Adhunik Niryat Ispat Limited vs Truvolt Engineering Co Private Limited

IN THE MATTER OF: Adhunik Niryat Ispat Ltd. ...Appellant Versus Truvolt Engineering Company Pvt. Ltd. ...Respondent Present: For Appellant : Mr. Pradeep Aggarwal, Mr. Arjun Aggarwal, Mr. Bhaskar Aditya, Advocates For Respondent : Ms. Bina Gupta, Ms. Sheena Taqui, Mr. V.N. Jha, Ms. Akansha Saini, Mr. Dhvanit Chopra, Advocates.

ORDER

03.04.2023: Heard Mr. Pradeep Aggarwal, Ld. Counsel appearing on

behalf of the Appellant and Ms. Bina Gupta, Ld. Counsel appearing on behalf of

the Respondent.

2. The present appeal has been preferred against an order dated 24.05.2022,

passed by Ld. National Company Law Tribunal, Kolkata Bench-I, Kolkata in

Restoration Application (IB) No. 7/KB/2022 in CP (IB) No. 1751/KB/2019. The

Restoration Application was filed by the Appellant/Operational Creditor in a

proceeding i.e. CP (IB) No. 1751/2019. The restoration application was filed with

a prayer to restore CP No. 1751/2019 which was dismissed on 29.10.2021,

primarily on the ground that settlement outside the court had already taken

place.

3. Short fact of the case is that the Appellant herein as Operational Creditor

filed an application under Section 9 of the Insolvency and Bankruptcy Code,

2016 (herein after referred to as 'Code') against Respondent/Corporate Debtor

claiming therein that Corporate Debtor had defaulted payment of debt to an

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amount of Rs. 1,14,88,897/- i.e. Principal amount of Rs. 98,91,729/- and

interest thereof i.e. Rs. 15,97,168/-. The said application was filed in September,

2019. While petition under Section 9 of the Code was pending and it was not

even admitted and CIRP was not initiated, it appears that both the parties had

settled the dispute outside the court and settlement agreement was entered in

between the parties vide agreement dated 16.08.2021. The copy of agreement

had been brought on record which is from page 109 to 112 of the present 'Memo

of Appeal'.

4. At this juncture, it would be appropriate to quote paragraph 3 of the

Settlement Agreement as follows:

"3. M/s TRUVOLT has offered to pay the total agreed outstanding amount of Rs. 98,91,729/- ( Rupees Ninety Eight Lac Ninety One Thousand Seven Hundred and Twenty Nine) Only - in 10 (Ten) Monthly instalments in following manner which ADHUNIK has agreed to and accepted the offered Payment plan by advance cheques as per following:

Dates of Payment Monthly Instalment Axis Bank Amount Payable Cheque No. and Date details 20.08.2021 987180 189377 dated 20.08.2021 20.09.2021 987172 189378 dated 20.09.2021 20.10.2021 987172 189379 dated 20.10.2021 20.11.2021 987172 189380 dated 20.11.2021 20.12.2021 987172 189381 dated 20.12.2021 20.01.2022 987172 189382 dated 20.01.2022 20.02.2022 987172 189383 dated 20.02.2022

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20.03.2022 987172 189384 dated 20.03.2022 20.04.2022 987172 189385 dated 20.04.2022 20.05.2022 1007173 189388 dated 20.05.2022 Total Rs. 98,97,729.00/-

5. In the agreement clause 4 & 5 also explains that in case of non- adherence

to the agreement, liberty to revive the Insolvency application was there.

Paragraph 4 & 5 of the Agreement is quoted herein below:

"4. It is understood by TRUVOLT that the above referred cheques shall be handed over to ADHUNIK at the time of signing of this MOU. It is further understood and confirmed by TRUVOLT that dishonour of any one cheque shall result in failure /collapse of this MOU and the insolvency proceeding shall be revived with additional costs and levies on account of additional litigation cost and other costs.

5. ADHUNIK agrees to withdraw the Matter on the next date or on any day thereafter as the business of the honourable Tribunal may permit with liberty to revive the matter in case of default."

6. It is case of the Appellant that since even after agreement it was not

honoured the appellant filed an application before the NCLT for restoration of

the Petition which was filed in the month of September, 2019 under Section 9 of

the Code, however Ld. NCLT by the impugned order has rejected the same. The

order dated 24.05.2022, since it is short is quoted herein below:

"1. This Court convened via hybrid mode.

2. This is a Restoration Petition filed by Mr. Rakesh Kumar Singhal, Managing Director of Adhunik Niryat Ispat Limited ('Operational Creditor') against Truvolt Engineering Company Private Limited ('Corporate Debtor') on its failure to adhere to the Settlement Agreement dated 16 August, 2021, entered between the parties

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3. The Operational Creditor had filed a petition under section 9 of the Insolvency and Bankruptcy Code, 2016 ('Code') against the Corporate Debtor for a default of Rs.1,14,88,897/- (Rupees One Crore Fourteen Lakh Eighty Eight Thousand Eight Hundred Ninety Seven only) [Principal

- Rs. 98,91,729/- and Interest- Rs. 15,97,168/-]. The Interest was calculated @ 18% per annum as on 25 August, 2019.

