Tribunal Overturns Orders Due to Procedural Issues in Insolvency Case

The Tribunal allowed two appeals challenging orders admitting applications under Section 9 of the Insolvency & Bankruptcy Code, 2016, due to procedural irregularities. Macquarie Bank Ltd. failed to provide a certificate from a financial institution as required by the Code, and the notice issued by their lawyer was deemed inadequate. Consequently, all orders, including the appointment of an Interim Resolution Professional, were set aside. The Appellant company was released from legal constraints and permitted to resume operations under its Board of Directors. The Tribunal directed the determination and payment of fees for any Interim Resolution Professional services.

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Issues:
Appeals against orders admitting applications under Section 9 of the Insolvency & Bankruptcy Code, 2016 without proper certification and notice by a financial institution.

Analysis:
The Appellate Tribunal considered two appeals challenging orders passed in insolvency proceedings initiated under Section 9 of the Insolvency & Bankruptcy Code, 2016. The Respondent, Macquarie Bank Ltd., had filed the applications, but the Appellant contested the validity of the proceedings. The Tribunal referred to a previous judgment involving the same parties, where it was held that Macquarie Bank Ltd. did not qualify as a financial institution under the Code. As a result, any certificate from the bank could not establish a debt default. Moreover, the notice issued by a lawyer on behalf of the Appellant was deemed inadequate under Section 8 of the Code, rendering the petition under Section 9 non-maintainable.

In the present appeals, the Tribunal noted that Macquarie Bank Ltd. failed to provide a certificate from a financial institution as defined in the Code. Additionally, the notice issued by the lawyer representing the Respondent was criticized by the adjudicating authority. Consequently, all orders passed by the Adjudicating Authority, including the appointment of an Interim Resolution Professional and the declaration of moratorium, were declared illegal and set aside. The Appellant company was released from the legal constraints and allowed to resume independent operations under its Board of Directors immediately.

Furthermore, the Adjudicating Authority was directed to determine the fees of the Interim Resolution Professional, if one was appointed, and the Appellant was instructed to pay the fees for the IRP's period of service. The Tribunal, based on the aforementioned reasons, allowed both appeals, setting aside the orders related to Macquarie Bank Ltd.'s case. It was clarified that the Tribunal did not address other issues raised in the appeals, focusing solely on the procedural irregularities regarding certification and notice in the insolvency proceedings.

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