Appellate Tribunal Upholds CIRP Initiation, Dismisses Appeal on Debt & Default

The appeal was dismissed by the Appellate Tribunal, upholding the initiation of Corporate Insolvency Resolution Process (CIRP) by the National Company Law Tribunal (NCLT). The Tribunal found no merit in the arguments presented by the Appellant, emphasizing the proper establishment of debt and default by the Respondent, and deeming the settlement agreement to have been executed without coercion. The Appellant's failure to file written submissions and the absence of irregularities in the Impugned Order led to the dismissal of the appeal.

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Issues Involved:
1. Validity of the Consultancy Agreement and the existence of debt and default.
2. Allegations of fraud and coercion in the settlement agreement.
3. Applicability of principles of res judicata and jurisdiction of the Appellate Tribunal.
4. Compliance with GST rules and their impact on the operational debt.
5. Admissibility and merits of the appeal against the initiation of CIRP.

Summary:

1. Validity of the Consultancy Agreement and the existence of debt and default:
The Corporate Debtor, JSP Projects Pvt. Ltd., appealed against the order dated 07.04.2021 by the NCLT, New Delhi Bench-VI, which initiated CIRP u/s 9 of the IBC, 2016. The Respondent had provided consultancy services and raised invoices amounting to Rs. 4,59,97,062.64/- under the Consultancy Agreement dated 20.10.2018. The Adjudicating Authority found that the Respondent had established the debt and default, leading to the initiation of CIRP.

2. Allegations of fraud and coercion in the settlement agreement:
The Appellant argued that the settlement agreement dated 21.04.2021 was entered into under coercion to save the business. They claimed that the Respondent's case was based on fraudulent invoices that were neither raised nor uploaded on the GST Portal. The Respondent countered that the settlement agreement was executed out of free will without any coercion, as reflected in Clause 1 and Clause 10 of the agreement.

3. Applicability of principles of res judicata and jurisdiction of the Appellate Tribunal:
The Respondent contended that the appeal was barred by the principles of res judicata, as the Impugned Order dated 07.04.2021 was set aside by the withdrawal order dated 12.05.2021 following the settlement agreement. The Appellate Tribunal, u/s 61(1) of the IBC, 2016, has jurisdiction to entertain appeals only from orders in operation, and since the order was set aside, the appeal was deemed not maintainable.

4. Compliance with GST rules and their impact on the operational debt:
The Appellant's argument regarding non-compliance with GST rules by the Operational Creditor was dismissed by the Respondent, stating that it did not affect the existence of operational debt in default. The Adjudicating Authority was not a court, and the process before the Tribunal was not litigation, thus the orders dated 07.04.2021 and 12.05.2021 were passed on their merits.

5. Admissibility and merits of the appeal against the initiation of CIRP:
The Appellate Tribunal reviewed the facts and submissions, noting that the Appellant failed to file written submissions despite being given the opportunity. The Tribunal found no irregularities in the Impugned Order, which had admitted the Section 9 petition and initiated CIRP. The appeal was dismissed, and the judgment was ordered to be uploaded on the Appellate Tribunal's website and sent to the Adjudicating Authority.

Conclusion:
The appeal was dismissed as the Appellate Tribunal found no merits in the arguments presented by the Appellant. The initiation of CIRP by the NCLT was upheld, and the settlement agreement was deemed to have been executed without coercion. The Tribunal emphasized the absence of pre-existing disputes and the proper establishment of debt and default by the Respondent.

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