Appeal allowed due to lack of notice, orders declared illegal - Corporate Debtor released from constraints

The appeal was allowed, setting aside the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code due to lack of notice to the Corporate Debtor, a violation of natural justice. As the matter had been settled between the parties, all orders by the Adjudicating Authority were declared illegal. The Corporate Debtor was released from legal constraints, and the application under Section 9 of the I&B Code was dismissed. The Adjudicating Authority was directed to determine the Interim Resolution Professional's fee, with the Corporate Debtor instructed to pay the fees. The appeal was allowed with no costs awarded.

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Issues:
Admission of application under Section 7 of the Insolvency and Bankruptcy Code without notice to the Corporate Debtor, violation of natural justice, settlement between parties.

Analysis:
The appeal was filed by the Managing Director of CK Infrastructures Ltd., the Corporate Debtor, against the order passed by the Adjudicating Authority admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 by RCI Industries and Technologies Ltd., the Financial Creditor. The appellant contended that the Adjudicating Authority did not issue any notice to the Corporate Debtor before admitting the application, which was a violation of the rules of natural justice. It was also highlighted that the parties had settled the dispute.

The counsel for the Financial Creditor acknowledged that while the Adjudicating Authority directed the Financial Creditor to issue a notice to the Corporate Debtor, no direct notice was issued by the Adjudicating Authority itself. The Appellate Tribunal, citing the decision in "M/s. Innoventive Industries Ltd. Vs. ICICI Bank & Anr.", emphasized the necessity of issuing a notice before admitting an application under the I&B Code. Consequently, the impugned order dated 3rd November, 2017 was set aside.

Given that the matter had been settled between the parties, and this fact was accepted by the counsel for the Respondent, there was no justification to remit the case back to the Adjudicating Authority. Therefore, all orders passed by the Adjudicating Authority, including the appointment of an Interim Resolution Professional, declaration of moratorium, freezing of accounts, and any actions taken by the Interim Resolution Professional were declared illegal and set aside. The application under Section 9 of the I&B Code was dismissed, and the Corporate Debtor was released from all legal constraints to function independently through its Board of Directors.

The Adjudicating Authority was directed to determine the fee of the Interim Resolution Professional, if appointed, and the Corporate Debtor was instructed to pay the fees for the period of the professional's service. The appeal was allowed with the mentioned observations, and no costs were awarded in the circumstances of the case.

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