Use of inherent power u/r 11 of NCLAT Rules to set aside section 7 petition would amount to an abuse of process of NCLAT

Case Details: Harish Raghavji Patel v. Shapoorji Pallonji Finance (P.) Ltd. - [2021] 133 taxmann.com 183 (NCLAT- New Delhi)

Judiciary and Counsel Details

• • Jarat Kumar Jain, Judicial Member and Dr. Alok Srivastava, Technical Member
  • Abhijeet Sinha, Nitin Mishra, Ms. Mitali Gupta and Sumit Shukla, Advs. for the Appellant. 
  • Arun Kathpalia, Sr. Adv., Kunal Kanungo, Abhijit Ghokale, Amey Hadwale, Advs., Prakash Shah and Durgaprasad Poojari for the Respondent.

Facts of the Case

The Adjudicating Authority by an impugned order admitted petition against appellant corporate debtor filed by financial creditor under section 7 of the IBC. The Appellant filed an appeal against the impugned order and submitted that before the constitution of the CoC, the settlement had been arrived at between parties and therefore, prayed that terms of settlement may be taken on record. It was further submitted that Appellate Tribunal exercising inherent power under rule 11 of NCLAT, Rules, 2016 could set aside impugned order and quash CIRP against the corporate debtor in terms of the settlement.

NCLAT Held

The NCLAT held that the inherent power can be exercised only when no other remedy is available to the litigant and nowhere a specific remedy is provided by statute. The NCLAT ruled that since the procedure for withdrawal of petition under sections 7, 9 or 10 of the IBC before and after Constitution of CoC had been provided in section 12A, there was no justification to invoke inherent power of this Appellate Tribunal and to take on record terms of settlement and pass an order for withdrawal of petition under section 7. Therefore, exercising inherent power under rule 11 would amount to an abuse of process of the Appellate Tribunal, hence, could not have been allowed, ruled NCLAT.

Case Review

• • Shapoorji Pallonji Finance (P.) Ltd. v. Rajesh Construction Company (P.) Ltd. [2021] 133 taxmann.com 182 affirmed [See Annex].
  • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 9)
  • Brilliant Alloys (P.) Ltd. v. S. Rajagopal [Special Leave to Appeal (c) No 31557 of 2018, dated 14-12-2018] (para 9) and
  • Kamal K. Singh v. Dinesh Gupta [Civil Appeal No. 4993 of 2021, 25-8-2021] (para 9) distinguished.

List of Cases Referred to

• • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 3)
  • Brilliant Alloys (P.) Ltd. v. S. Rajagopal [Special Leave to Appeal (c) No. 31557 of 2018, dated 14-12-2018] (para 3)
  • Kamal K. Singh v. Dinesh Gupta [Civil Appeal No. 4993 of 2021, dated 25-8-2021] (para 3)
  • Anuj Tejpal v. Rakesh Yadav [2021] 129 taxmann.com 296 (NCL – AT) (para 3).