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Insolvency Proceedings Can Be Closed Where Parties Have Settled The Matter Before The Constitution Of CoC: NCLAT

By Lawstreet News Network      Feb 14, 2019      0 Comments      1,783 Views

The National Company Law Appellate Tribunal (NCLAT) on February 8, 2019, in the case of Mr. Ashish Garodia v. Impact Event Management & Anr., has asked the Kolkata Bench of National Company Law Tribunal to close an insolvency proceeding on finding that the Corporate Debtor and the Operational Creditor have settled the matter before the constitution of the Committee of Creditors (CoC).

A Bench comprising of Chairperson Justice S.J. Mukhopadhaya and Judicial Member Justice Bansi Lal Bhat has also found that there was a ‘pre-existing dispute’ between the parties, and hence the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, was not maintainable.

The appellate tribunal was hearing an appeal filed by Ashish Garodia, the Director and Shareholder of 'M/s. Garodia Automobiles Pvt. Ltd'. (Corporate Debtor) against the order passed by the Kolkata Bench of NCLT on January 14, 2019, wherein it had admitted the application under Section 9 of IBC filed by the Operational Creditor – ‘Impact Event Management’.

On hearing the parties, the NCLAT took note of the fact that there was a pre-existing dispute and the Operational Creditor accepted that the parties have settled the matter.

The appellate tribunal setting aside the order passed by the Kolkata Bench of NCLT said that " In effect, order (s), passed by the Adjudicating Authority appointing any ‘Interim Resolution Professional’, declaring moratorium, freezing of Bank accounts, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action, if any, taken by the ‘Interim Resolution Professional’, including the advertisement published in the newspaper calling for applications and all other orders and actions taken are declared illegal and are set aside. The application preferred by Respondent under Section 9 of the 'I&B Code' is dismissed. Learned Adjudicating Authority will now close the proceeding. The 'Corporate Debtor' (company) is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect.”

With this view, the NCLAT allowed the appeal and asked the Kolkata Bench of NCLT to fix the fee of 'Interim Resolution Professional', directing the Corporate Debtor to pay the fees for the period Interim Resolution Professional has functioned.

Read the order below.

National Company Law Appellate Tribunal
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