2020 (10) TMI 965 - Tri - Insolvency and Bankruptcy

Restoration of petition - whether the Applicant/Financial Creditor is entitled to seek restoration of the company petition that has already been disposed of, and whether the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, has the power to do so? HELD THAT - The applications seeking revival of a company petition disposed of as withdrawn after recording the settlement terms arrived at between the parties, is permissible in exercise of the powers conferred on the Tribunal under rule 11 of the NCLT Rules, 2016 - Incidentally, exercise of the power conferred by rule 11 of the Rules ibid for the purposes of the Code has been upheld by the Hon ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. 2019 (1) TMI 1508 - SUPREME COURT . Petition is revived and restored to file.

Summary

Issues:
1. Entitlement of Financial Creditor to seek restoration of a disposed company petition.
2. Power of the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (the Code) to restore a disposed company petition.

Analysis:

Issue 1: Entitlement of Financial Creditor to seek restoration of a disposed company petition:
The application filed by the Financial Creditor sought restoration of the Company Petition that had been disposed of earlier based on a settlement between the parties. The Financial Creditor alleged that the Corporate Debtor failed to honor payment deadlines as per the settlement terms. The Respondent argued that once a company petition is withdrawn, the Financial Creditor can only file a fresh application under the Code, subject to fresh adjudication. However, the Financial Creditor cited a Supreme Court order recognizing the power of the Tribunal to recall its own order and revive an application under the Code. Additionally, a Division Bench of the Bombay High Court's judgment was presented, supporting the restoration of a company petition. The Financial Creditor contended that the NCLT has the authority to restore a disposed company petition.

Issue 2: Power of the Adjudicating Authority under the Code to restore a disposed company petition:
The Respondent argued that there is no provision under the Code for the revival of a disposed company petition and referred to past orders dismissing restoration applications, emphasizing the absence of a restoration procedure under the Code. However, the Tribunal noted a change in the law allowing withdrawal of applications under the Code in different circumstances. Citing the power conferred by Rule 11 of the NCLT Rules, 2016, the Tribunal held that the revival of a company petition disposed of as withdrawn after recording settlement terms is permissible. The Tribunal referred to a Supreme Court judgment upholding the exercise of power under Rule 11 for the Code's purposes. Consequently, the Tribunal allowed the application, reviving and restoring the company petition for further proceedings.

In conclusion, the Tribunal determined that the Financial Creditor was entitled to seek restoration of the disposed company petition, and the Adjudicating Authority had the power to restore the petition under the Code and NCLT Rules. The Tribunal's decision was based on the interpretation of relevant legal provisions and precedents, allowing the revival of the petition for continued adjudication.