Settlement under section 12A permitted release of the deposited insolvency amount to the financial creditor

On settlement of the insolvency dispute and withdrawal of the section 7 petition under section 12A of the Insolvency and Bankruptcy Code, the deposited fixed deposit amount, together with accrued interest, could be released to the financial creditor in terms of the settlement agreement. The Appellate Tribunal noted that the Adjudicating Authority had already allowed the section 12A application, dismissed the petition as withdrawn, and directed payment to the financial creditor, while the earlier tribunal order contemplated compliance with that direction. As there was no objection from the suspended director, the lien on the deposit was removed and release of the amount was permitted.

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Issues: Whether the fixed deposit amount of Rs. 1,18,88,924/- lying with the Registry of the Appellate Tribunal, together with accrued interest, should be released in favour of the financial creditor after the settlement and dismissal of the section 7 insolvency petition as withdrawn under section 12A of the Code.

Analysis: The parties had settled the dispute and the Adjudicating Authority had already allowed the application under section 12A of the Insolvency and Bankruptcy Code, 2016, dismissed the section 7 petition as withdrawn, and directed that the amount deposited with the Appellate Tribunal be received by the financial creditor as per the settlement agreement. The Tribunal also noted that its earlier order had contemplated that the deposited amount would be dealt with in accordance with the order passed on the section 12A application. In view of the settlement, the order of the Adjudicating Authority, and the absence of objection from the suspended director, no impediment remained to release the deposit.

Conclusion: The application was allowed and the Registry was directed to release the fixed deposit amount of Rs. 1,18,88,924/- along with accrued interest in favour of the financial creditor after removing the lien.

Ratio Decidendi: Where a settlement is accepted and the insolvency petition is withdrawn under section 12A, the deposited amount may be released to the financial creditor in terms of the settlement and the consequential direction of the Adjudicating Authority.

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