1. Insolvency proceeding — Amicable settlement between parties after admission of petition — Challenge to NCLAT's refusal to record compromise. (Para 2 , 3 )
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2017 Supreme(SC) 1752
SUPREME COURT OF INDIA
ROHINTON FALI NARIMAN, SANJAY KISHAN KAUL, JJ.
UTTARA FOODS AND FEEDS PRIVATE LIMITED - Appellants
Versus
MONA PHARMACHEM - Respondents
CIVIL APPEAL NO. 18520 OF 2017
(Arising out of SLP(C) No. 26824 of 2017)
Decided On : 13-11-2017
Important Points
The need to amend relevant rules to include inherent powers to allow a compromise to take effect after admission of the insolvency petition, in order to obviate unnecessary appeals being filed before the Supreme Court in such matters.
Subject
Civil Law - Insolvency and Bankruptcy
Act Referred
CONSTITUTION OF INDIA: Art.142
I & B APPLICATION TO ADJUDICATING AUTHORITY RULES: R.8
NATIONAL LAW APPELLATE TRIBUNAL RULES: R.11
I & B APPLICATION TO ADJUDICATING AUTHORITY RULES: R.8
NATIONAL LAW APPELLATE TRIBUNAL RULES: R.11
Headnote
Inherent Powers - Settlement Agreement - The court recognized the need to amend relevant rules to include inherent powers to allow a compromise to take effect after admission of the insolvency petition, in order to obviate unnecessary appeals being filed before the Supreme Court in such matters. The court took on record the settlement between the parties and set aside the NCLAT order.
Fact of the Case:
The matter has been settled amicably between the parties, and the court observed the need to amend relevant rules regarding inherent powers.
Finding of the Court:
The court recognized the need to amend relevant rules to include inherent powers, took on record the settlement between the parties, and set aside the NCLAT order.
Issues: Settlement agreement, amendment of rules regarding inherent powers
Ratio Decidendi: The court emphasized the need to include inherent powers in relevant rules to avoid unnecessary appeals before the Supreme Court in matters where a settlement has been reached.
Final Decision: The appeal is allowed in the aforesaid terms, and a copy of the order is to be sent to the Ministry of Law & Justice immediately.
Legal Category Hierarchy
Table of Contents
2. Parties submitted that the matter had been settled amicably. (Para 2 )
3. NCLAT prima facie cannot use inherent powers to allow compromises after insolvency petition admission due to Rule 8 of the I & B Rules, 2016. (Para 3 )
4. NCLAT lacks inherent power to allow compromises after admission of insolvency petitions under current I & B Rules, 2016. (Para 3 )
5. Settlement taken on record, NCLAT order set aside, and appeal allowed. (Para 3 , 4 )
6. Can the National Company Law Appellate Tribunal (NCLAT) exercise inherent powers to allow a compromise after an insolvency petition is admitted?
No, in view of Rule 8 of the I & B (Application to Adjudicating Authority) Rules, 2016, the NCLAT prima facie cannot use inherent powers under Rule 11 of the National Law Appellate Tribunal Rules, 2016 to allow a compromise after the admission of an insolvency petition. (Para 3 )
7. What measure is suggested to reduce Supreme Court appeals regarding settlements in insolvency matters?
The court suggested that the competent authority amend the relevant Rules to include inherent powers for the NCLAT to allow compromises, as currently only the Supreme Court can utilize its powers under Article 142 of the Constitution of India for such purposes. (Para 3 )
ORDER :
Leave granted.
2. Mr. Shyam Divan, learned senior counsel appearing on behalf of the appellant and the learned counsel appearing on behalf of the respondent both agree that the matter has since been settled amicably between the parties.
3. In an earlier order dated 24.07.2017, this Bench had observed that in view of Rule 8 of the I & B (Application to Adjudicating Authority) Rules, 2016, the National Company Law Appellate Tribunal prima facie could not avail of the inherent powers recognised by Rule 11 of the NATIONAL LAW APPELLATE TRIBUNAL RULES , 2016 to allow a compromise to take effect after admission of the insolvency petition. We are of the view that instead of all such orders coming to the Supreme Court as only the Supreme Court may utilise its powers under Article 142 of the Constitution of India, the relevant Rules be amended by the competent authority so as to include such inherent powers. This will obviate unnecessary appeals being filed before this Court in matters where such agreement has been reached. On the facts of the present case, we take on record the settlement between the parties and set aside the NCLAT order.
4. As a result, the appeal is allowed in the aforesaid terms.
5. A copy of this order be sent to the Ministry of Law & Justice immediately.
