Arjun Puri vs Kunal Prasad & Ors

For Appellant : Mr. K. Venugopal Senior Advocate assisted by Mr. Pawan Sharma, Mr. Anuj Shah and Mr. Rishabh Sharma, Advocates

For Respondents : Mr. Ashish Agarwal and Mr. Gurcharan Singh, Advocates for Respondent Nos. 1 and 2

Mr. Tarun Kumar Banga, IRP

ORDER

31.01.2019 The appellant - Shareholder (Corporate Debtor) has

challenged the order dated 10th January, 2019 passed by the Adjudicating

Authority (National Company Law Tribunal), Principal Bench, New Delhi

whereby and whereunder the application under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (for short, 'the I&B Code') filed by the respondent -

Kunal Prasad has been admitted, order of moratorium has been passed and the

interim resolution professional has been appointed.

2. Learned counsel for the appellant submitted that the Adjudicating

Authority failed to notice the contract between the parties and if it would have 2

gone through it, then it was evident that there was no 'default' in payment of

'debt'. It is also informed that the parties have already settled the claim.

3. Mr. Ashish Agarwal, learned counsel appeared on behalf of 1st and 2nd

Respondent (Financial Creditors) and accepted that the parties have settled the

claim. Mr. Tarun Kumar Banga, Interim Resolution Professional, who is present,

submits that in view of the 'Terms of Settlement', the resolution cost and fee has

already been paid to him.

4. It is informed by the Interim Resolution Professional that advertisement

was issued asking for claims but 'Committee of Creditors' have not been

constituted.

5. In the case of 'Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India &

Ors. - Writ Petition (Civil) No. 99 of 2018' the Hon'ble Supreme Court while

upholding the provisions of the Insolvency and Bankruptcy Code by its judgment

dated 25th January, 2019, observed as follows:

"52. It is clear that once the Code gets triggered by

admission of a creditor's petition under Sections 7

to 9, the proceeding that is before the Adjudicating

Authority, being a collective proceeding, is a

proceeding in rem. Being a proceeding in rem, it is

necessary that the body which is to oversee the

resolution process must be consulted before any

individual corporate debtor is allowed to settle its

claim. A question arises as to what is to happen

before a committee of creditors is constituted (as per

the timelines that are specified, a committee of

Company Appeal (AT) (Insolvency) No. 52 of 2019 3

creditors can be appointed at any time within 30

days from the date of appointment of the interim

resolution professional). We make it clear that at

any stage where the committee of creditors is not

yet constituted, a party can approach the NCLT

directly, which Tribunal may, in exercise of its

inherent powers under Rule 11 of the NCLT Rules,

2016, allow or disallow an application for

withdrawal or settlement. This will be decided after

hearing all the concerned parties and considering

all relevant factors on the facts of each case."

6. In the present case, parties have settled the matter before constitution

of the 'Committee of Creditors, and argued that the respondent do not want

to proceed with the matter and wants to withdraw the application and in view

of the fact that the Adjudicating Authority failed to consider the question of

'default' as was raised by the 'Corporate Debtor', we set aside the impugned

order dated 10th January, 2019 and dismiss the application under Section 7

as withdrawn.

7. In effect, order (s) passed by Ld. Adjudicating Authority appointing 'Interim

Resolution Professional', declaring moratorium, freezing of account and all other

order (s) passed by Adjudicating Authority pursuant to impugned order and

action taken by the 'Resolution Professional', including the advertisement

published in the newspaper calling for applications all such orders and actions

Company Appeal (AT) (Insolvency) No. 52 of 2019 4

are declared illegal and are set aside. The application preferred by the 1st

Respondent under Section 7 of the I&B Code is dismissed. The Adjudicating

Authority will now close the proceeding. The 2nd Respondent Company is

released from all the rigour of law and is allowed to function independently

through its Board of Directors from immediate effect.

8. The 'Interim Resolution Professional' has already been paid the fees and

resolution cost, no separate order is required. The appeal is allowed with

aforesaid observation and direction. However, in the facts and circumstances of

the case, there shall be no order as to cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

/ns/uk/

Company Appeal (AT) (Insolvency) No. 52 of 2019