insolvency admission order and permit withdrawal of the section 9 proceeding, while safeguarding reasonable costs already incurred in the process.

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