Ramesh Kumar Suneja vs Brij Mohan Sahni & Anr.

Per: Justice Rakesh Kumar Jain:

09.11.2022: This appeal is directed against the order dated 09.09.2022 by which an application bearing I.A. No. 4261 of 2022 filed by the Appellant has been dismissed on the ground that the Appellant has already been debarred in terms of Section 29A(g) of the Code.

Shorn of unnecessary details, an application under Section 7 of the Code was filed by Brij Mohan Sahni (Respondent No. 1), being the partner of M/s. Gray Printers in respect of a loan of Rs. 1 Crore with interest @ 15% per annum advanced in the month of April, 2014 to M/s Pawan Buildwell Pvt. Ltd. (Corporate Debtor). The said application was admitted on 04.04.2018 by the Adjudicating Authority and CIRP proceedings were initiated with the appointment of Arun Chadha as the IRP of the Corporate Debtor. The Corporate Debtor challenged the order of admission by way of an appeal before this Tribunal which was allowed on 07.08.2018 on the ground that there is a dispute as to who is the financial creditor. The order dated 07.08.2018 passed by this Tribunal was challenged by the Financial Creditor before the Hon’ble Supreme Court in Civil Appeal No. 8709 of 2018 which was allowed on 30.11.2018 and the order of this Tribunal was set aside. Thereafter, the resolution process failed, the liquidation order against the Corporate Debtor was passed on 05.02.2020 and RP Arun Chadha was appointed as the Liquidator of the Corporate Debtor. It is alleged that after several rounds of litigation, the Corporate Debtor filed a scheme of settlement before the Liquidator which was examined and the Corporate Debtor was found ineligible under Section 29A of the Code. Thereafter, the Corporate Debtor filed an application bearing I.A. No. 3879 of 2021 before the Adjudicating Authority for a direction to the Liquidator to convene the meeting and place the scheme of compromise/settlement for their consideration. However, the said application was dismissed vide order dated 04.01.2022 by the Adjudicating Authority on the ground that the Corporate Debtor was ineligible to propose a scheme under Section 230-232 of the Companies Act, 2013, Section 29A(g) of the Code and Regulation 2(B)(1) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (in short ‘Regulations). The said order dated 04.01.2022 was challenged before this Tribunal by way of CA (AT) (Ins) No. 165 of 2022, which was dismissed on 22.02.2022 and led to another round of litigation before the Hon’ble Supreme Court by way of Civil Appeal No. 3526 of 2022 but the said appeal was withdrawn by the Corporate Debtor on 13.05.2022. Thereafter, I.A. No. 4261 of 2022 was filed at the instance of the Corporate Debtor for closure of the liquidation proceedings pending against it on payment of the debt to the financial creditor of the Corporate Debtor but the same was also dismissed on 09.09.2022 and hence, the present appeal.

Counsel for the Appellant, during the course of hearing, has pressed only one request on behalf of the Appellant, invoking Rule 11 of the NCLAT Rules, 2016, that the Appellant is willing to settle the dispute with the Financial Creditor on payment of a sum of Rs. 2,12,13,175/- and the dues of the employees amounting to Rs. 84,310 besides the liquidation costs.

On the other hand, Counsel appearing on behalf of the Financial Creditor, on instructions, has submitted that dues are much more than 2.12 Crores. According to him the dues are in the range of Rs. 3.38 Crores plus other expenses incurred by the Respondent.

Counsel for the Appellant, after receiving instructions in Court from his client could not offer the amount which is being asked to pay by the Respondent. Thus, there is no settlement.

The question is as to whether the Appellant can press Rule 11 for the purpose of entering into a settlement with the Respondent who is not interested in the settlement at all?

In this regard, Counsel for the Appellant has referred to the decisions of Hon’ble Supreme Court in the case of Ebix Singapore Pvt. Ltd. Vs. CoC of Educomp Solutions Ltd. & Anr. (2022) 2 SCC 401, Vallal RCK Vs. Siva Industries and Holdings Ltd. & Ors. 2022 SCC Online SC 717 and a decision of this Tribunal rendered in the case of K. Srinivas Krishna, Suspended Director of C-Tel, Infosystems (P) Ltd. Vs. Shyam Arora, IRP of Corporate Debtor &Ors. MANU/NL/0369/2021.

On the other hand, Counsel for Respondent has referred to an order of the Supreme Court which has been passed in the second round of litigation initiated at the instance of the Appellant, which read thus “Learned Counsel for the Appellant(s), on instructions, wants to withdraw the present appeals with liberty to raise all objections available under the law in the pending proceedings before the Tribunal. The appeals alongwith pending applications(s), if any, stand dismissed as withdrawn with liberty as prayed for”

In this regard, Counsel for the Appellant has submitted that no doubt the application was filed for the purpose of settlement which was prepared on the basis of scheme for the settlement before the Adjudicating Authority but in the said application itself prayer was also made to invoke Rule 11 for the purpose of settlement between the parties. Counsel for the Respondent has thus submitted that initially, the Court did not provide the exit route in case of settlement between the parties, however, it was then provided by way of an amendment in Section 12A of the Code. According to him, the said exit route is only at the stage when the CIRP proceedings have been continuing but later on by another amendment the consent of 90% of the CoC members was also added. It is further submitted that there is another exit route which is provided under Section 230 of the Companies Act, 2013 which has also been invoked by the Appellant but the Appellant has been found ineligible for the settlement in view of Section 29A of the Code. It is also submitted that the order of admission was passed in the year 2018 in regard to CIRP. Four years have passed and there have been two rounds of litigation up to the Hon’ble Supreme Court as well and now the Appellant is showing his inclination in order to settle the dispute, that too, without offering the money which is actually owed by the Appellant. It is thus submitted that until and unless there is a settlement between the parties, Rule 11 cannot be invoked for the purpose of settling the dispute with the Respondent.

We have heard Counsel for the parties and perused the record with their able assistance.

The issue involved in this appeal is as to whether Rule 11 can be invoked for the purpose of pressing upon the Respondent to enter into a settlement who is otherwise having its own terms and conditions which are not being accepted by the Appellant?

Rule 11 is a residuary provision in the Rules to meet the exigency. It is akin to Section 151 of the CPC. Such Rules can be invoked when there is no provision in the Code to meet an emergent situation. In the present case, there were so many opportunities before the Appellant for the purpose of settlement in order to claim the exit from the CIRP proceedings but those proceedings were not initiated by the Appellant and when the application was filed on which the impugned order is passed, he was found ineligible in view of the bar under Section 29A.

We have gone through the judgments relied upon by the Appellant of both the Hon’ble Supreme Court and this Tribunal which are not at all applicable to the present facts and circumstances of the case because in all the cases there was a settlement between the parties whereas in this case there is no settlement between the parties because the Appellant is not offering the money which is being claimed by the Respondent and until and unless a settlement is there, we cannot invoke our jurisdiction for the purpose of settling the dispute. Thus, in view of the aforesaid facts and circumstances, we do not find any error in the impugned order and hence the appeal is dismissed. No costs.