2019 (6) TMI 906 - AT - Insolvency and Bankruptcy

Tribunal Upholds Insolvency Application, Shareholder Appeals Dismissed. Resolution Process Directions Issued

The Tribunal upheld the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by 'Union Bank of India' ... Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - notice and representation of the corporate debtor at admission proceedings - rights of operational creditors at the stage of admission - obligation to complete the resolution process within the stipulated period - duties of the resolution professional and the committee of creditors to cooperate in the resolution processAdmission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - notice and representation of the corporate debtor at admission proceedings - Validity of the Adjudicating Authority's order admitting the Section 7 application filed by the financial creditor - HELD THAT: - The Adjudicating Authority's admission of the Section 7 petition was sustained because notice had been issued to the corporate debtor and senior counsel along with another advocate appeared and were heard on multiple occasions before the Adjudicating Authority. The Tribunal found the appellants' contention that the corporate debtor had not been given notice to be unfounded in view of the record of representation and hearings conducted prior to passing the impugned order.The admission order dated 1st November, 2018 was not interfered with.Rights of operational creditors at the stage of admission - Whether operational creditors are entitled to be heard at the time of admission of a Section 7 application - HELD THAT: - The Tribunal held that claims of operational creditors are to be considered by the resolution professional once admitted; operational creditors do not have a right to be heard at the stage of admission of the Section 7 application unless their claims have been admitted and are required to be considered in the insolvency process.Operational creditors have no right to be heard at the admission stage; their claims are to be considered subsequently by the resolution professional.Obligation to complete the resolution process within the stipulated period - duties of the resolution professional and the committee of creditors to cooperate in the resolution process - Direction regarding conduct and timeline of the resolution process following admission - HELD THAT: - The Tribunal directed that the Adjudicating Authority is expected to ensure completion of the resolution process in accordance with law within the stipulated period. The resolution professional and the committee of creditors were enjoined to cooperate to facilitate the success of the resolution process, reflecting the court's supervisory expectation that timelines and cooperative conduct be observed post-admission.The Adjudicating Authority must complete the resolution process within the stipulated period and the resolution professional and committee of creditors shall cooperate to ensure its success.Final Conclusion: Appeals dismissed; impugned order admitting the Section 7 application is upheld, operational creditors' claims to be considered post-admission by the resolution professional, and directions issued to complete the resolution process within the stipulated period with cooperation from the resolution professional and the committee of creditors. Issues involved:Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 without notice to the Corporate Debtor, consideration of claims of Operational Creditors, interference with the impugned order dated 1st November, 2018, completion of Resolution Process within stipulated period.Analysis:The appeals were filed by the Appellants - Shareholders against the order passed by the Adjudicating Authority admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 filed by the Respondent - 'Union Bank of India'. The Appellants contended that the Corporate Debtor is a Public Limited Company with numerous shareholders and dependents, and the application was admitted without notice to the Corporate Debtor. However, it was noted that notice was indeed issued to the Corporate Debtor, and their representatives appeared before the Adjudicating Authority and were heard. The Respondents highlighted that the Corporate Debtor's counsel appeared on multiple occasions before the Adjudicating Authority before the order was passed.The issue of claims of Operational Creditors was addressed, stating that their claims would be considered by the Resolution Professional once admitted. It was emphasized that Operational Creditors do not have the right to be heard at the time of admission of the application under Section 7 of the Insolvency and Bankruptcy Code. The Tribunal declined to interfere with the impugned order dated 1st November, 2018, and directed the Adjudicating Authority to complete the Resolution Process within the stipulated period. The Resolution Professional and the Committee of Creditors were urged to cooperate to ensure the success of the resolution process.In conclusion, both appeals were disposed of with the mentioned observations and directions, without any costs being imposed. The Tribunal's decision focused on upholding the legal procedures under the Insolvency and Bankruptcy Code, emphasizing the importance of following due process and cooperation for the effective resolution of the matter.