Appeal allowed, ex-parte order set aside under Insolvency and Bankruptcy Code, 2016. Errors found in proceedings.

The appeal was allowed, and the impugned ex-parte order dated 16.12.2022 admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was set aside. The Tribunal found errors in the Adjudicating Authority's handling of the proceedings and emphasized that the out-of-court settlement between the Corporate Debtor and the Financial Creditor, where the Corporate Debtor agreed to pay Rs. 24 Crores, resolved the dispute. The Tribunal directed the Intervenor (Union Bank of India) to pursue its claim independently, separate from the resolved case, and allowed the Financial Creditor's legal proceedings to continue independently.

---

---

Issues Involved:
1. Whether the Adjudicating Authority erred in proceeding ex-parte against the Corporate Debtor.
2. Validity of the ex-parte order dated 16.12.2022 admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
3. Impact of the out-of-court settlement on the ongoing insolvency proceedings.
4. Rights of the Intervenor (Union Bank of India) in the insolvency proceedings.

Summary:

1. Ex-Parte Proceedings Against Corporate Debtor:
The Adjudicating Authority issued notice to the Corporate Debtor on 11.10.2022, but the Corporate Debtor was absent on the next hearing date, 07.11.2022. The Financial Creditor was granted time to file an affidavit of service, which was filed on 18.11.2022. On 21.11.2022, the Corporate Debtor was again absent, and the Adjudicating Authority proceeded ex-parte and reserved the order. The Corporate Debtor argued that it was not given a proper opportunity to appear, as the notice was issued on 11.10.2022, and the first hearing was on 07.11.2022. The Tribunal found that the Adjudicating Authority erroneously recorded the Corporate Debtor's absence on multiple occasions, which was not supported by the record.

2. Validity of Ex-Parte Order:
The ex-parte order dated 16.12.2022 admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, based on the Corporate Debtor's failure to appear. The Tribunal noted that the Adjudicating Authority should have passed an order to proceed ex-parte and listed the case for ex-parte hearing, rather than reserving the order on the same day. The Tribunal found the observations of the Adjudicating Authority regarding the Corporate Debtor's absence to be erroneous and set aside the impugned order.

3. Out-of-Court Settlement:
During the pendency of the appeal, the Corporate Debtor and the Financial Creditor entered into an out-of-court settlement, where the Corporate Debtor agreed to pay Rs. 24 Crores. The Tribunal observed that the Corporate Debtor had already made the entire payment of the amount sought in the application under Section 7 of the Code, rendering the dispute resolved. Consequently, the Tribunal held that nothing survives for adjudication and allowed the appeal, setting aside the impugned order.

4. Rights of the Intervenor:
Union Bank of India filed an application for intervention, claiming to be a creditor with a claim of Rs. 22,27,81,187.21/-. The Tribunal noted that the Intervenor had also filed a separate application under Section 7 of the Code before the Adjudicating Authority. The Tribunal directed that the Intervenor may pursue its application independently, and the Adjudicating Authority shall decide the same without being influenced by the present case. Similarly, the Financial Creditor's legal proceedings regarding the KCC account may continue independently.

Conclusion:
The appeal was allowed, and the impugned order dated 16.12.2022 was set aside. The Tribunal emphasized that the out-of-court settlement resolved the dispute, and no further adjudication was necessary. The Intervenor and Financial Creditor were directed to pursue their respective claims independently.

---