Tribunal sets aside Insolvency Code application order due to flawed service, allows Corporate Debtor independence.

The Tribunal set aside the order admitting an application under Section 9 of the Insolvency and Bankruptcy Code due to lack of proper service of demand notice under Section 8(1). The Tribunal declared all related orders illegal, dismissed the application, and allowed the Corporate Debtor to operate independently. The Adjudicating Authority was directed to determine the Resolution Professional's fee to be paid by the Corporate Debtor. The appeal was successful with no costs imposed, as the parties had settled the claim.

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Issues involved:
Admission of application under Section 9 of Insolvency and Bankruptcy Code without proper service of demand notice under Section 8(1).

Analysis:
The appeal was filed by a Shareholder and Ex-Director of a Corporate Debtor against an order passed by the Adjudicating Authority admitting the application of an Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Appellant argued that no demand notice under Section 8(1) was served on the Corporate Debtor, despite the Adjudicating Authority treating it as served. Evidence confirmed that the demand notice was never served on the Corporate Debtor, as acknowledged by both parties. The Appellant mentioned that settlement negotiations were ongoing, and a draft of a bank was to be handed over to the Operational Creditor as part of the settlement. An affidavit was filed by the Appellant, providing terms of settlement and confirming payment to the Respondent through a draft. The Tribunal found that the impugned order was passed without considering the evidence of non-service of the demand notice, leading to the setting aside of the order. The case was not remitted as the parties had settled the claim.

The Tribunal declared all orders passed by the Adjudicating Authority, including the appointment of Resolution Professional, declaration of moratorium, freezing of accounts, and actions taken by the Resolution Professional, as illegal and set them aside. The application under Section 9 of the I&B Code was dismissed, releasing the Corporate Debtor to function independently through its Board of Directors immediately. The Adjudicating Authority was tasked with fixing the fee of the Resolution Professional, to be paid by the Corporate Debtor. The appeal was allowed with no costs imposed.

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