Operational creditor retains right to file fresh Section 9 application after settlement breach despite withdrawal

NCLAT Principal Bench allowed operational creditor's appeal against adjudicating authority's order declining liberty to reapproach in case of MoU breach. Court held that withdrawal of Section 9 application based on settlement did not constitute relinquishment of creditor's right to file future applications upon corporate debtor's default. MoU only required joint withdrawal application, not waiver of future legal remedies. Adjudicating authority's denial of liberty was fallacious as no undertaking existed preventing creditor from pursuing matter upon breach. Order declining liberty was set aside and appeal partly allowed.

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Issues Involved:
1. Condonation of Delay in Filing the Appeal.
2. Withdrawal of Section 9 Application under Section 12A.
3. Liberty to Reapproach the Adjudicating Authority in Case of Breach of MoU.

Condonation of Delay in Filing the Appeal:
The Appellant filed Interlocutory Application No. 5343 of 2023 seeking condonation of 14 days delay in filing the Appeal. The Tribunal, being satisfied with the reasons provided, condoned the delay and disposed of the application.

Withdrawal of Section 9 Application under Section 12A:
The Appeal was filed by the Operational Creditor challenging the order dated 21.08.2023, which allowed the withdrawal of the Section 9 Application under Section 12A based on a Memorandum of Understanding (MoU) dated 07.07.2023. The Operational Creditor claimed a default of operational debt amounting to Rs. 1,85,00,668/- plus interest. The Adjudicating Authority allowed the withdrawal but did not grant liberty to reapproach in case of breach of the MoU.

Liberty to Reapproach the Adjudicating Authority in Case of Breach of MoU:
The Appellant argued that the Corporate Debtor breached the MoU by not making the full payment and not executing the Sale Deed as agreed. The Appellant contended that liberty to reapproach should not have been foreclosed. The Respondent countered that no application could be filed to revive Section 9 proceedings for breach of the MoU.

The Tribunal examined the MoU and noted that it did not contain any undertaking by the Operational Creditor relinquishing the right to reapproach the Adjudicating Authority. The Tribunal found that the Adjudicating Authority's basis for denying further liberty was fallacious. The Tribunal referred to precedents where liberty to revive CIRP was granted in case of default in settlement terms.

Conclusion:
The Tribunal set aside the Adjudicating Authority's order to the extent it declined liberty to the Operational Creditor to reapproach the Adjudicating Authority. The Tribunal granted liberty to the Operational Creditor to revive the Section 9 Application in case of default by filing an appropriate application in accordance with law. The Appeal was partly allowed, and no order as to costs was made.

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