Shraddha Enterprises vs Simplex Infrastructures Ltd.

Per: Justice Rakesh Kumar Jain (Oral)

This appeal is directed against the order dated 14.07.2023 by which an application filed by the appellant bearing I.A No. 1439 of 2023 filed in C.P. (IB) 253/(KB)2022 has been dismissed on the ground that the order dated 18.04.2023 by which the CP was dismissed on the basis of a settlement cannot be restored/revived.

The brief facts of the case are that the appellant filed an application under Section 9 of Insolvency & Bankruptcy Code, 2016 (‘Code’) for resolution of an amount of Rs.1,35,40,097/- before the National Company Law Tribunal, Kolkata Bench (in short ‘Tribunal’).

The appellant and the respondent entered into a settlement deed on 24.03.2023 as per which the respondent (Simplex Infrastructure Ltd.) undertook to pay the settlement amount of Rs.1,35,40,097/- by way of 7 installments. The said payments were to be made as under:

The parties also agreed that in case of a breach in the payment of the aforesaid amount by the respondent, appellant shall be entitled to file an application for restoration of the application or could file a fresh application under Section 9 for the unpaid dues. The said clause in the agreement is as under:

It so happened that the respondent paid the 1^st installment of Rs.17 lakhs and thereafter stopped making the payment and as a result thereof, there was a breach of settlement, arrived at between the parties, by way of a written agreement dated 24.03.2023. As a consequence, the appellant filed an application for restoration of the application filed under Section 9 bearing C.P. (IB)253/(KB)2022. The said application has been dismissed by the impugned order dated 14.07.2023 and hence the present appeal has been filed.

Counsel for the appellant has submitted that the Ld. Tribunal has committed a patent error in dismissing the application for restoration only because of the reason that at the time when the order was passed for withdrawal of the application on 18.04.2023, reference to the agreement was not made. However, it is submitted that in the order dated 18.04.2023 it has been categorically mentioned by the Ld. Tribunal that “Ld. Counsel for the Operational Creditor states that the matter has been settled between the parties, this is admitted by the Ld. Counsel appearing for the Corporate Debtor. In view of this position this petition is dismissed as withdrawn’’.

It is submitted that once it has been recorded by the Ld. Tribunal that the matter has been settled between the parties than obviously it was on the basis of the settlement dated 24.03.2023 as there was no other settlement. In support of his contention, he has relied upon a decision of this Court in the case of IDBI Trusteeship Services Limited Vs. Nirmal Lifestyle, Company Appeal (AT) (Ins.) No. 117 of 2023.

On the other hand, counsel for the respondent has vehemently argued that there is no error in the impugned order which may call for any interference by this Court because the order dated 18.04.2023 was not passed with reference to the settlement agreement dated 24.03.2024. In support of his submission, he has relied upon a decision of this Court rendered in the case of SRLK Enterprises LLP v. Jalan Transolutions India Limited in Company Appeal (AT) (Ins.) No. 294 of 2021 decided on 08.04.2021.

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

We have come across yet another case in which the respondent (Corporate Debtor) has shown his dishonesty. The Corporate Debtor/Respondent had agreed to bury the hatchet by way of settlement agreement dated 24.03.2023 and assured the appellant that he would pay the amount in question in 7 installments. Believing the Respondent, the appellant agreed to sign the settlement agreement and allowed him to pay the amount in seven installments but the 1^st Respondent only paid the 1^st installment and stopped the payment of rest of the installments. However, the appellant was vigilant at that time when he entered into agreement because he added a clause that in case of a breach of payment the appellant would be entitled to file the restoration application of the CP.

Since the payment was not made by the respondent, therefore, the appellant took recourse to clause 4 to file the application which has wrongly been dismissed by the Ld. Tribunal only on the ground that the order passed was not on the basis of the settlement agreement, though, the Ld. Tribunal in its order dated 08.04.2024 has categorically mentioned that the matter has been settled between the parties and settlement agreement was placed on record at that time.

Thus, in our considered opinion, the Ld. Tribunal has committed a patent error in dismissing the application of the appellant because if this procedure is allowed to be adopted then the unscrupulous Corporate Debtor like the respondent may keep on cheating the gullible operational creditors who would believe them that they would make their payment in installments and thus entered into the settlement. We strongly condemn the act and conduct of the respondent in this case because such type of cases are increasing day by day specially in the matter of operational creditors, where the corporate debtor like the respondent first enters into a settlement and then after paying one or two installments stop making the payment and when the application is filed for revival then the same is dismissed by the Tribunal on the hyper technical grounds. The judgment relied upon by the appellant is not applicable. Therefore, in the aforesaid discussion we allow this appeal and set aside the impugned order and restore the application filed under Section 9 by the appellant.

The respondent shall pay cost of Rs. 2 lakhs to the appellant by way of bank draft within a period of one month from the date of passing of this order. In case, the cost is not paid, the appellant shall be free to file an appropriate petition in accordance with law.