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2026 Supreme(Online)(NCLAT) 327
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Sharad Kumar Sharma, Judicial Member
Avant Garde Clean Room & Engg. Solutions Pvt. Ltd. – Appellant
Versus
HLL Biotech Ltd. – Respondent
Company Appeal (AT) (CH) (Ins) No.26 / 2023 | CP(IB) No. 02 / KOB / 2021 | Restoration Application (IBC) No. 02/KOB/2022
Important Points
Subject
Insolvency and Bankruptcy - Section 9 Proceedings
Act Referred
Headnote
(B) Compromise and Settlement - Implications in insolvency proceedings - Post-withdrawal on compromise, proceedings cannot be restored on breach; fresh cause of action arises for enforcement via execution or new petition, not revival of closed matter - Provisions of CPC apply distinctly; Order XXIII r.3/3A bars fresh suit except to set aside unlawful compromise decree, no provision for restoration. (Paras 15-17, 35-36)
Facts of the case:
Operational creditor initiated Section 9 proceedings for operational debt. Parties entered settlement deed providing part payment and balance in instalments, with clause reserving liberty on default to approach NCLT or other remedy. Petition withdrawn and closed by order observing liberty to approach competent authority on non-compliance. On default in balance payment, restoration application filed and rejected; appeal challenges rejection.
Findings of Court:
Restoration impermissible as petition finally closed on withdrawal per settlement; no fraud or procedural default alleged; appropriate remedy is fresh proceedings or execution for settled balance, not revival.
Issues: Whether restoration of withdrawn Section 9 petition permissible on settlement default; scope of liberty clause permitting NCLT proceedings; applicability of CPC provisions to bar restoration.
Ratio Decidendi: Proceedings withdrawn on settlement cannot be restored on subsequent default, as closure attains finality with no pending lis; settlement breach creates new cause for execution or fresh action, not revival; CPC Order XXIII distinguishes restoration (Order IX) from compromise effects.
Result: Appeal dismissed.
For the Appellants/Petitioners:Ms. Ramya, Advocate
For the Respondents: No Appearance
| Table of Content |
|---|
| 1. initiation of section 9 proceedings and settlement leading to withdrawal. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8) |
| 2. appellant's claim for restoration based on settlement default clause. (Para 9 , 10 , 24 , 25) |
| 3. order 23 rule 3a cpc bars restoration post-compromise withdrawal. (Para 11 , 12 , 13 , 14 , 15 , 16) |
| 4. no restoration right reserved; withdrawn proceedings final. (Para 17 , 18 , 19 , 27 , 28 , 29) |
| 5. 'competent authority' excludes nclt for post-settlement recovery. (Para 20 , 21 , 22 , 23) |
| 6. settlement default creates new cause; execution, not restoration. (Para 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37) |
| 7. tribunal correctly rejected restoration; appeal dismissed. (Para 38 , 39 , 40 , 41) |
O R D E R
(Hybrid Mode)
13.03.2026:
Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial): The Appellant is an Applicant to the proceedings under Section 9 of I & B Code, 2016, which stood registered, as CP(IB) No. 02 / KOB / 2021, before the NCLT, Kochi Bench.
2. The reason for initiation of those proceedings, as against the Corporate Debtor had been that there was an inability on part of the Corporate Debtor to pay an amount due to be remitted amounting to Rs.7,93,49,287/- being the outstanding debt and due payable to the Operational Creditor, owing to the fact that there has been a failure to respond to the notices issued by the Operational Creditor, the proceedings thus stood initiated accordingly, under Section 9 of the I & B Code, 2016.
3. When the process of those proceedings were being carried before the Ld. Adjudicating Authority its that, on 11.01.2021 a Deed of Settlement was arrived at between the Operational Creditor and the Corporate Debtor, which was duly signed and verified by the parties including the witnesses who was signatories to the document.
4. It’s based upon the said Settlement Deed, that the Ld. Tribunal proceeded to pass an order on 29.01.2021 observing thereof that, qua the recovery of the said amount, which is said to be treated as debt and due amounting to Rs.7,93,49,287/-, which according to the Operational Creditor was shown to have been falling due as on 26.10.2020.
5. It was observed that since the parties have filed a memo, seeking withdrawal of the Application and in the memo, which was thus preferred by the Appellant herein, the Appellant had submitted that owing to the mutual discussions, which had been taken place between the parties, a settlement has been arrived at under the terms as narrated in the Settlement Deed of 11.01.2021 wherein the Corporate Debtor had agreed to make the payment of Rs.2,20,00,000/- on the date of the signing of the Memorandum and the balance amount of Rs.3,55,27,260/- was to be remitted within a period of one year by way of four instalments, which would be ending on 31.03.2022.
6. It was further agreed, that in an event of default in the payment of balance amount as per the Memorandum of Settlement ``the Operational Creditor reserved its rights to initiate proceedings before the NCLT or any other remedy available to him for recovery of the amount’’. Clause 8 of the Settlement dated 11.01.2021 is extracted hereunder:
``Clause 8:
Notwithstanding the above, in the event of default in balance payment as per clause 6 hereinabove or any part thereof by HBL, Avant shall be at liberty to adopt appropriate proceedings before the NCLT and / or any other legal remedy available at that time for recovery of the original amount outstanding including interest after deducting the payment of INR 2,20,00,000/- (Rupees Two Crore Twenty lakh only) made under the present Deed of Settlement’’.
7. The Ld. Tribunal on the basis of the terms of settlement dated 11.01.2021 as extracted in the order passed by it on 29.01.2021, directed the closure of the CP(IB) No. 02/KOB/2021, holding it to be dismissed as withdrawn and it was observed that, it was left open for the Appellant to ``initiate’’ appropriate proceedings before the ``Competent Authority’’, if there was a failure on part of t
