2023 (5) TMI 770 - AT - Insolvency and Bankruptcy

CIRP - Seeking revival of company - withdrawal of Company Petition under Section 12-A of the Code - default in making payment of any of the tranches of Financial Creditors - settlement of dispute between the parties - HELD THAT - In the present case, consent terms were brought on record since they were part of the Application under Section 12A of the Code which was noticed in the Order of the Adjudicating Authority itself. When consent term itself contains clause for revival, non-giving liberty specifically for revival by the Adjudicating Authority is inconsequential. The Adjudicating Authority has also referred to the Judgment of this Tribunal in Himadri Foods Ltd. v. Credit Suisse Funds AG, 2021 (1) TMI 1303 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , which was distinguished by the Adjudicating Authority. The Adjudicating Authority held that the liberty was granted by the Adjudicating Authority hence the case is distinguishable - It was found that there are no distinguishing feature of the Judgment in Himadri Foods Ltd. In the said case also, consent terms contemplated event of default and gave liberty to report the matter. In the present case also, Company Petition was disposed of taking settlement on record and when Clause 10 of the Settlement specifically contains an undertaking by the Corporate Debtor for revival, corporate debtor can not be allowed to go back from its commitment as was made in the settlement. Another judgment which has been relied on by Learned Counsel for the Respondent is C.A. (AT) Ins. No. 294 of 2021-SRLK Enterprises LLP v. JALAN Transolutions (India) Ltd. 2021 (4) TMI 1358 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI - the adjudicating Authority while rejecting the revival application observed that the settlement was arrived in between the parties outside the Tribunal. In the present case, the Settlement was arrived and submitted before the Adjudicating Authority which was noticed in the Order dated 09.02.2022 hence the Judgement of SRLK Enterprises LLP is clearly distinguishable from the facts of the present case. Thus in the facts of the present case, the 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. Application allowed.

Summary

Issues Involved:

1. Revival of Company Petition after settlement default.
2. Interpretation of consent terms and their enforceability.
3. Adjudicating Authority's power to revive petitions based on consent terms.

Revival of Company Petition After Settlement Default:

The Appellant, a Financial Creditor, filed an appeal against the order dated 21.12.2022 by the National Company Law Tribunal (NCLT), Mumbai Bench, which rejected the revival of Company Petition CP(IB)-4412(MB)/2019. The original petition was filed under section 7 of the I&B Code, 2016 for a default of Rs. 2,86,89,35,109/-. A consent term was executed between the Financial Creditor and the Respondent, leading to the withdrawal of the Company Petition under Section 12-A of the Code. However, the Respondent defaulted in making payment towards the second tranche as per the consent term dated 05th August, 2021, prompting the Appellant to seek revival of the Company Petition, which was rejected by the Adjudicating Authority on the grounds that there is no specific provision in the Code for reopening a withdrawn petition.

Interpretation of Consent Terms and Their Enforceability:

The Appellant argued that the consent term dated 05th August, 2021 clearly stipulated that in the event of default, the settlement shall be canceled, and the company petition can be revived. The Adjudicating Authority's failure to grant liberty for revival in the 12-A withdrawal order was deemed inconsequential by the Appellant, as the consent term itself provided for revival in case of default. Clause 4 of the consent term detailed the settlement amount and payment plan, while Clause 10 specifically mentioned that any deviation/default would entitle the Financial Creditor to revive the Company Petition.

Adjudicating Authority's Power to Revive Petitions Based on Consent Terms:

The Tribunal referred to its previous judgments to support the Appellant's case. In the case of Pooja Finlease v. Auto Needs (India) Pvt. Ltd., it was held that consent terms filed and recorded by the Adjudicating Authority entitle the Financial Creditor to revive the petition in the event of default. Similarly, in Himadri Foods Ltd. v. Credit Suisse Funds AG, the Tribunal emphasized that consent terms contemplating event of default and providing liberty for revival should be honored. The Tribunal distinguished this case from others where consent terms were not brought on record or where settlements were made outside the Tribunal.

Conclusion:

The Tribunal concluded that the Adjudicating Authority erred in rejecting the revival application when the consent term itself contained a clause for revival in the event of default. The rejection of revival was seen as denying the Financial Creditor a rightful remedy. The Tribunal allowed the appeal, set aside the order dated 21.12.2022, and revived the Company Petition CP(IB)-4412(MB)/2019 before the Adjudicating Authority to proceed in accordance with law.