2023 (8) TMI 1325 - AT - Insolvency and Bankruptcy

Appeal granted due to oversight of subsequent events in Section 9 application

The appeal was filed against the admission of a Section 9 application by the Adjudicating Authority, based on unpaid dues. The appellants, representing ... Admission of application u/s 9 of IBC - application under Section 9 was filed in the year 2021 inspite of notice issued by the Adjudicating Authority Corporate Debtor did not file any reply and apparently did not contest the proceedings - HELD THAT:- Before the Adjudicating Authority neither the Corporate Debtor nor the Operational Creditor brought all the facts into the notice of the Adjudicating Authority and Adjudicating authority without taking into consideration the subsequent events which have bearing on the CIRP process has admitted Section 9 application by initiating CIRP - appellants who have been handed over the projects and who under the statutory orders have submissions which need to be looked into by the Adjudicating Authority before passing any order under Section 9. The order impugned cannot be sustained and is set aside, however, the application is revived before the Adjudicating Authority to be preceded and decided again in accordance with law - Appellants are impleaded to the Section 9 application and they are permitted to file their reply. Appeal allowed. Issues involved:The issues involved in the judgment are the admission of a Section 9 application by the Adjudicating Authority, subsequent events affecting the insolvency process, and the rights and obligations of the appellants who took over certain construction projects.Admission of Section 9 Application:The appeal was filed against an order admitting a Section 9 application by the Adjudicating Authority, based on a claim by the Operational Creditor for unpaid dues of Rs. 3,88,12,122. The Corporate Debtor did not contest the matter, leading to the appointment of the IRP. However, the appellants, representing Flat Buyer Welfare Associations, argued that the Adjudicating Authority was unaware of subsequent events, including an order by the HRERA Authority handing over projects to the appellants for completion. The appellants asserted that they should have been heard before any decision on insolvency proceedings, as they had taken over the projects and could not be held liable for past debts.Subsequent Events and Rights of Appellants:The HRERA Authority's order directed the appellants to maintain financial records, approved payments, and clarified that the appellants had taken over the projects free from past liabilities. The appellants had effectively stepped into the shoes of the promoters for the project. The judgment highlighted that these crucial facts were not brought to the attention of the Adjudicating Authority before the admission of the Section 9 application. It was emphasized that the appellants, as new project holders, deserved a fair hearing before any insolvency decision was made. Consequently, the impugned order was set aside, reviving the Section 9 application for proper consideration.Resolution Professional and Discharge:The Resolution Professional was discharged due to the setting aside of the impugned order. It was noted that if expenses were incurred during the CIRP process, the Resolution Professional had the option to file for fees and expenses before the Adjudicating Authority. The appellants were impleaded to the Section 9 application and granted the opportunity to file their reply, ensuring their rights and interests were adequately addressed in the proceedings.In conclusion, the judgment addressed the procedural irregularities in admitting the Section 9 application without considering crucial subsequent events and the rights of the appellants who had taken over the construction projects. The decision to set aside the impugned order and allow the appellants to participate in the proceedings ensured a fair and just resolution in accordance with the law.