2022 (11) TMI 454 - Tri - Insolvency and Bankruptcy

Seeking restoration of petition - commission of grave default of the terms of the Deed of Settlement - competent authority mentioned in the order exclude or include this Adjudicating Authority (NCLT) or not - HELD THAT - The petitioner is not entitled to any liberty under Order XXIII, Rule 3A, since the Settlement Deed dated 11.01.2021 is voluntarily executed between the OC and CD on mutually agreed conditions without alleging any fraud, coercion or misrepresentation. Further, the Settlement Deed is analogous to passing a money decree directing its payment by instalments as provided in Order XX, Rule 11, CPC, but even the said provision does not provide for restoration of the disposed suit in the event the judgment Debtor commits default. Once the lis is validly settled between the parties and accepted by the Court, the lis attains a quietus and terminates since the cause of action for the lis has merged with the final order of settlement. If the terms thereof are violated by any of the parties thereto, the breach thereof provides a fresh cause of action to take appropriate action against the party concerned. However, it shall not under any circumstances restore or revive the cause of action, which had already merged with the final order of settlement. In the application, the applicant stated that the disposed petition to be revived for the recovery of the outstanding operational debt due from the corporate debtor. Time and again it has been expressed and explained by the Apex Court that the Provisions of IBC, 2016 is not of money recovery proceeding; but here the intent of applicant reveals that the applicant invoices the provisions of IBC,2016 so as to enforce recovery against the corporate debtor; the same should not be allowed. In the circumstances, the petition cannot be restored. Application dismissed.

Summary

Issues:
1. Whether the competent authority mentioned in the order excludes or includes the Adjudicating Authority (NCLT)?
2. Whether the petition is to be restored?

Analysis:
1. The application sought restoration of a petition under Rule 11 of NCLT Rules, 2016, which was withdrawn due to a settlement between the parties. The main issue was whether the Adjudicating authority can grant liberty to restore a withdrawn petition. Statutory provisions under IBC, 2016 and NCLT Rules, 2019 allow withdrawal of petitions before or after admission into CIRP. However, there is no provision to grant liberty to restore a finally disposed petition. The judgment highlighted that the Code of Civil Procedure, 1908, does not permit restoration of withdrawn suits unless there is a formal defect. The restoration of a disposed case is only allowed in specific circumstances, such as fraud or misrepresentation. The judgment emphasized that once a settlement is accepted, the cause of action merges with the final order, and any breach provides a fresh cause of action without reviving the original petition.

2. The judgment clarified that the petitioner was not entitled to revive the petition as the settlement agreement had been voluntarily executed without fraud or coercion. The judgment emphasized that the provisions of IBC, 2016 are not meant for money recovery proceedings. The petitioner's intent to enforce recovery through IBC, 2016 was deemed inappropriate. The judgment concluded that since no specific order granted liberty to approach NCLT for restoration, the application could not be entertained. The judgment dismissed the application, citing the absence of legal backing to restore a withdrawn petition.

Key Points:
- The judgment analyzed the lack of legal provisions for restoring a withdrawn petition under IBC, 2016 and NCLT Rules, 2019.
- It highlighted the limitations of the Code of Civil Procedure, 1908, in allowing restoration of withdrawn suits.
- The judgment emphasized that settlements terminate the cause of action, and any breach provides a fresh cause of action without reviving the original petition.
- It concluded that the petitioner's attempt to enforce recovery through IBC, 2016 was not permissible, leading to the dismissal of the restoration application.