NCLT Admits Insolvency Application, Parties Reach Settlement, Corporate Debtor Management Restored

The National Company Law Tribunal (NCLT) admitted an insolvency application under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process (CIRP). However, the parties reached a settlement agreement, leading to the withdrawal of the insolvency application and restoration of the Corporate Debtor's management. The tribunal directed the parties to comply with the settlement terms, set aside previous orders, and allowed the Corporate Debtor to operate independently through its Board of Directors. The appeal was allowed without costs imposed.

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Issues Involved:
1. Admittance of Insolvency Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Settlement Agreement between the parties.
3. Expenses and fees of the Interim Resolution Professional.
4. Withdrawal of Insolvency Application and restoration of the Corporate Debtor’s management.

Detailed Analysis:

1. Admittance of Insolvency Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
Sunrise 14 A/S Denmark, the Financial Creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Metalore Overseas Pvt. Ltd., the Corporate Debtor. The Adjudicating Authority, National Company Law Tribunal (NCLT), Principal Bench, New Delhi, admitted the application on 13th May 2019, initiating the Corporate Insolvency Resolution Process (CIRP).

2. Settlement Agreement between the parties:
During the appeal, the parties reached a settlement. A formal Settlement Agreement dated 4th June 2019 was executed between Maersk Trade Finance A/S (MTF) and the Metalore Promoters. The agreement acknowledged an outstanding amount of USD 222,722, but MTF agreed to accept a Settlement Amount of USD 150,000 in full and final settlement of all dues. The terms included the transfer of the Settlement Amount to an account designated by MTF and compliance with all terms and conditions of the agreement by both parties.

3. Expenses and fees of the Interim Resolution Professional:
Mr. Anil Bhatia, the Interim Resolution Professional (IRP), reported expenses of Rs. 1,65,000 towards advertisement and litigation and sought fees for 30 days of work. The tribunal assessed his fee at Rs. 1,00,000 and recognized the incurred expenses, totaling Rs. 2,65,000. Since the Financial Creditor had advanced Rs. 2,00,000, the IRP was entitled to an additional Rs. 65,000. The Corporate Debtor was directed to pay Rs. 2,00,000 to Sunrise 14 A/S Denmark and Rs. 65,000 to the IRP within 15 days.

4. Withdrawal of Insolvency Application and restoration of the Corporate Debtor’s management:
Considering the settlement, the tribunal exercised its inherent powers under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016, allowed the settlement, and set aside the impugned order dated 13th May 2019. Consequently, Company Petition No. IB-832(PB)/2018 filed by Sunrise 14 A/S, Denmark, was disposed of as withdrawn. The tribunal directed that if the settlement amount was not paid, the Financial Creditor could move for the revival of the CIRP and initiate contempt proceedings against the concerned parties.

The tribunal also set aside all orders passed by the Adjudicating Authority, including the appointment of the IRP and the declaration of moratorium. The application under Section 7 of the I&B Code was disposed of as withdrawn, and the Corporate Debtor was released from all legal rigors, allowing it to function independently through its Board of Directors with immediate effect.

Conclusion:
The appeal was allowed with the aforementioned observations and directions, and no costs were imposed.

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