NCLAT sets aside insolvency process, directs payment to creditor.

The National Company Law Appellate Tribunal (NCLAT) exercised its inherent power under Rule 11 of NCLAT Rules, 2016 to set aside the Corporate Insolvency Resolution Process initiated against the Corporate Debtor. The NCLAT allowed the Operational Creditor's application for withdrawal of the Section 9 application, disposing of the Company Petition. The Adjudicating Authority was directed to close the proceeding. The Appellant was ordered to pay the remaining amount to the Operational Creditor as per the Terms of Settlement and to also pay the fee of the Interim Resolution Professional along with the cost of Corporate Insolvency Resolution Process amounting to Rs. 2.50 Lakhs within three weeks.

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Issues:
Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 rejected by Adjudicating Authority - Settlement reached before constitution of Committee of Creditors - Application for withdrawal of application under Section 9 - Exercise of inherent power under Rule 11 of NCLAT Rules, 2016 - Disposal of Company Petition - Payment of fee and cost incurred during Corporate Insolvency Resolution Process.

Analysis:
The Respondent, an Operational Creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor. The application was rejected by the Adjudicating Authority, but a settlement was reached between the parties before the constitution of the Committee of Creditors. The Operational Creditor filed an application for withdrawal of the Section 9 application, which was adjourned by the Adjudicating Authority. The National Company Law Appellate Tribunal observed that since the matter was settled before the constitution of the Committee of Creditors, the Adjudicating Authority should have passed an appropriate order under Rule 11 of the NCLT Rules, 2016. Therefore, the NCLAT exercised its inherent power under Rule 11 of NCLAT Rules, 2016 to set aside the Corporate Insolvency Resolution Process initiated against the Corporate Debtor and allowed the Operational Creditor's application for withdrawal of the Section 9 application, disposing of the Company Petition. The Adjudicating Authority was directed to close the proceeding.

The Interim Resolution Professional incurred a fee and cost during the Corporate Insolvency Resolution Process, which was determined to be Rs. 2.50 Lakhs. The Appellant agreed to pay this amount to the Interim Resolution Professional. The NCLAT directed the Appellant to pay the remaining amount to the Operational Creditor as per the Terms of Settlement and to also pay the fee of the Interim Resolution Professional along with the cost of CIRP amounting to Rs. 2.50 Lakhs within three weeks. The appeal was allowed with the mentioned observations and directions, ensuring the settlement terms were fulfilled and the necessary payments were made.

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