Tribunal dismisses appeal against admission of insolvency application under Section 9 of IBC

The tribunal dismissed the appeal challenging the admission of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, filed against a corporate debtor. The tribunal found no collusion between the respondents, deemed the feasibility of Corporate Insolvency Resolution Process (CIRP) against the corporate debtor alone, clarified the bar under Section 11 of IBC, and addressed procedural irregularities in the impugned orders. The tribunal concluded that the claims lacked merit, upheld the admission order, and disposed of all pending applications without costs.

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Issues Involved:
1. Admission of Application under Section 9 of Insolvency and Bankruptcy Code, 2016.
2. Alleged collusion between the Respondents.
3. Feasibility of CIRP against Respondent No.1 alone.
4. Bar under Section 11 of IBC.
5. Procedural irregularities in the Impugned Orders.

Detailed Analysis:

1. Admission of Application under Section 9 of Insolvency and Bankruptcy Code, 2016:
The appellant, representing 350 home buyers, challenged the admission of the application under Section 9 of IBC filed by Respondent No.2 (Straight Edge Contracts Pvt. Ltd.) against Respondent No.1 (Three C Shelters Pvt. Ltd.). The admission order dated 20th July 2020 was challenged on grounds of being perverse and devoid of merit. The appellant claimed that Respondent No.2, being a corporate debtor in another petition, could not be an operational creditor.

2. Alleged Collusion between the Respondents:
The appellant alleged collusion between Respondent No.1 and Respondent No.2, arguing that Respondent No.2, in a separate matter, had taken a contrary stand, claiming that the debt was assigned to the principal employer. The tribunal found no substance in these allegations, stating that the definition of financial and operational creditors includes any person to whom the debt has been legally assigned or transferred, but this does not apply to a corporate debtor. The tribunal concluded that the claim of collusion and fraud was not appealing.

3. Feasibility of CIRP against Respondent No.1 alone:
The appellant argued that CIRP against Respondent No.1 alone was not feasible without including Orris Infrastructure Pvt. Ltd., with whom the project was developed. The tribunal noted that there was no pending CIRP against Orris Infrastructure and that the IRP of Respondent No.1 denied any joint venture agreement. The tribunal found no documentary support for the appellant's contentions and stated that the matter would be for the IRP/RP to look into during the CIRP proceedings.

4. Bar under Section 11 of IBC:
The appellant contended that Respondent No.2 could not initiate insolvency proceedings due to the bar under Section 11(b) of IBC, as it had exited CIRP on 13th March 2020 and twelve months had not elapsed. The tribunal clarified that the bar under Section 11 applies to the initiation of the application, and since the application was filed after the CIRP against Respondent No.2 was set aside, the bar did not apply. Further, the tribunal referred to the Insolvency and Bankruptcy Code (Amendment) Act of 2020, which clarified that nothing in Section 11 prevents a corporate debtor from initiating CIRP against another corporate debtor.

5. Procedural Irregularities in the Impugned Orders:
The appellant argued that the impugned orders were untenable and perverse as they lacked reasons. The tribunal acknowledged that the initial order dated 20th July 2020 had errors, which were corrected on 14th October 2020, and a detailed judgment was passed on 16th October 2020. The tribunal criticized the adjudicating authority for not passing a complete order initially but found no purpose in setting aside the CIRP on technical grounds. The tribunal noted that both respondents were now under CIRP and trusted the IRPs/RPs to follow the law.

Order:
The tribunal dismissed the appeal, finding no substance in the appellant's claims. All pending I.A.s and intervention applications were disposed of, with no orders as to costs.

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