2018 (4) TMI 936 - AT - Insolvency and Bankruptcy

Tribunal sets aside orders, declares Companies Act application abated, grants liberty for fresh notice under Insolvency and Bankruptcy Code

The Tribunal set aside the impugned orders, declaring the application under Sections 433 and 434 of the Companies Act, 1956 as abated. The Respondent was ... Insolvency resolution by operational creditor - corporate insolvency procedure - Corporate Debtor has preferred these appeals on the ground that provisions of Rule 5 have not been followed, as no demand notice under sub-section (1) of Section 8 of the ‘I&B Code’ was issued, nor relevant information in terms of Part IV of Form 5 were provided by the ‘Financial Creditor’ - Held that:- Similar issue fell for consideration before this Appellate Tribunal in “M/s. Sabari Inn Pvt. Ltd. [2017 (12) TMI 834 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] wherein as held as 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. Liberty is given to the 1st Respondent to issue fresh notice under sub-section (1) of Section 8 of the ‘I&B Code’ and on service of such notice if there is a debt and default or no dispute is raised, it will be open to the 1st Respondent to file fresh application under Section 9 of the ‘I&B Code’ after ten days of service of such notice. Issues involved:1. Admittance of appeal, moratorium order, and appointment of Insolvency Resolution Professional by the Adjudicating Authority under the Companies Act, 1956 and the Insolvency and Bankruptcy Code, 2016.2. Non-compliance with Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016 regarding demand notice and information submission.3. Challenge to Rule 5's validity and abatement of the application under Sections 433 and 434 of the Companies Act, 1956.4. Liberty granted to issue a fresh notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, and the dismissal of the application as abated.Analysis:1. The case involved the Adjudicating Authority admitting an appeal, imposing a moratorium, and appointing an Insolvency Resolution Professional under the Companies Act, 1956 and the Insolvency and Bankruptcy Code, 2016. The Appellant challenged these orders citing non-compliance with Rule 5 of the Transfer Rules, specifically the lack of a demand notice under Section 8 and incomplete information submission as per Form-5.2. The Appellate Tribunal referred to the M/s. Sabari Inn Pvt. Ltd. case, highlighting the importance of Rule 5 in transferring winding up proceedings to the Tribunal. The Rule mandated the submission of all necessary information by the Operational Creditor within sixty days for admission of the petition under the Insolvency and Bankruptcy Code. Failure to adhere to these requirements could result in abatement of the application.3. The Respondent admitted the non-issuance of the demand notice and incomplete information submission but argued against Rule 5's validity, stating it was challenged in the Madras High Court. However, the Tribunal rejected this argument, emphasizing that the Respondent had utilized Rule 5 and could not contest its validity after benefiting from it. The Appellant's case aligned with the Sabari Inn Pvt. Ltd. decision.4. Consequently, the Tribunal set aside the impugned orders, declaring the application under Sections 433 and 434 of the Companies Act, 1956 as abated. The Respondent was granted liberty to issue a fresh notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, with the opportunity to file a new application under Section 9 after ten days if no dispute arose. All orders related to the impugned actions were deemed illegal and set aside, allowing the Corporate Debtor to resume operations independently. The Adjudicating Authority was tasked with determining the Resolution Professional's fee, to be paid by the Corporate Debtor for the period served.