Breach in settlement terms couldn’t entitle financial creditors to come back and seek revival of CIRP: NCLAT

Case details: Krishna Garg v. Pioneer Fabricators (P.) Ltd. - [2021] 130 taxmann.com 127 (NCLAT- New Delhi)

Judiciary and Counsel Details

• • Justice Bansi Lal Bhat, Actg. Chairperson Dr. Ashok Kumar Mishra and Dr. Alok Srivastava, Technical Member
  • Sanchit Garga, Adv. for the Appellant.

Facts of the Case

The Appellants-financial creditors filed a Corporate Insolvency Resolution Process (CIRP) against the corporate debtor in this case. The CIRP began with the appointment of an IRP and the imposition of a moratorium.

However, the parties reached an agreement, as a result of which appellants got some post-dated cheques. The CIRP was ended after the Adjudicating Authority permitted the appellants to drop their claim.

Following that, the appellants filed an application for CIRP resurrection, claiming that the corporate debtor had failed to comply with the settlement provisions. The Adjudicating Authority denied the application in the challenged ruling.

NCLAT Held

The NCLAT stated that the settlement terms were neither filed nor brought to the attention of the Adjudicating Authority; however, it was incorporated in an order of the Adjudicating Authority that, with the power to revive/restore CIRP in the event of a corporate debtor not adhering to the terms of settlement or post-dated cheques issued to appellants being dishonored.

From the aforesaid, it could not be said that settlement terms not incorporated in the order of Adjudicating Authority, such terms would not assume the character of a decree of Court and breach thereof would not entitle the financial creditor to come back and seek revival of CIRP.

Case Review

• • Smt. Krishna Garg v. Pioneer Fabricators (P.) Ltd. [2021] 130 taxmann.com 126 (NCLT – New Delhi) (para 3) affirmed.

List of Cases Referred to

• • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 2).