Appellate Tribunal overturns Section 9 order, upholds natural justice principles

The Appellate Tribunal set aside the order admitting the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, as the Corporate Debtor was not heard, violating natural justice principles. The Tribunal acknowledged the settlement between the parties, dismissing the application and releasing the Corporate Debtor from insolvency proceedings. All previous orders were deemed illegal, and the Corporate Debtor was allowed to operate independently. The parties made payments towards legal dues and resolution costs, with no costs awarded in the appeal. The proceedings were directed to be closed, relieving the Corporate Debtor from insolvency immediately.

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Issues involved:
1. Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 without hearing the Corporate Debtor.
2. Challenge to the order of admission by a Shareholder of the Corporate Debtor.
3. Settlement reached between the parties.
4. Payment made towards legal dues and resolution professional's cost.
5. Setting aside the impugned order and its consequences.

Analysis:

1. The Respondent, an Operational Creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor. The National Company Law Tribunal admitted the application and appointed an Interim Resolution Professional without hearing the Corporate Debtor, which was challenged by a Shareholder of the Corporate Debtor. The Appellate Tribunal noted that the order of admission without hearing the Corporate Debtor violated the principles of natural justice and set aside the impugned order.

2. The Shareholder challenged the order on the grounds that the Corporate Debtor was not given an opportunity to present its case, which could have led to a settlement and resolution of the dispute. The Appellate Tribunal, considering the readiness of the parties to settle the matter, decided to set aside the impugned order without remanding the case back to the Adjudicating Authority.

3. The parties had reached a settlement, with a significant amount being paid towards the total due. The Appellate Tribunal acknowledged the payments made by the parties and decided to dismiss the application under Section 9 of the I&B Code. Consequently, all orders passed by the Adjudicating Authority, including the appointment of the Interim Resolution Professional, were declared illegal and set aside.

4. Additional payments were made towards legal dues and the resolution professional's cost, which were considered by the Tribunal in its decision to release the Corporate Debtor from the insolvency proceedings and allow it to function independently through its Board of Directors.

5. As per the settlement agreement, the Respondent agreed to pay a sum to the Interim Resolution Professional for the period of his service and towards the resolution cost. The appeal was allowed with the mentioned observations, and no costs were awarded in the circumstances of the case. The Adjudicating Authority was directed to close the proceedings, and the Corporate Debtor was relieved from the insolvency process with immediate effect.

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