Settlement Agreement During Pendency Of Section 7 Petition Does Not Bar From Filing Second Section 7 Petition: NCLAT Delhi
The National Company Law Appellate Tribunal, Delhi Bench, comprising Justice Rakesh Kumar Jain (Judicial Member), Shri Naresh Salecha and Shri Indevar Pandey (Technical Members), while adjudicating an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Desh Bhushan Jain, Erstwhile Director of Angel Promoters Pvt. Ltd. vs Abhay Kumar, IRP of...
The National Company Law Appellate Tribunal, Delhi Bench, comprising Justice Rakesh Kumar Jain (Judicial Member), Shri Naresh Salecha and Shri Indevar Pandey (Technical Members), while adjudicating an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Desh Bhushan Jain, Erstwhile Director of Angel Promoters Pvt. Ltd. vs Abhay Kumar, IRP of Angel Promoters Pvt. Ltd. & Ors. has held that a second petition under Section 7 is maintainable if the Corporate Debtor defaulted in the settlement agreement arrived during the pendency of Section 7 petition
Background Facts
Desh Bhushan Jain, Erstwhile Director of Angel Promoters Pvt. Ltd. (“Corporate Debtor”) availed loan of Rs. 3,25,00,000/- on interest in 2015 from Angel Promoters Pvt. Ltd. & Ors (“Financial Creditors”). A petition under Section 7 of IBC was filed by the Financial Creditors since the Corporate Debtor defaulted in the repayment of loan. When the petition was pending, the settlement agreement was made between the parties dated 26.07.2018. As per the agreement, Corporate Debtor had agreed to pay to the Financial Creditor an amount of Rs. 4,34,00,000/ by way of Post-Dated Cheque including interest. Resultantly, the first petition was withdrawn by the Financial Creditors on 27.07.2018 by filing a joint application. The Corporate Debtor failed to make timely payments, either by dishonoring post-dated cheques or requesting extensions. Despite some payments, many cheques were unpaid or not replaced as per the settlement agreement. Consequently, a second petition was filed by the Financial Creditors under Section 7 of IBC.
It was argued by the appellant that that unpaid instalment as per the settlement agreement cannot be treated as debt and breach of settlement agreement cannot be made a ground to file an application under Section 7. It was further argued that when the order was passed in the first petition, no permission was sought of the Adjudicating Authority to revive the petition. It was also submitted that the Appellant has paid Rs. 87 lakhs out of the court which cannot be appropriated by Respondent in the component of interest as the amount for which the petition under Section 7 was filed had already been crystallized.
It was submitted by the respondents that they were mischievously influenced by the Corporate Debtor to enter into a settlement agreement on the pretext that the principal amount with interest shall be paid. It was also contended that there is no question of seeking permission to the Court because it was not a case of revival of the same petition rather a second petition has been filed.
NCLAT Verdict
It was observed by the tribunal that it is not in support of the argument that the application under Section 7 cannot be filed on the basis of the settlement. It was observed that if “the plea raised by the Appellant is accepted that the second petition on the ground of settlement agreement is not maintainable then it would give a premium to the unscrupulous CD to get the petition filed under Section 7 withdrawn on the basis of the settlement which was not to be ultimately followed.” Therefore, the plea by the Appellant was rejected.
With the aforesaid observation, the appeal was dismissed.
Case:Desh Bhushan Jain, Erstwhile Director of Angel Promoters Pvt. Ltd. vs Abhay Kumar, IRP of Angel Promoters Pvt. Ltd. & Ors.
Case No.Company Appeal (AT) (Ins) No.124 of 2024
Order Dated20.05.2024
Counsels for the Appellant Mr. Rajnish Sinha, Ms. Pooja Singh, Monika Dhruv Jain, Advocates
Counsels for the Respondent Mr. Abhimanyu Mahajan, Ms. Anubha Goel, Mr. Mayank Joshi, Advocates for R-2 to 10 ,Mr. Abhay Kumar, IRP,PCS, Mohammad Khalik (IRP)