BRIEF FACTS
The present appeal, is against an interim order passed by the National Company Law Appellate Tribunal (NCLAT), whereby the NCLAT issued notice of the Appeal, but did not restrain the Interim Resolution Professional (IRP) from proceeding with Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor. The NCLAT, however, restrained the IRP from constituting a Committee of Creditors (CoC) till the next date of hearing. In the meanwhile, the Appellant and the Respondents were given the opportunity to settle their disputes before the Adjudicating Authority (NCLT) in terms of Section 12A of the IBC read with Rule 11 of the National Company Law Tribunal Rules, 2016 (NCLT Rules) .
The Corporate Debtor took recourse to Arbitration Proceedings against the Respondents. Beacon Trusteeship issued a notice to the Corporate Debtor regarding non-payment of interest amount of Rs.2,18,95,890.41/-. Beacon Trusteeship also issued an Enforcement Notice accelerating payment of the full investment amount i.e. Rs.77,94,92,513/- as due on on account of non-payment of Rs.2,18,95,890.41/- being interest coupon amount.
The Arbitrator passed an interim award in favour of Beacon Trusteeship and other Respondents and directed the Corporate Debtor to make payment of Rs.72,06,99,244/- along with interest. Aggrieved by the order of the Arbitrator, the Appellant and Corporate Debtor preferred an arbitration petition under Section 34 of the Arbitration and Conciliation Act, 1996 before the High Court of Bombay.
Being aggrieved by the order passed by the NCLT, Mumbai Bench, admitting and allowing application for initiating CIRP against the Corporate Debtor, the Appellant who is Director of the Corporate Debtor filed an appeal in the NCLAT, New Delhi.
The NCLAT stayed the formation of CoC, but declined to exercise its power under Rule 11 of the NCLAT Rules to take on record the settlement and dispose of the matter. Further, the NCLAT permitted the IRP to issue publication and also handover all assets and proceed with the CIRP even though the matter had been settled between the parties. Being dissatisfied by the order of the NCLAT, the Appellant has preferred the present Civil Appeal.
COURT’S OBSERVATION
The Apex Court observed that the settlement cannot be stifled before the constitution of the Committee of Creditors in anticipation of claims against the Corporate Debtor from third persons. The withdrawal of an application for CIRP by the applicant would not prevent any other financial creditor from taking recourse to a proceeding under IBC. The urgency to abide by the timelines for completion of the resolution process is not a reason to stifle the settlement.
The Court dismissing the appeal held that “the application for settlement under Section 12A of the IBC is pending before the Adjudicating Authority (NCLT). The NCLAT has stayed the constitution of the Committee of Creditors. The order impugned is only an interim order which does not call for interference. In an appeal under Section 62 of the IBC, there is no question of which requires determination by this Court.”
The court further directed the NCLT to take up the settlement application and decide the same in the light of the observations made by the Court.
CASE: ASHOK G. RAJANI Versus BEACON TRUSTEESHIP LTD. & ORS.
CASE CITATION: CIVIL APPEAL NO.4911 OF 2021
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