Successful appeal in insolvency case, debts paid, illegal actions annulled, Corporate Debtor free to operate independently. The appeal was successful as the total dues owed to the Operational Creditor were paid by the Appellant shareholder of the Corporate Debtor. As the ...
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Successful appeal in insolvency case, debts paid, illegal actions annulled, Corporate Debtor free to operate independently.
The appeal was successful as the total dues owed to the Operational Creditor were paid by the Appellant shareholder of the Corporate Debtor. As the Committee of Creditors had not been constituted, the order admitting the application under Section 9 of the Insolvency and Bankruptcy Code was set aside. Consequently, all actions taken by the Interim Resolution Professional were declared illegal, and the Corporate Debtor was released from legal restrictions to operate independently. The appeal was allowed, and no costs were awarded, directing the Adjudicating Authority to close the proceedings in favor of the Appellant.
Issues: - Appeal against the order admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Constitution of Committee of Creditors - Payment of dues to Operational Creditor - Payment of Resolution Cost to Interim Resolution Professional - Legal actions taken by Interim Resolution Professional - Setting aside the impugned order and releasing the Corporate Debtor
Analysis: 1. The appeal was filed against the order passed by the Adjudicating Authority admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Appellant, a shareholder of the Corporate Debtor, contested the admission of the application and stated readiness to pay the total dues to the Operational Creditor. The Committee of Creditors had not been constituted at the time of the appeal.
2. The Appellant's counsel submitted a Demand Draft of Rs. 66,87,540, which covered the total dues owed to the Operational Creditor. Subsequently, discussions revealed that the admitted claim by the Interim Resolution Professional was Rs. 74,30,682, including interest, and an additional Rs. 2 lakhs for Resolution Cost. The Interim Resolution Professional also claimed a fee for the working period.
3. The Appellant presented three Demand Drafts totaling Rs. 76,30,682, which included the principal amount, interest, and the Resolution Cost paid on behalf of the Interim Resolution Professional. These were handed over to the Operational Creditor for onward transmission. Another Demand Draft for Rs. 2,16,000 in the name of the Interim Resolution Professional was to be handed over later due to the absence of the professional.
4. As the total amount owed to the Operational Creditor was paid, and the Committee of Creditors had not been constituted, the impugned order admitting the application under Section 9 of the Insolvency and Bankruptcy Code was set aside. Consequently, all orders appointing the Interim Resolution Professional, declaring moratorium, freezing accounts, and any other actions taken were declared illegal and dismissed. The Corporate Debtor was released from the legal restrictions and allowed to function independently through its Board of Directors.
5. The appeal was allowed with the above observations, and no costs were awarded in the case. The Adjudicating Authority was directed to close the proceedings, thereby concluding the matter in favor of the Appellant.
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