2024 (2) TMI 1442 - AT - IBC

Corporate debtor's settlement breach allows operational creditor to revive Section 60(5) application despite initial dismissal

Finsbury Global FZE Versus Uttam Sucrotech International Pvt. Ltd.

The NCLAT allowed an appeal challenging dismissal of an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The corporate debtor ... Dismissal of application u/s 60(5) of the Insolvency and Bankruptcy Code, 2016 - Corporate Debtor did not adhere to the payment schedule set out in the settlement - nature of the `debt’ of the Operational Creditor has now been changed because of the settlement which is no longer an Operational Debt for filing of application under Section 9 - condition precedent in the settlement - HELD THAT:- In this case, the facts are not much in dispute, because the matter has been settled between the Parties through a written settlement, in which one of the clauses permitted the Appellant to file an application for revival in case of breach on the part of the Corporate Debtor/Respondent. It is otherwise true that the application filed by the Applicant was initially dismissed as withdrawn on account of the settlement between the Parties and no permission was sought at the time for revival of the said application. However, in the case of IDBI Trusteeship Service Ltd. [2023 (5) TMI 770 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], this Court while distinguishing the order in the case of SRLK Enterprises LLP [2021 (4) TMI 1358 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] has held 'Adjudicating Authority committed error in rejecting the revival application 3196 of 2022 when the consent term itself contemplates a clause for revival in event of default and default having been committed by the Corporate Debtor, rejection of revival is to deny the Financial Creditor rightful remedy. Non-mention of specific liberty in the Order is inconsequential in view of the clear terms in the settlement which was the basis of withdrawal of Company Petition.' Moreover, in case of Ahluwalia Contracts (India) Ltd. [2023 (9) TMI 239 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], which was a case under Section 9 itself, the same observations have been made by this Court for the purposes of revival of the application filed under Section 9 on the ground that there was a provision made in the Settlement Agreement that in case of default, the Appellant would be entitled to get the application revived. Thus, there is an error on the part of Adjudicating Authority in dismissing the application filed by the Appellant. The Appeal thus succeeds and the impugned order is hereby set aside - appeal allowed. Issues:1. Dismissal of application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 for revival of C.P.(IB) No. 1013 (PB)/2020.2. Interpretation of settlement agreement between parties regarding debt resolution.3. Applicability of settlement terms on the nature of debt and right to seek revival of the application.4. Comparison of relevant case laws for determining the validity of revival application.5. Error in dismissing the application by the Adjudicating Authority.Analysis:The judgment by the National Company Law Appellate Tribunal in New Delhi involved an appeal against the dismissal of an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 for the revival of a previous case. The appellant had initially filed an application under Section 9 of the Code for the resolution of a debt amounting to 598,548 USD. A settlement was reached between the parties, reducing the debt to 578,148 USD, with a specific payment schedule outlined in the agreement. The settlement agreement allowed the appellant to seek revival of the application in case of default by the corporate debtor.The Tribunal noted that the settlement agreement was part of the record and that the appellant had the right to file for revival as per the terms agreed upon. The Tribunal referred to previous judgments, such as 'IDBI Trusteeship Service Ltd.' and 'Ahluwalia Contracts (India) Ltd.', which supported the appellant's position regarding the right to seek revival based on the settlement terms. The Tribunal distinguished the case of 'SRLK Enterprises LLP' and emphasized the importance of bringing the settlement on record for revival applications.The respondent argued that partial payments were made as per the settlement and cited the case of 'SRLK Enterprises LLP' to support the contention that the remaining amount could not be recovered under the IBC proceedings. However, the Tribunal found in favor of the appellant, stating that the Adjudicating Authority erred in dismissing the revival application. The judgment highlighted that the settlement agreement's clause for revival in case of default entitled the appellant to seek revival, despite the initial dismissal of the application.In conclusion, the Tribunal set aside the impugned order, allowing the revival of the original application filed by the appellant for debt resolution, which would now be decided in accordance with the law. The judgment emphasized the importance of honoring settlement terms and upheld the appellant's right to seek revival based on the agreed conditions, despite initial dismissal due to settlement.