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IBC : Restoration of withdrawn application is subject to agreement between parties

 Cause Title : IDBI Trusteeship Services Limited vs Nirmal Lifestyle Limited, Company Appeal (AT) (Insolvency) No. 117 of 2023, NCLAT-Delhi

Date of Judgment/Order : 15/5/2023

Corum : Justice Ashok Bhushan, Chairperson & Barun Mitra, Member (Technical)

Citied: 

  1. Pooja Finlease v. Auto Needs (India) Pvt. Ltd., C.A. (AT) Ins. No. 103 of 2022, NCLAT- Delhi
  2. Himadri Foods Ltd. v. Credit Suisse Funds AG, C.A. (AT) Ins. No. 1060 of 2020
  3. Krishna Garg & Anr. v. Pioneer Fabricators Pvt. Ltd., C.A. (AT) Ins. No. 92 of 2021
  4. SRLK Enterprises LLP v. JALAN Transolutions (India) Ltd., C.A. (AT) Ins. No. 294 of 2021

Background

An application was filed before the NCLAT, under section 7 of I&B Code, 2016. Subsequently, a compromise being reached between parties, the compromise/consent term was placed on record before the Adjudicating Authority and the application was withdrawn. However, on the Respondent failing to honour the consent terms, the Appellant file an IA seeking revival of the Company Petition which has been rejected by Adjudicating Authority observing that when the Company Petition was withdrawn after settlement there is no specific provision anywhere in the Code for reopening of the Company Petition.

Hence this appeal.

Judgment

The NCLAT observed that it is an admitted position that the consent terms provided for settlement amount, payment plan as well as event of defaults. One of the events was, default in making payment of any of the tranches mentioned in th consent terms and it was also mentioned in the consent terms that in the event of default, the Appellant shall be entitled to revive the present Company Application or initiate any other action that may accrue to it under law and the appellant shall also be entitled to recover all expenses incurred in that regard.

A perusal of the order of the NCLT allowing withdrawal of the original petition indicates that a separate consent terms were executed between the parties and the consent term was brought on record along with the Application.

The NCLAT then analysed the judgments referred to by all parties including the Adjudicating Authority and concluded that :-

1) Pooja Finlease (supra) fully supports the submission of the Appellant.
2) Himadri Foods (supra) also supports the Appellant but was incorrectly read the AA.
3) Krishna Garg &  SRLK Enterprises (supra) referred to by the Respondents don't apply here as the consent terms were brought on record.

The NCLAT held that in the present case, consent terms were brought on record since they were part of the Application under Section 12A of the Code which was noticed in the Order of the Adjudicating Authority itself. When consent term itself contains clause for revival, non-giving liberty specifically for revival by the Adjudicating Authority is inconsequential.

When the consent term itself contemplates a clause for revival in event of default and default having been committed by the Corporate Debtor, rejection of revival is to deny the Financial Creditor rightful remedy. Non-mention of specific liberty in the Order is inconsequential in view of the clear terms in the settlement which was the basis of withdrawal of Company Petition.

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