Filling Of Claim Before IRP Does Not Absolve Director From Liability Under Settlement Decree Signed In Personal Capacity: Delhi High Court

The Petitioner, Managing Director of company Shree Shyam Pulp and Board Mills Ltd. had signed a Settlement Agreement where he and the Company were jointly described as "the second party".

The Agreement was to fix non-payment of rent by the Company and vacate the lease premises. When the Company failed to vacate the premises, the Landlords filed execution petitions.

During pendency of the Execution, the Company was declared insolvent and IRP was appointed. A second Settlement Agreement with respect to possession and recovery of damages/mesne profits in respect of the property was executed after which the Company vacated the premises.

The Landlords then filed their claim for recovery of rent before IRP and simultaneously pursued an execution petition against the Director (petitioner herein) before a Trial court.

The Trial Court decided that the petitioner was liable to pay the landlords as he had not only signed as the Director of the Company but also in his personal capacity.

The petitioner herein, filed three petitions before the High Court, challenging the claim for recovering against him. He based his claims on the following grounds - the execution cannot be pursued against him when already a claim is pending before IRP and also on the ground that the Director cannot be held liable for the recovery of debts in the name of the company.

Justice Prateek Jalan rejected both the contentions. It was held that when the Director has signed in his personal capacity, he is also liable under the Decree. Further, filing of claim before IRP does not absolve the Director from his liability under the Decree when he is party in personal capacity.

"I am of the view that the filing of the plaintiffs' claims before the Resolution Professional does not absolve the petitioner from his liability under the decrees," the Bench said.

"The settlement deeds, which have been placed on record, were entered into between the respondent-plaintiffs, the Company and also the petitioner in his individual capacity. The petitioner has, in fact, appended his signature to each of the settlement deeds twice, once in his personal capacity and once as the authorised signatory/ director of the Company...The argument of the petitioner that he is not liable in his personal capacity for satisfaction of the decrees flies in the face of the aforesaid facts," it noted further.

It added that the petitioner cannot now resist execution on the basis of such a defence.

"After the decree has been passed, that too by virtue of a settlement, the Executing Court is not entitled to go behind the decrees."

Further noting that the petitioner appears to be an attempt to go back on the terms of the settlement deed entered into by him, the Court dismissed his petition with cost of Rs. 60,000/- (Rs. 20,000/- for each petition).

The petitioner has also been directed to file a list of his assets, and the execution proceedings are next listed before the Executing Court on 21.01.2022.

The landlords/Respondent were represented by Advocate Stuti Gupta.

Case Title: Naresh Kumar Gupta v. Satya Pal & Ors., CM (M) 66/2022 and connected matters

Citation: 2022 LiveLaw (Del) 32