2019 (1) TMI 842 - AT - Insolvency and Bankruptcy

Tribunal Overturns Insolvency Admission, Emphasizes Law Accuracy for Fair Results

The National Company Law Appellate Tribunal, New Delhi, set aside the Adjudicating Authority's order admitting an application under Section 7 of the ... Corporate insolvency process - default in payment of dues - settlement of claim - Held that:- From the ‘Settlement Deed’ filed it appears that e-stamp was purchased on 30th October, 2018 at 01:41 PM and the settlement was reached on 1st November, 2018. Thus, it is clear that the parties have reached for settlement much prior to the date of admission of application on 13th November, 2018. From the aforesaid fact, it is clear that there was no default of payment on the part of the appellant as on 13th November, 2018 and thereby no occasion for the Adjudicating Authority (National Company Law Tribunal), Chandigarh Bench, Chandigarh to admit the application under Section 7. Order (s) passed by Ld. Adjudicating Authority appointing ‘Interim Resolution Professional’, declaring moratorium, freezing of account and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action taken by the ‘Resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by the 1st Respondent under Section 7 of the I&B Code is dismissed. Issues: Settlement reached between parties prior to admission of application under Section 7 of the I&B Code. Validity of the settlement and its impact on the insolvency proceedings.The judgment by the National Company Law Appellate Tribunal, New Delhi, involved a dispute where the Corporate Debtor contended that a settlement had been reached with the Financial Creditor before the admission of the application under Section 7 of the Insolvency and Bankruptcy Code. The Appellate Tribunal noted that the settlement deed was executed before the admission date, indicating no default by the Corporate Debtor as of the admission date. The Adjudicating Authority had admitted the application under Section 7 based on incorrect information. The Resolution Professional confirmed that the settlement had been reached, and all fees and insolvency costs had been paid. Consequently, the Tribunal set aside the Adjudicating Authority's order, declaring it illegal. The Tribunal dismissed the application under Section 7, releasing the Company from the insolvency proceedings and allowing it to function independently through its Board of Directors immediately.Furthermore, the Tribunal invalidated all orders passed by the Adjudicating Authority, including the appointment of the Interim Resolution Professional, declaration of moratorium, freezing of accounts, and any actions taken by the Resolution Professional. The Tribunal directed the Adjudicating Authority to close the proceedings, effectively ending the insolvency process against the Company. The appeal was allowed without any cost implications due to the circumstances of the case. This judgment highlights the importance of settlements in insolvency proceedings and the need for correct application of the law to ensure fair outcomes for all parties involved.