Appeal allowed in favor of Corporate Debtor due to violation of natural justice. Corporate Debtor released from restrictions.

The appeal was allowed by the Appellate Tribunal in favor of the Corporate Debtor. The impugned order admitting the application under Section 7 without proper notice was set aside due to a violation of the principle of natural justice. Consequently, the Corporate Debtor was released from all legal restrictions, including the appointment of the Interim Resolution Professional. The Adjudicating Authority was directed to close the proceedings, allowing the Corporate Debtor to function independently through its Board of Directors. The decision on the Interim Resolution Professional's fee was also clarified, with the Corporate Debtor being responsible for the determined fee and expenses. No costs were awarded in this case.

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Issues Involved:
Admission of application under Section 7 by the Adjudicating Authority without proper notice to the Corporate Debtor, violation of principle of natural justice, setting aside the impugned order, releasing the Corporate Debtor from legal restrictions, deciding the fee of the Interim Resolution Professional, and allowing the Corporate Debtor to function independently.

Analysis:

1. Admission of Application under Section 7 without Proper Notice:
The appeal was filed by the Director of the Corporate Debtor against the order passed by the Adjudicating Authority admitting the application under Section 7 by the Financial Creditor. The Appellant argued that no notice was served on the Corporate Debtor, and a settlement had been reached between the parties. The Financial Creditor claimed that notice for admission was served upon the Corporate Debtor. The Appellate Tribunal found that no notice was issued or served on the Corporate Debtor, contrary to the procedure mandated by NCLT Rules 2017 and the Companies Act, 2013. Citing the decision in 'Innoventive Industries Ltd. Vs. ICICI Bank & Anr.', the impugned order was set aside as it violated the principle of natural justice.

2. Release of Corporate Debtor and Setting Aside Orders:
The Appellate Tribunal declared the impugned order and all subsequent actions taken by the Adjudicating Authority and the Interim Resolution Professional as illegal and set them aside. The Corporate Debtor was released from all legal restrictions, including the appointment of the Interim Resolution Professional, declaration of moratorium, and freezing of accounts. The Adjudicating Authority was directed to close the proceedings, allowing the Corporate Debtor to function independently through its Board of Directors immediately.

3. Decision on Interim Resolution Professional's Fee:
The Adjudicating Authority was tasked with determining the fee of the Interim Resolution Professional and the actual expenditure to be borne by the Corporate Debtor. It was mandated that the Corporate Debtor would be responsible for paying the determined fee and expenses of the Interim Resolution Professional.

4. Conclusion and Costs:
The appeal was allowed with the specified observations, and no costs were awarded in the circumstances of the case. The Appellate Tribunal emphasized the importance of following due process and ensuring that the rights of the Corporate Debtor are upheld, as demonstrated by the setting aside of the impugned order due to the lack of proper notice and violation of natural justice principles.

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