Appellate Tribunal frees Corporate Debtor, finds no default, orders CIRP costs.

The Appellate Tribunal allowed the appeal, releasing the Corporate Debtor from the Corporate Insolvency Resolution Process. The Tribunal found that the debt had been paid before the initiation of the process, determining no default. The Financial Creditor was directed to pay the CIRP costs, and management control was returned to the Corporate Debtor for independent operation through its Board of Directors.

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Issues:
1. Adjudication of application under section 7 of Insolvency and Bankruptcy Code, 2016.
2. Default in loan repayment by the Corporate Debtor.
3. Allegations of cheque forgery and dishonor.
4. Payment of debt by the Corporate Debtor before the initiation of Corporate Insolvency Resolution Process (CIRP).

Issue 1: Adjudication of application under section 7 of IBC
The appeal was filed against the order admitting the application under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by the Adjudicating Authority. The Financial Creditor initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for defaulting on a loan of Rs. 41,90,000.

Issue 2: Default in loan repayment by the Corporate Debtor
The Adjudicating Authority admitted the application based on the loan reflected as Long Term Borrowing in the balance sheet of the Corporate Debtor and a written undertaking accepting the debt. The Corporate Debtor contended that the cheque issued for repayment was dishonored due to alleged forgery by the Financial Creditor.

Issue 3: Allegations of cheque forgery and dishonor
The Corporate Debtor claimed that the Financial Creditor forged the cheque and deposited it, leading to a criminal case. However, the Corporate Debtor made payments totaling Rs. 1,50,17,700 before the admission of the application, which the Financial Creditor did not deny receiving.

Issue 4: Payment of debt by the Corporate Debtor before the initiation of CIRP
The Appellate Tribunal found that the Corporate Debtor had paid the debt before the initiation of CIRP, releasing them from the resolution process. The Tribunal concluded that there was no default as the debt was settled, and the Financial Creditor was directed to pay the CIRP costs and fees.

The Tribunal, after analyzing the evidence and submissions, allowed the appeal, setting aside the impugned order and releasing the Corporate Debtor from the Corporate Insolvency Resolution Process. The Financial Creditor was held liable for the CIRP costs, and the management, assets, and records were to be handed over to the Corporate Debtor for independent functioning through its Board of Directors.

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