Harish Bagla vs Agarwal Industries Pvt Ltd.& Anr
- CitationCompany Appeal (AT) (Insolvency) No. 102 of 2019
Ratio decidendi
The rule this decision rests on
The Adjudicating Authority's admission of an application under Section 9 of the Insolvency and Bankruptcy Code cannot stand where the operational creditor's claim was subject to a pre-existing dispute notified to the creditor before the application was filed, and the operational creditor fails to controvert that notice by reply; in such circumstances the admission order is set aside and the Section 9 application dismissed. Where the parties settle the underlying dispute after admission and before the Committee of Creditors has been constituted, the Appellate Tribunal may set aside the admission order and all consequential orders and actions taken under it, including the appointment of an Interim Resolution Professional, the declaration of moratorium, and the advertisement calling for applications, and direct that the corporate debtor be released from the rigours of the process.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Harish Bagla ...Appellant
Versus
Agarwal Industries Pvt. Ltd. & 4 Ors. ...Respondents
Present:
For Appellant : Mr. Joy Saha, Senior Advocate assisted by Mr. V. Jhunjhunwala, Mr. D. Maheshwari, Mr. Sachin Shukla, Mr. Aditya V. Singh, Advocates
For Respondents : None
ORDER
11.02.2019 The Respondent - 'Agarwal Industries Pvt. Ltd.'-
('Operational Creditor') has filed application Under Section 9 of Insolvency
& Bankruptcy Code ('I&B' Code) for initiation of Corporate Insolvency
Resolution Process against 'Amit Feeds Limited' ('Corporate Debtor'). The
application having been admitted by impugned order dated 15.01.2019 by
the Adjudicating Authority (National Company Law Tribunal), Kolkata
Bench, Kolkata, the present appeal has been preferred by Director /
Shareholders of the Company ('Corporate Debtor').
On 31.01.2019, we noticed the submissions made on behalf of the
Appellant. On that day, notice was issued to the Respondents.
Learned Counsel for the Appellant produced a settlement agreement
reached between the parties on 08.02.2019 to suggest that Demand Draft
No. 316696 dated 08.02.2019 drawn on State Bank of India for Rs.
20,50,000/- has been prepared for payment in favour of 'Operational
Creditor'. It is further submitted that 'Committee of Creditors' has also not
been constituted.
Mr. B.Kiran Kumar, Constituted Attorney of 'Agarwal Industries Pvt.
Ltd. ('Operational Creditor') accepts that the parties have reached settlement
on 08.02.2019. No reply-affidavit has been filed by the 'Operational Creditor'
against the statement made by the Appellant that there were pre-existing
disputes intimated by letter dated 10.04.2017.
Taking into consideration the aforesaid fact, that there were pre-
existing disputes between the parties and the matter have been settled
subsequently on 08.02.2018 and the 'Committee of Creditors' have not yet
been constituted, we set aside the impugned order dated 08.02.2019.
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 are declared illegal and are set aside. The application preferred by the
Respondent under Section 9 of the ''I&B Code' is dismissed. The Adjudicating
Authority will now close the proceeding. The 'Corporate Debtor' is released from
all the rigour of law and is allowed to function independently through its Board
of Directors from immediate effect.
The Adjudicating Authority will fix the fee of 'Interim Resolution
Professional' and the 'Corporate Debtor' will pay the fees for the period he has
functioned. The appeal is allowed with aforesaid observations and directions.
No cost.
[Justice S.J. Mukhopadhaya] Chairperson
[ Justice Bansi Lal Bhat ] Member (Judicial)
ss/sk/
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