Digant L. Kapadia vs Bank Of India & Anr
- CitationCompany Appeal (AT) (Insolvency) No. 1040 of 2019
Ratio decidendi
The rule this decision rests on
Where a settlement is reached between the appellant and the financial creditor after the initiation of the Corporate Insolvency Resolution Process, and no Committee of Creditors has been constituted, the Appellate Tribunal may, in exercise of its power under Rule 11 of the NCLAT Rules and following the Supreme Court's decision in Swiss Ribbons Pvt. Ltd. v. Union of India, set aside the order initiating the process and release the corporate debtor from it, subject to the payment of the settled amounts as agreed. Such release is conditional: if the agreed payments are defaulted upon, the setting-aside order stands automatically vacated and the insolvency resolution process revives, with the Interim Resolution Professional or Resolution Professional taking over the assets and records of the corporate debtor.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Bank of India & Anr. ...Respondents Present: For Appellant : Mr. Dhaval Deshpande, Advocate
For 1st Respondent: Mr. Jitendra Kumar, Advocate Mr. Vishal Jain, RP
ORDER
20.11.2019 The 'Bank of India' filed an application under Section 7 of the
'Insolvency and Bankruptcy Code, 2016 (for short, 'the I&B Code') pursuant to
which the Adjudicating Authority (National Company Law Tribunal), Mumbai
Bench by impugned order dated 20th September, 2019 initiated 'Corporate
Insolvency Resolution Process' of 'B.E. Billimoria & Company Limited' (Corporate
Debtor).
When the matter was taken up on 15th October, 2019, learned counsel for
the Appellant submitted that the Appellant was ready for amicable settlement
with 'Bank of India' (Financial Creditor), which is likely to be materialised. It is
also informed that the 'Committee of Creditors' was not constituted.
On 15th November, 2019, learned counsel for the Appellant informs that
the 'Terms of Settlement' has been reached between the parties. Therefore, it
was allowed to file the 'Terms of Settlement'.
The Appellant has filed the 'Terms of Settlement' and letter dated 1st
November, 2019, which reads as follows:
2
Company Appeal (AT) (Insolvency) No. 1040 of 2019 3
Company Appeal (AT) (Insolvency) No. 1040 of 2019 4
Mr. Jitendra Kumar, learned counsel appearing on behalf of the 'Bank of
India' (Respondent No. 1) accepts that the settlement has been arrived at
between the parties and further submits that the 'Bank of India' be allowed to
Company Appeal (AT) (Insolvency) No. 1040 of 2019 5
file application for withdrawal of the application filed under Section 7 of the 'I&B
Code' and also submits that the 'Committee of Creditors' have not yet been
constituted.
Learned counsel for the Appellant also informs that the fee and corporate
insolvency resolution cost' of the 'Interim Resolution Professional', as informed
by the IRP, will be paid.
In view of the aforesaid development, in exercise of powers conferred on
this Appellate Tribunal under Rule 11 of the NCLAT Rules and the decision of
the Hon'ble Supreme Court in ''Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of
India & Ors.- '2019 SCC Online SC 73', we set aside the impugned order dated
20th September, 2019 for initiation of 'Corporate Insolvency Resolution Process'
against 'B.E. Billimoria & Company Limited' (Corporate Debtor). The 'Corporate
Debtor' is released from the rigour of the 'Corporate Insolvency Resolution
Process'. The Appellant, Directors, Shareholders and Board of Directors of the
'Corporate Debtor' are directed to ensure that the payment of rest of the amount
be made, as per agreed terms and as intimated by the 'Bank of India' by its letter
dated 1st November, 2019 and quoted above. In case of default of any of the
payment, the present order passed by this Appellate Tribunal shall stand
automatically vacated and the 'Corporate Insolvency Resolution Process' against
the 'Corporate Debtor' would revive. The 'Interim Resolution Professional'/
'Resolution Professional' will take over the assets and the records of the
'Corporate Debtor'. It will be open to the 'Bank of India' to file a petition for
initiation of contempt against the Appellant and other Directors, Managing
Directors etc.
Company Appeal (AT) (Insolvency) No. 1040 of 2019 6
We further make it clear that in case the Appellant/Directors etc. objects
to make the payments and the 'corporate insolvency resolution process' initiated
and funds is found to be diverted by the Appellant or any other
Directors/Shareholders/Corporate Debtor, apart from the payment of the dues
to the 'Bank of India', other financial creditors, if any, and day to day running of
the company, the Adjudicating Authority or this Appellate Tribunal may direct
the Directors and 'Promoters' to refund such amount.
The appeal is allowed with aforesaid observations and directions.
[Justice S.J. Mukhopadhaya] Chairperson
[Justice Bansi Lal Bhat] Member (Judicial)
[Justice Venugopal M.] Member (Judicial)
/ns/gc
Company Appeal (AT) (Insolvency) No. 1040 of 2019
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