Tribunal Allows Withdrawal of Insolvency Application, Orders Set Aside, Corporate Debtor Released

The Tribunal allowed the Operational Creditor to withdraw the application under Section 9 of the Insolvency and Bankruptcy Code due to a settlement reached before the constitution of the Committee of Creditors. The impugned order was set aside, and the application was disposed of as withdrawn. Consequently, all related orders were declared illegal, the application was dismissed, and the Corporate Debtor was released from legal constraints to operate independently. The Corporate Debtor was directed to pay the remaining amount towards the Resolution Professional's fee, and the appeal was allowed without costs, instructing the Adjudicating Authority to close the proceedings.

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Issues:
1. Challenge to the order admitting the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Settlement reached between parties before the constitution of the Committee of Creditors.
3. Legal implications of settlement on the insolvency proceedings and moratorium.
4. Dismissal of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
5. Consequences of the dismissal on the Corporate Debtor and Resolution Professional.

Detailed Analysis:

1. The appellant, a shareholder of a company, challenged the order admitting the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, filed by an Operational Creditor. The order of moratorium was passed by the Adjudicating Authority. The appellant contended that a settlement was reached between the parties before the constitution of the Committee of Creditors.

2. Both parties acknowledged that a settlement had indeed been reached, with cheques issued by HDFC Bank on 18th January, 2019, totaling Rs. 18,12,643, being handed over to the Operational Creditor. The Operational Creditor accepted the settlement, and the Resolution Professional confirmed that the Committee of Creditors was constituted after the settlement.

3. The Tribunal, considering the settlement reached prior to the constitution of the Committee of Creditors, referred to the decision of the Supreme Court in "Swiss Ribbons Pvt. Ltd & Anr. Vs. Union of India & Ors" and allowed the Operational Creditor to withdraw the application. Consequently, the impugned order was set aside, and the application under Section 9 of the Insolvency and Bankruptcy Code was disposed of as withdrawn.

4. As a result of the withdrawal of the application, all orders passed by the Adjudicating Authority, including the appointment of an Interim Resolution Professional, declaration of moratorium, freezing of accounts, and any related actions were declared illegal and set aside. The application under Section 9 of the Insolvency and Bankruptcy Code was dismissed, and the Corporate Debtor was released from the legal constraints, allowing it to function independently through its Board of Directors immediately.

5. The Corporate Debtor was directed to pay the remaining amount of Rs. 7 lakhs towards the fee and cost of the Resolution Professional within 15 days. The appeal was allowed with the mentioned observations, and no costs were awarded. The Adjudicating Authority was instructed to close the proceedings in light of the withdrawal of the application and the settlement between the parties.

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