2017 (12) TMI 834 - AT - Insolvency and Bankruptcy

Corporate Debtor Wins Appeal Due to Operational Creditor's Non-Compliance with I&B Code

M/s. Sabari Inn Pvt. Ltd. Versus M/s. Rameesh Associates Pvt. Ltd.

The Appellant, a Corporate Debtor, successfully challenged an order treating an application under the Insolvency and Bankruptcy (I&B) Code, 2016 by ... Insolvency resolution by operational creditor - corporate insolvency procedure - Held that:- Admittedly, no notice was issued under sub-section (1) of Section 8 of the I&B Code . In terms with Rule 5, other informations were also not placed before the Adjudicating Authority. The Respondent having failed to provide all the details as required under Form-5 as noticed above, the application under sections 433 and 434 of the Companies Act, 1956 cannot be treated to be an application under section 9 of the I&B Code in terms of Rule 5 of Transfer Rules, 2016. In such circumstances, in view of proviso to Rule 5 of the Transfer Rules, the application under Sections 433 and 434 of the Companies Act, 1956 stands abated. For the reasons aforesaid, declare that the application preferred by Respondent under Sections 433 and 434 of the Companies Act, 1956 stood abated. Issues:Challenge to impugned order treating application under I&B Code, existence of dispute, compliance with I&B Code provisions, notice issuance, format of application, transfer of case, details required for admission, demand notice requirements, format for filing application under section 9, abatement of application.Comprehensive Analysis:The Appellant, a Corporate Debtor, challenged an order treating an application under the Insolvency and Bankruptcy (I&B) Code, 2016 by the Adjudicating Authority. The Respondent, an Operational Creditor, had filed a petition under Sections 433 and 434 of the Companies Act, 1956. The Appellant contended that the Respondent did not comply with I&B Code provisions, specifically regarding notice issuance and admission in the absence of a dispute. The Respondent failed to appear despite notice, and the Appellant claimed the entire amount under dispute had been settled and paid.Upon the constitution of the Tribunal and Adjudicating Authority, the case was transferred to the Chennai Bench. The Appellant disputed the liability during the proceedings but was not given an opportunity to file a reply before the application was treated as one under Section 9 of the I&B Code. The Appellant argued that proper notice under Section 8 was not issued, and the application was not filed in the required format.The Appellant cited a Central Government notification framing rules for transferring pending proceedings, emphasizing the need for submission of all required information within a specified period. The Appellant highlighted the demand notice requirements under Section 8 of the I&B Code and the format for filing an application under Section 9, including the documents to be attached.The Tribunal noted that no notice was issued under Section 8, and essential details were not provided as required by the rules. Consequently, the application under Sections 433 and 434 of the Companies Act, 1956 could not be treated as one under Section 9 of the I&B Code, leading to its abatement. The impugned order was set aside, and all related actions were declared illegal and dismissed. The Appellant was released from the legal constraints, and the Interim Resolution Professional's fee was to be determined and paid accordingly.In conclusion, the appeal was allowed with the specified observations and directions, with no costs imposed. The Adjudicating Authority was instructed to close the proceedings, marking the end of the legal dispute between the parties.