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Issues: (i) Whether the default claimed under the settlement agreement could sustain an under Section 9 of the Insolvency and Bankruptcy Code, 2016 when the actual date of default fell within the Section 10A suspended period. (ii) Whether the settlement agreement and related documents were enforceable in view of the stamp law objections and the validity of the authority to execute the documents.
Issue (i): Whether the default claimed under the settlement agreement could sustain an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 when the actual date of default fell within the Section 10A suspended period.
Analysis: The default relied on by the appellant arose from non-payment of the first instalment under the settlement agreement. On the facts, the actual date of default was 01.08.2020, which fell within the period protected by the first proviso to Section 10A of the Insolvency and Bankruptcy Code, 2016. The claim in the petition could not be reshaped by reverting to the earlier invoice dates, because those transactions had merged into the settlement arrangement. A petition under Sections 7, 9 and 10 of the Code was therefore not maintainable for such default.
Conclusion: The default fell within the Section 10A suspension period and the Section 9 petition was not maintainable on that basis.
Issue (ii): Whether the settlement agreement and related documents were enforceable in view of the stamp law objections and the validity of the authority to execute the documents.
Analysis: The documents relied on by the appellant, including the power of attorney, the sales contracts and the settlement agreement, were treated as unenforceable because of non-compliance with the applicable stamp law requirements. The power of attorney executed outside India was found to be invalid and unenforceable in the manner presented. The settlement arrangement, which was the foundation of the claim, was also held to lose enforceability in the circumstances noticed by the Tribunal. In addition, the Tribunal accepted the settled principle that a default in payment of instalments under a settlement agreement does not, by itself, constitute operational debt for the purposes of Section 9.
Conclusion: The documents were not treated as enforceable for sustaining the operational debt claim under Section 9.
Final Conclusion: The dismissal of the Section 9 petition was affirmed because the claimed default was hit by the statutory suspension under Section 10A and the documentary foundation for the claim was held unenforceable.
Ratio Decidendi: A petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 cannot be maintained where the only pleaded default occurred during the Section 10A suspension period, and a claim founded on an unenforceable settlement arrangement cannot be used to convert such instalment default into operational debt.
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