2021 (3) TMI 771 - AT - Insolvency and Bankruptcy

Tribunal sets aside order, accepts settlement, releases Corporate Debtor from CIRP, and concludes appeal.

The Tribunal set aside the order admitting the application under Section 9 of the Insolvency and Bankruptcy Code, accepted the settlement between the ... Ex parte admission under the Insolvency and Bankruptcy Code - Settlement after initiation of Corporate Insolvency Resolution Process - Withdrawal/dropping of CIRP on settlement between parties - Duties of Interim Resolution Professional under Section 18 and constitution of Committee of Creditors under Section 21(1) of the I&B Code - Quantification and payment of IRP fee and resolution expensesEx parte admission under the Insolvency and Bankruptcy Code - Settlement after initiation of Corporate Insolvency Resolution Process - Withdrawal/dropping of CIRP on settlement between parties - Whether the impugned ex parte admission under Section 9 and the consequent CIRP should be set aside in view of the subsequent settlement between the Corporate Debtor and the Operational Creditor. - HELD THAT: - The Adjudicating Authority admitted the Section 9 application in ex parte as the Corporate Debtor did not contest it. Immediately thereafter the parties executed a Settlement Agreement providing for full and final satisfaction of the Operational Creditor's claim and contemplated withdrawal of the Section 9 application. The Tribunal noted that the settlement was effected within four days of the ex parte admission and that the Operational Creditor, being the sole claimant, had the capacity and will to settle its claim. In these circumstances the Tribunal accepted the settlement and held that continuation of CIRP was no longer required. Consequently the impugned order of admission was set aside and the Corporate Debtor was released from the rigour of CIRP. [Paras 1, 4, 6, 7]Impugned ex parte admission set aside; settlement accepted and CIRP dropped; Corporate Debtor released from CIRP; appeal disposed.Duties of Interim Resolution Professional under Section 18 and constitution of Committee of Creditors under Section 21(1) of the I&B Code - Quantification and payment of IRP fee and resolution expenses - Extent of IRP's entitlement to fees and resolution costs and direction for payment in consequence of dropping CIRP. - HELD THAT: - The IRP submitted a quantified claim for his fee and resolution costs and sought addition of counsel fee to resolution expenses. Having accepted the settlement and directed closure of CIRP, the Tribunal quantified the total cost to be paid in respect of IRP's fee and resolution expenses at the sum specified in the order and recorded that the same had been or would be arranged: the Corporate Debtor stated payment to the Operational Creditor had been made and the Operational Creditor undertook to provide a Demand Draft for the quantified amount to the IRP within five days. The order directs payment of the quantified cost to satisfy the IRP's claim as a condition of closing the CIRP. [Paras 3, 7]IRP's fee and resolution expenses quantified and directed to be paid; Operational Creditor to provide demand draft to IRP within five days; case to be closed by the Adjudicating Authority thereafter.Final Conclusion: The Tribunal set aside the ex parte admission under Section 9 in view of the parties' settlement, accepted the settlement, quantified and directed payment of the IRP's fees and resolution expenses, released the Corporate Debtor from CIRP and directed communication of the order to the Adjudicating Authority for closure of the case. Issues Involved:Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 in ex-parte, settlement agreement between parties, constitution of Committee of Creditors, fairness of the procedure in constituting the Committee of Creditors, acceptance of settlement, quantification of costs, release of Corporate Debtor from CIRP.Admission of Application under Section 9:The Adjudicating Authority admitted the Operational Creditor's application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) in an ex-parte manner. The Corporate Debtor learned about the initiation of Corporate Insolvency Resolution Process (CIRP) only after receiving an email from the Interim Resolution Professional (IRP). The Corporate Debtor subsequently settled the claim with the Operational Creditor and executed a Settlement Agreement for withdrawal of the application under Section 9. The IRP was informed to initiate the process for withdrawal, but no action was taken.Settlement Agreement:The Operational Creditor confirmed that the claim had been settled by the Corporate Debtor as per the Settlement Agreement, which involved a payment of a specific amount. The Stamp Paper issued on the date of the Settlement Agreement was presented as evidence. The IRP, representing the Committee of Creditors, acknowledged the settlement and claimed fees and costs incurred during the resolution process.Constitution of Committee of Creditors:The Committee of Creditors was constituted hastily by the IRP, despite there being only one claim received. The IRP justified this by stating that the quick constitution was due to the single claim received. However, the timing of the constitution raised concerns about the fairness of the process, as certain procedures under the I&B Code were seemingly rushed.Acceptance of Settlement and Quantification of Costs:Considering the settlement between the parties and the satisfaction of the Operational Creditor's claim, the Tribunal deemed it appropriate to accept the settlement. The total costs, including the IRP's fee and CIRP costs, were quantified. The parties agreed to the payment of these costs, with the Operational Creditor undertaking to provide the required amount to the IRP within a specified timeframe. Consequently, the Corporate Debtor was released from the CIRP.Conclusion:The Tribunal set aside the impugned order of admission under Section 9 of the I&B Code, accepted the settlement, and disposed of the appeal accordingly. The order was to be communicated to the Adjudicating Authority for case closure, marking the resolution of the issues raised in the appeal.