2022 (7) TMI 1409 - AT - Insolvency and Bankruptcy

Application for revival of Corporate Insolvency Resolution Process (CIRP) rejected - in the corporate insolvency process, settlement reached between the parties - HELD THAT - The Consent Terms clearly entitle the Financial Creditor to revive the Section 7 petition in event any default of the terms of the Consent Terms - Further, the order dated 05.02.2020 cannot be read as an order by which Consent Terms has not been taken on record when by the said order application filed alongwith the consent terms under Rule 11 of NCLT rules, 2016 was taken on record and was allowed. When the application was allowed in terms of the consent terms, Clause 8 itself shall be treated to be part of the order which shall entitle the Financial Creditor to revive the petition in the event of any default. Judgment of this Tribunal which has been relied by the Respondent in Krishna Garg and Anr. vs. Pioneer Fabricators Pvt. Ltd. 2021 (2) TMI 1344 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI was a case where neither settlement terms were filed nor the same were brought on the record - The facts in the present case are distinguishable from the above case as Consent Terms were filed and also were taken on record by the Adjudicating Authority. When the Adjudicating Authority allowed the application filed, the Consent Terms were also taken record and the Financial Creditor was fully entitled to seek revival of the Section 7 petition in event of default of consent terms. The Section 7 petition is revived - appeal allowed.

Summary

Issues:
1. Revival of Corporate Insolvency Resolution Process (CIRP) based on default committed by the Corporate Debtor.
2. Interpretation of Consent Terms and its implications on the revival of the Section 7 petition.
3. Applicability of previous judgments in similar cases regarding revival of CIRP.

Issue 1: Revival of CIRP based on default by Corporate Debtor

The appeal was filed against the rejection of the application for the revival of the Corporate Insolvency Resolution Process (CIRP) by the Adjudicating Authority. The Corporate Debtor had allegedly committed a default, leading to the Appellant seeking the revival of the CIRP as per the Consent Terms. The Adjudicating Authority rejected the revival application, prompting the appeal. The Appellant argued that the Adjudicating Authority erred in not reviving the Section 7 petition as per the terms of the Consent Terms.

Issue 2: Interpretation of Consent Terms and its implications

The Consent Terms, specifically Clause 8, outlined the obligations of the parties and the right of the Financial Creditor to revive the Section 7 petition in case of default by the Corporate Debtor. The Adjudicating Authority had previously accepted the Consent Terms and dismissed the petition under Section 7 as withdrawn. The Appellant contended that Clause 8 entitled them to revive the petition upon default by the Corporate Debtor, contrary to the decision of the Adjudicating Authority.

Issue 3: Applicability of previous judgments

The Respondent argued that the Adjudicating Authority rightly rejected the application for revival, citing the absence of liberty granted in the previous order. Reference was made to a previous judgment, 'Krishna Garg and Anr. vs. Pioneer Fabricators Pvt. Ltd.,' which was relied upon by the Adjudicating Authority. However, the Appellate Tribunal distinguished the present case from the cited judgment, emphasizing that in this case, the Consent Terms were filed, taken on record, and formed part of the order. This distinction was crucial in allowing the revival of the Section 7 petition by the Financial Creditor.

In conclusion, the Appellate Tribunal allowed the appeal, setting aside the impugned order and reviving the Section 7 petition for further proceedings before the Adjudicating Authority. The decision was based on the clear entitlement of the Financial Creditor to seek revival as per the Consent Terms and the proper interpretation of the previous order and relevant judgments.