2019 (10) TMI 51 - AT - Insolvency and Bankruptcy

Successful Appeal: Flat Owners' Association's Section 9 Application Dismissed

P.R. Earnarst, Director of M/s. Green Peace Construction Pvt. Ltd. Versus M/s. Ajantha Flat Owners Association And Anr.

P.R. Earnarst, Director of M/s. Green Peace Construction Pvt. Ltd. Versus M/s. Ajantha Flat Owners Association And Anr. - TMI Issues:1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 by 'M/s. Ajanta Flat Owners' Association' against 'M/s. Green Peace Construction Pvt. Ltd.'2. Whether 'Association of Flat Owners' can be considered an 'Operational Creditor' as per Section 5(20) and Section 5(21) of the I&B Code.3. Validity of orders passed by the Adjudicating Authority and actions taken by the Interim Resolution Professional.4. Settlement between the parties and its impact on the proceedings.Analysis:1. The appeal was filed by the Director of 'M/s. Green Peace Construction Pvt. Ltd.' against the order admitting the application under Section 9 of the I&B Code by 'M/s. Ajanta Flat Owners' Association'. The grounds for the application were the alleged failure of the Corporate Debtor to take corrective measures as required.2. Initially, the Appellant argued that the Flat Owners' Association could not be considered 'Operational Creditors' as they had not provided goods or services. However, a question was raised regarding the Association's status as an 'Operational Creditor' under the I&B Code.3. A settlement was reached between the parties, where the expenses incurred by the Flat Owners' Association were paid by the Corporate Debtor. Following this settlement, it was concluded that the Flat Owners' Association, having not supplied goods or services, could not be classified as an 'Operational Creditor', rendering the Section 9 application not maintainable.4. Consequently, the impugned order was set aside, and the application under Section 9 was dismissed. All orders passed by the Adjudicating Authority, including the appointment of the Interim Resolution Professional and actions taken, were declared illegal and set aside. The Corporate Debtor was released from the legal constraints and allowed to function independently. The fees of the Interim Resolution Professional were to be determined and paid by the Corporate Debtor for the period of service.This detailed analysis covers the key issues addressed in the judgment, focusing on the application's maintainability, the status of the Flat Owners' Association, the validity of orders passed, and the impact of the settlement on the proceedings.