2022 (5) TMI 17 - Tri - Insolvency and Bankruptcy

Revival of the petition of the Operational Creditor - Settlement agreement entered upon - HELD THAT - Since the parties had entered into terms of settlement, any breach of the said terms of settlement would give rise to a different cause of action, and not the restoration of the underlying petition to file. The intention of the Code is not to enforce settlement, but to resolve insolvency of the Corporate Debtor. Application dismissed.

Summary

Issues:
Restoration Application filed by an Operational Creditor for revival of a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 against a Corporate Debtor.

Detailed Analysis:

1. Background and Settlement Agreement:
The Operational Creditor initiated proceedings under Section 9 of the Insolvency and Bankruptcy Code against the Corporate Debtor. During the proceedings, the Corporate Debtor admitted to a due amount and entered a settlement with the Operational Creditor, agreeing to pay in instalments. The terms of settlement included a waiver of a specific amount due to financial difficulties faced by the Corporate Debtor.

2. Submissions by Operational Creditor's Counsel:
The Operational Creditor's counsel highlighted that the Corporate Debtor failed to make the payment of the sixth instalment, leading to a letter of demand being issued. The total amount due, considering the waived sum, was emphasized by the Operational Creditor's counsel.

3. Submissions by Corporate Debtor's Counsel:
The Corporate Debtor's counsel argued that the settlement terms were not part of the previous order and that the repayment was subject to the outcome of proceedings related to Central Excise Authority. The ongoing adjudication process was cited as a reason for the ambiguity in the amount payable, indicating no current liability for the Corporate Debtor.

4. Judicial Analysis and Decision:
The Tribunal considered the breach of settlement terms as a separate cause of action, not warranting restoration of the original petition. The focus was on resolving the insolvency of the Corporate Debtor rather than enforcing the settlement. Consequently, the Restoration Application was dismissed, granting the Operational Creditor the liberty to pursue other legal remedies available.

5. Conclusion:
The Tribunal's decision emphasized the distinction between enforcing settlements and resolving insolvency issues under the Code. The dismissal of the Restoration Application signified the need to adhere to settlement terms separately from insolvency proceedings, allowing parties to explore alternative legal avenues.