The National Company Law Appellate Tribunal vide order dated 14.07.2020 has now made it easier for companies to exit ongoing corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code 2016, even when an interim resolution professional has been appointed and a moratorium period is imposed.
The order was passed in response to an application filed by one Mr. Vivek Bansal, under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 for recording the settlement arrived at between both the parties.
A ‘corporate insolvency resolution process’ was commenced at the instance of the Respondent (Operational Creditor) in terms of the impugned order dated 27th May, 2020 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench –V with consequential orders in the nature of slapping of the moratorium and appointment of ‘Interim Resolution Professional’.
However, the dispute was amicably settled between the parties without constituting a ‘Committee of Creditors’, whereby the Respondent had agreed to pay the Appellant Rs. 4, 25, 00,000/- (Rupees Four Crores and Twenty Five Lakhs Only/). The execution and contents of the ‘Settlement Agreement’ was thereby admitted by the parties.
Since ‘Committee of Creditors’ was not constituted at the time of settlement, the Coram comprising of Justice Bansi Lal Bhat, Justice Anant Bijay Singh and Dr. Ashok Kumar Mishra (Technical Member), allowed the exit of the Respondent Company from the corporate insolvency resolution process, after setting aside the impugned order dated 27.05.2020 passed in C.P. No. IB 2223 (ND)/ 2019.
The order passed by Ld. Adjudicating Authority appointing ‘Interim Resolution Professional’, declaring moratorium and all other orders passed by the Adjudicating Authority pursuant to the impugned order dated 27.05.2020 and actions taken by the Interim Resolution Professional were also set aside.
Disposing off the present matter, the Hon’ble Tribunal allowed the Respondent Company to function independently through its Board of Directors with immediate effect.
Taking note of the excessively inflated claims, the Hon’ble Tribunal fixed the fee and corporate insolvency resolution process cost at an amount of Rs. 7,00,000/- (Rupees Seven Lakhs Only/) (inclusive of Rupees Two Lakhs, already been paid by the ‘Operational Creditor’) to be borne by both the parties in terms of the settlement agreement in equal proportion.
In case of non compliance of the terms of settlement agreement, the Operational Creditor was allowed to seek revival of the corporate insolvency resolution process before the Adjudicating Authority.
To mitigate the effect of the Covid-19 pandemic on businesses and avoid the potential disruptions caused to a company in case of initiation of Corporate Insolvency Resolution Process by creditors or the resolution applicant, insolvency proceedings were suspended for a period of one year.
The present order would provide a breath of fresh air to companies as well as lenders when economic growth has been stagnated and cash flows are in the negative. It also provides an opportunity to firms already in the resolution process to settle claims.