Corporate insolvency proceedings closed following consent settlement; impugned order set aside and deposits released to respondent

Settlement between the financial creditor and the corporate debtor led to termination of the insolvency proceedings initiated under a Section 7 application; the settlement furnished on record produced the effect of closing the proceedings and the impugned order was set aside. The amount deposited in court registry is to be paid to the respondent party. The financial creditor is directed to reimburse the interim resolution professional for expenses incurred during the insolvency process, including publication costs. Appeal disposed accordingly.

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Issues: (i) Whether the insolvency proceedings against the Corporate Debtor should be closed and the impugned order admitting the Section 7 application set aside in view of the settlement/consent between the parties; (ii) Whether it was necessary to require the Financial Creditor to file a Section 12A application where no other creditors have come forward; (iii) How the amounts deposited in court and the IRP's expenses should be dealt with.

Issue (i): Closure of insolvency proceedings and setting aside the order admitting the Section 7 application in view of settlement.

Analysis: The Tribunal considered the settlement/consent terms brought on record showing that the Financial Creditor agreed to receive the amount deposited under the earlier interim order to settle the entire claim. The RP's publication attracted no other claims and there were no other creditors. The Tribunal noted authority permitting exercise of inherent powers to close proceedings in appropriate cases.

Conclusion: The insolvency proceedings against the Corporate Debtor are ordered to be closed and the impugned order admitting the Section 7 application is set aside; the amount deposited in the registry shall be paid to the Financial Creditor (Respondent No.1).

Issue (ii): Necessity of directing the Financial Creditor to file a Section 12A application where no other creditors exist.

Analysis: Given that the RP's publication received no claims other than that of the Financial Creditor and the Financial Creditor had settled the claim, requiring a Section 12A application would be a formal step without practical effect.

Conclusion: There is no necessity to direct the Financial Creditor to file a Section 12A application in the facts of this case.

Issue (iii): Treatment of amounts deposited in court and payment of IRP expenses.

Analysis: The Tribunal directed that the registry deposit be paid to the Financial Creditor as per the settlement. It also noted that a sum had been deposited for IRP fees and that expenses were incurred; the Tribunal directed that the Financial Creditor and the Appellant shall jointly bear the IRP's expenses and directed the IRP to communicate his expenses within two weeks for payment within four weeks.

Conclusion: The registry deposit shall be paid to the Financial Creditor; the Financial Creditor and the Appellant shall jointly share and pay the IRP's expenses as directed.

Final Conclusion: The appeal is allowed to the extent of closing the insolvency proceedings, setting aside the impugned admission order, directing payment of the deposited amount to the Financial Creditor, and allocating payment of IRP expenses jointly to the Financial Creditor and the Appellant.

Ratio Decidendi: Where a settlement between the parties resolves the lone claim against a corporate debtor and no other creditors have come forward following RP's publication, the adjudicatory authority/tribunal may, by exercise of inherent powers, close the insolvency proceedings and set aside an admission order, subject to appropriate directions regarding deposits and IRP expenses.

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