Appellate Tribunal sets aside order, directs closure of proceedings, releases Corporate Debtor, fixes IRP fees

The Appellate Tribunal allowed the appeal, set aside the impugned order, and directed the Adjudicating Authority to close the proceedings. The Corporate Debtor was released from legal obligations, and any Interim Resolution Professional fees were to be fixed and paid by the Corporate Debtor for the period of service.

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Issues:
1. Service of notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016.
2. Adjudicating Authority's failure to issue notice on the Corporate Debtor before admitting the application under Section 9.
3. Legality of the direction given to the Operational Creditor to serve notice of the date of hearing on the Corporate Debtor.

Analysis:

Issue 1: Service of notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016
The appellant contended that the notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016 was never served on the Corporate Debtor. The Operational Creditor had issued a Demand Notice on 29th August 2017, but it was not served on the Corporate Debtor and was returned with the note "insufficient address." The Adjudicating Authority acknowledged this but still entertained the application under Section 9 based on the address mentioned by the Operational Creditor. The Appellate Tribunal emphasized that the issuance of the Demand Notice under Section 8(1) is mandatory, and without its service, an Operational Creditor cannot file an application under Section 9.

Issue 2: Failure to issue notice on the Corporate Debtor before admitting the application under Section 9
The Adjudicating Authority failed to issue any notice on the Corporate Debtor before admitting the application under Section 9. This omission was deemed necessary as per the decision of the Appellate Tribunal in a previous case. The absence of such notice rendered the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 not maintainable.

Issue 3: Legality of the direction to serve notice of the date of hearing on the Corporate Debtor
The direction given to the Operational Creditor to serve notice of the date of hearing on the Corporate Debtor was found to be against the NCLT Rules, 2016 and not in compliance with Section 424(2) of the Companies Act, which is applicable to the Insolvency and Bankruptcy Code, 2016. This direction could not be considered as a notice issued and served by the Adjudicating Authority. Consequently, the Appellate Tribunal set aside the impugned order, declared all related orders and actions illegal, dismissed the application under Section 9, and allowed the Corporate Debtor to function independently through its Board of Directors.

In conclusion, the Appellate Tribunal allowed the appeal, set aside the impugned order, and directed the Adjudicating Authority to close the proceedings. The Corporate Debtor was released from the legal obligations, and the fee of the Interim Resolution Professional, if appointed, was to be fixed and paid by the Corporate Debtor for the period of service.

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