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TMI Blog2022 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... arose before the Hon ble Supreme Court in (2019) 4 SCC 17 [2019 (1) TMI 1508 - SUPREME COURT] as to what is to be done if a settlement is arrived at even before the committee of creditors is constituted. The Hon ble Supreme Court answered this question by holding that where the committee of creditors is not yet constituted, a party can approach the NCLT directly and the Tribunal, in exercise of its powers under Rule 11 of the NCLT Rules, may allow or disallow such an application for withdrawal or settlement - In view of the observations of the Hon ble Supreme Court, the NCLT has the inherent power, to direct withdrawal of the creditors petition, before the committee of creditors is constituted. The recognition of such a power, by the Hon ble Supreme Court, in a situation, which is not covered or contemplated under the Statute or the Rules made thereunder, clearly shows that the inherent powers of the NCLT cannot be interpreted restrictively and a wider and larger approach need to be taken while interpreting Rule 11 of the NCLT Rules. Such an expansive interpretation of Rule 11 would clearly mean that the Tribunal, which has the inherent power to permit withdrawal of a petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andum of Understanding, dated 20.07.2020, under which it was recorded that :- a) The 3rd respondent agreed to withdraw the application filed before the NCLT immediately. b) On withdrawal of the application, the petitioner was to pay an amount of Rs.5,00,00,000/- to the 3rd respondent as full and final settlement. c) This amount of Rs.5,00,00,000/- was to be paid in installments of Rs.20,00,000/- each in 25 installments, within 45 days from the date of withdrawal of the application. d) The mode of payment was to be online banking through RTGS to the account of the 3rd respondent. 3. The Memorandum of Understanding also contained a term that the above compromise was towards full and final settlement of all the claims of the parties against each other and no further claims would remain. 4. On the basis of the above Memorandum of Understanding, the 3rd respondent filed a memo of withdrawal before the NCLT. In this memo of withdrawal it was stated that the parties had entered into a joint Memorandum of Understanding dated 20.07.2020 and the details of the understanding were set out. The Memo also stated that the 3rd respondent be permitted to withdraw the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present writ petition. 8. Sri C. Raghu, learned Senior Counsel appearing on behalf of Sri L. Sai Radha Krishna, learned counsel for the petitioner, would submit, on the question of maintainability of the writ petition, that a writ petition is maintainable against an order passed by the NCLT and relies upon a judgment of the Hon ble Supreme Court in the case of Radha Krishan Industries vs. State of Himachal Pradesh and Ors., (2021) 6 SCC 771 (paragraphs 24 to 28). Learned Senior Counsel would also rely upon the judgment of the Hon ble Supreme Court dated 24.09.2021 in Civil Appeal No.5728 of 2021 in the case of M/s. Magadh Sugar Energy Ltd., vs. The State of Bihar and Ors., to contend that a writ petition would be maintainable in such circumstances. 9. Smt. S.V. Rama Krishna, learned counsel appearing for the 3rd respondent would submit that the petitioner has an effective alternative remedy under Section 61 of the Insolvency and Bankruptcy Code, 2016, which provides an appeal before the NCLAT. He would further contend that the petitioner has already filed such an appeal before the NCLAT and has now chosen to approach this Court without pursuing the alternati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of its writ jurisdiction, such a view would not readily be interfered with. 28. These principles have been consistently upheld by this Court in Chand Ratan v. Durga Prasad [Chand Ratan v. Durga Prasad, (2003) 5 SCC 399], Babubhai Muljibhai Patel v. Nandlal Khodidas Barot [Babubhai Muljibhai Patel v. Nandlal Khodidas Barot, (1974) 2 SCC 706] and Rajasthan SEB v. Union of India [Rajasthan SEB v. Union of India, (2008) 5 SCC 632] among other decisions. 12. In the present case, there is an effective alternative remedy of appeal before the NCLAT. On account of this availability, paragraph 27.3 of the judgment in Radha Krishan Industries vs. State of Himachal Pradesh and Ors., would have to be considered. The Hon ble Supreme Court, in Paragraph 27.3, had held that a challenge to the jurisdiction of the authority passing the impugned order can be considered by the court, even in the presence of an alternative remedy. In the present case, the jurisdiction of the National Company law tribunal, to recall it s earlier orders is under challenge. Accordingly, this writ petition is maintainable. 13. The contention of the writ petitioner is that, the NCLT does not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmittee of creditors is to be constituted within 30 days from the date of admission / appointment of an interim resolution professional. 18. A question arose before the Hon ble Supreme Court in Swiss Ribbons (P) Ltd., and Anr., vs. Union of India and Ors., (2019) 4 SCC 17 as to what is to be done if a settlement is arrived at even before the committee of creditors is constituted. The Hon ble Supreme Court answered this question by holding that where the committee of creditors is not yet constituted, a party can approach the NCLT directly and the Tribunal, in exercise of its powers under Rule 11 of the NCLT Rules, may allow or disallow such an application for withdrawal or settlement. 19. In view of the above observations of the Hon ble Supreme Court, in paragraph 82 of the said judgment, the NCLT has the inherent power, to direct withdrawal of the creditors petition, before the committee of creditors is constituted. The recognition of such a power, by the Hon ble Supreme Court, in a situation, which is not covered or contemplated under the Statute or the Rules made thereunder, clearly shows that the inherent powers of the NCLT cannot be interpreted restrictively and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been no failure of justice. We are unable to accept this contention. Section 465 of the Code is the residuary section intended to cure any error, omission or irregularity committed by a court of competent jurisdiction in course of trial through accident or inadvertence, or even an illegality consisting in the infraction of any provisions of law. The sole object of the section is to secure justice by preventing the invalidation of a trial already held, on the ground of technical breaches of any provisions in the Code causing no prejudice to the accused. But by no stretch of imagination the aforesaid provisions can be attracted to a situation where a court having no jurisdiction under the Code does something or passes an order in contravention of the mandatory provisions of the Code. In view of our interpretation already made, that after a criminal proceeding is committed to a Court of Session it is only the Court of Session which has the jurisdiction to tender pardon to an accused and the Chief Judicial Magistrate does not possess any such jurisdiction, it would be impossible to hold that such tender of pardon by the Chief Judicial Magistrate can be accepted and the evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent, capping the liability of the writ petitioner to Rs.5 crores whereas the petition filed before the NCLT was on the basis of the claim of Rs.8.9 crores. He would further submit that there is no default clause in the MOU which stipulates that the previous dues would revive in the event of any default in the terms of MOU. He would submit that in such a situation the earlier liability of the petitioner would not survive and consequently revival of the petition would not, in any manner, enure to the benefit of the unofficial respondent. 26. The aforesaid dispute between the petitioner and the respondent as to the maintainability of the petition filed by the unofficial respondent before the NCLT on account of the subsequent MOU, capping the liability of the writ petitioner to Rs.5 crores, and whether the writ petitioner had remitted the entire amount as claimed by the unofficial respondent or whether the writ petitioner had not remitted the entire amount of Rs.5 crores as contended by the unofficial respondent, are all issues which need to be gone into by the NCLT, without being bound by its earlier observation that, the situation, as before the Memorandum of Understanding, would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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