The Tribunal has the inherent power under Rule 11 of the NCLT Rules, 2016 to restore CIRP proceedings against a corporate debtor in case of breach of a settlement agreement, even if the withdrawal order did not explicitly grant such liberty.

Headnote:
Insolvency and Bankruptcy - Corporate Insolvency Resolution Process - Restoration of CIRP Proceedings
Fact of the Case:

The Applicant, Omega Corrugators Private Limited, had filed a Company Petition against the Corporate Debtor, Apex Consumer Appliances Private Limited, under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) for default of principal amount and interest. The Company Petition was admitted by the Tribunal, initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Subsequently, the parties entered into a Settlement Agreement, and the CIRP proceedings were withdrawn. However, the Corporate Debtor failed to make the agreed payments, leading the Applicant to file the present application seeking restoration of the CIRP proceedings.
Finding of the Court:

The Tribunal found that the Settlement Agreement contained a clause allowing the Applicant to revive the CIRP proceedings in case of default by the Corporate Debtor. The Tribunal also held that the withdrawal application was filed by the Interim Resolution Professional (IRP) on behalf of the Applicant, and therefore, the present application filed by the Applicant is maintainable. The Tribunal invoked its inherent powers under Rule 11 of the NCLT Rules, 2016 to restore the CIRP proceedings against the Corporate Debtor.
Issues: 1. Whether the present application seeking revival of CIRP against the Corporate Debtor is maintainable in the absence of any liberty granted in the withdrawal order dated 30.08.2021?
Ratio Decidendi: The Tribunal held that the Settlement Agreement itself contained a clause granting liberty to the Applicant to revive the CIRP proceedings in case of non-compliance by the Corporate Debtor. The Tribunal relied on the judgments of the NCLAT, which held that a creditor can apply for restoration of a company petition when the settlement agreement contains a clause emphasizing on the same, even if it has not been specifically recorded in the order.
Final Decision: The Tribunal restored the Company Petition no. 3456/2019 and ordered the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal appointed Mr. Rajendra Dattatray Aphale as the Interim Resolution Professional (IRP) to carry out the functions under the Insolvency & Bankruptcy Code, 2016.

I.A. 1407/2022

C.P. No. (IB) 3456/MB/C-III/2019

Under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 read with

Rule 11 of the NCLT Rules, 2016

Omega Corrugators Pvt Ltd ) Having its registered office at: ) Plot No. 85 & 86, Kaman Industrial ) Development Corporation Village ) Po:man; Opp Universal College )

Vasai (E) – 401208 ) … Applicant

Vs.

Apex Consumer Appliances

Private Limited

Having its registered office at: ) Plot No. 29-P, off Kanjur Village ) Road, Opposite Crescent Industrial ) Estate, Kanjur Marg (East) )

Mumbai- 400042 ) … Respondent

IN THE MATTER OF

Omega Corrugators Private Limited … Financial Creditor

Apex Consumer Appliances Private Limited … Corporate Debtor

Order pronounced on: 21.05.2024

Coram:

Hon’ble Ms. Lakshmi Gurung, Member (Judicial) Hon’ble Sh. Charanjeet Singh Gulati (Technical)

Appearances:

For the Applicant : Adv. Kunal Kanungo

For the Respondent : Adv. Sahil Mahajan

Per: Sh. Charanjeet Singh Gulati, Member (Technical

ORDER

1. The above I.A. is filed by the Applicant, Omega Corrugators Private Limited, under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“the Code”), seeking following reliefs:

a) To revive/restore the Company Petition No. 3456/MB/2019 under Rule 11 of the National Company Law Tribunal Rules, 2016 on account of breach of the Settlement Agreement dated 09.08.2021;

b) To declare that the corporate insolvency resolution process in respect of the Corporate Debtor is reinstated from the stage of its withdrawal;

c) To take on record the FORM 2- Consent of Mr. Rajendra Dattatray Aphale to act as the Interim Resolution Professional in the captioned Company Petition.

Relevant Facts of the Case:

2. M/s Omega Corrugators Private Limited (Applicant/Operational Creditor), had filed a Company Petition bearing no. 3456/2019 against M/s Apex Consumer Appliances Private Limited (Corporate Debtor under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) for default of principal amount of Rs. 64,54,046/- and interest of Rs. 10,72,623/- aggregating to Rs. 75,26,669/-.

3. The said Company Petition no. 3456/2019 was admitted by this Tribunal vide order dated 29.07.2021 thereby initiating Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor. Mr. Rajat Mukherjee was appointed as the Insolvency Resolution Professional (IRP).

4. In the meanwhile, the suspended directors of the Corporate Debtor, Mr.

Dhaval Anand Shah and Mrs. Kinjal Dhaval Shah, approached the Applicant and after some discussions and negotiations, the parties agreed to amicably settle the matter with Rs. 95,00,000/- to be paid to the Applicant as full and final settlement, by way of post-dated cheques. In view thereof, a Settlement Agreement dated 09.08.2021 was executed between the Applicant and the Suspended Directors of the Corporate Debtor.

5. Accordingly, it was decided that the Corporate Debtor will make the payment to the Applicant in the following tranches/ installments starting from November 2021:

6. The IRP moved an application bearing no. IA/1826/2021 (Withdrawal Application under Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 seeking withdrawal of Company Petition No. 3456/2019. The Settlement Agreement dated 09.08.2021 as well as Form FA dated 10.08.2021 submitted by the Applicant/Operational Creditor in compliance of Regulation 30A(2) of the IBBI(CIRP) Regulations, 2016 were also annexed to the withdrawal application. The withdrawal application no. 1826/2021 was allowed by the Tribunal vide order dated 30.08.2021.

7. It is submitted that when the Applicant presented the post-dated cheques bearing no. 175953, 175954 and 175955, the same were dishonoured. Consequently, the Applicant issued a Breach Letter dated 13.01.2022 on both the suspended directors to which no reply has been received till date. Thereafter, demand notices dated 14.01.2022, 15.01.2022 and 31.01.2022 were issued by the Applicant demanding the payment of the above dishonoured ch

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2024 Supreme(Online)(NCLT) 1067

The Tribunal has the inherent power under Rule 11 of the NCLT Rules, 2016 to restore CIRP proceedings against a corporate debtor in case of breach of a settlement agreement, even if the withdrawal order did not explicitly grant such liberty.

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