4. However, when the matter was listed for admission, the parties entered into a settlement agreement dated 16 August, 2021. As per the terms of settlement, the Corporate Debtor had agreed to pay the principal amount i.e., Rs.98,91,729/- (Rupees Ninety Eight Lakh Ninety One Thousand Seven Hundred Twenty Nine only) in ten instalments. It was also agreed between the parties that the Operational Creditor would withdraw the petition under Section 9 filed before this Adjudicating Authority.

5. Thereafter, this Adjudicating Authority vide its order dated 29 October, 2021 dismissed the petition as withdrawn.

6. Submissions by the Ld. Counsel appearing on behalf of the Operational Creditor

6.1 The Corporate Debtor has failed to adhere to the agreed terms of agreement between the parties and defaulted in payments of some of the instalments. The Corporate Debtor till 31 December, 2021 has paid only five instalments. On 18 January, 2022 the Corporate Debtor issued a notice by email to the Operational Creditor stating the allegations made by the Operational Creditor as frivolous and false.

6.2 In pursuance of such notice by the Corporate Debtor, the Operational Creditor vide its letter dated 20 January, 2022 refuted the allegations raised and also requested the Corporate debtor to honor its commitment. Subsequently, a cheque dated 20 January, 2022 against the sixth instalment was issued by the Corporate Debtor.

6.3 However, after presentation the said cheque was returned back to the Operational Creditor with an

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endorsement as 'payment stopped on 05 February, 2022. This act of the Corporate Debtor clearly reflects that they chose not to honor their commitment or the mutual settlement arrived between the parties.

Orders

7. We have heard the Ld. Counsel appearing on behalf of the Operational Creditor and perused the record.

8. It is pertinent to mention that the as per the Company Petition the default was of Rs.1,14,88,897/- (Rupees One Crore Fourteen Lakh Eighty Eight Thousand Eight Hundred Ninety Seven only) but as per the settlement agreement between the parties the Corporate Debtor was to pay the principal amount of Rs.98,91,729/- (Rupees Ninety Eight Lakh Ninety One Thousand Seven Hundred Twenty Nine only) in ten installments. Further, upon perusal of the record at page 26 of the Restoration Application it is apparent that the Corporate Debtor has paid the first five instalments i.e., a sum of Rs. 49,35,868/- (Rupees Forty Nine Lakh Thirty Five Thousand Eight Hundred Sixty Eight only).

9. Further, in order dated 29 October, 2021 by this Adjudicating Authority no liberty was granted to the Operational Creditor on the revival of the Petition. However, be that as it may, even if the Operational Creditor is given a chance to revive or restore the Company Petition in the event of default, by not adhering to the terms of settlement agreement by the Corporate Debtor, then also it would not fulfil the threshold limit of Rupees One Crore because five out of ten installments (i.e., a sum of Rs. 49,35,868/-) has been paid by the Corporate Debtor.

10. Hence, the Restoration Application being REST. A. (IB) No.7/KB/2022 is dismissed as not maintainable. This is in terms of the Judgment dated 06 May, 2022 by the Hon'ble NCLAT in Comp. App. (AT) (Ins.) No. 498 of 2022 in the matter of Prafulla Purushottamrao Gadge v.

Narayan Mangal & Anr. The applicant is, however, at liberty to pursue other available means under the law for recovery.

11. A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities".

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7. Mr. Aggarwal, Ld. Counsel for the Appellant assailing the impugned order

has firstly argued that once the Respondent had breach with the agreement the

appellant was entitled to approach the NCLT with a request to revive its case

which was filed under Section 9 of the Code. He submits that virtually

disobedience to the agreement amounts to misleading the party as well as court

also and in such situation Ld. NCLT was required to restore the application.

8. Mr. Aggarwal, Ld. Counsel for the Appellant has further argued that the

second ground for rejection of restoration petition was noticed by the Ld. NCLT

that on date of restoration the application was not meeting the threshold of the

limit. Assailing the order he submits that the appellant had made a prayer for

revival of his application which was filed at the time where threshold limit was

only Rs. One Lakh. As such the Ld. NCLT has erred in rejecting the application

considering the lack of threshold limit.

9. On behalf of the Appellant, number of Judgments have been cited to

persuade the court that in a case of obtaining an order by committing fraud the

said order is termed as nullity and as such the Ld. NCLT had committed serious

error in rejecting the application wherein a prayer was made for restoration of

the main application.

10. Ms. Bina Gupta, Ld. Counsel for the Respondent submits that there is no

error in the impugned order. She has firstly drawn our attention to order dated

29.10.2021 i.e. the order whereby the application filed under Section 9 was

dismissed even before its admission. She by way of referring to paragraph 2 of

the order submits that the application was dismissed by the NCLT however, in

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the last paragraph it was indicated as if it was dismissed as settlement out of

court had arrived. She further submits that while accepting to the prayer for

dismissal of the application on the ground of outside settlement the Ld. NCLT

in its order dated 29.10.2021, had made it clear regarding non-granting of any

liberty for revival. She submits that had the appellant was aggrieved with the

order dated 29.10.2021, the appellant was having remedy to assail the said

order. However, instead of assailing the said order the appellant admitted to the

condition imposed by the Ld. NCLT.

11. She submits that once the appellant before the withdrawal of the

application filed before the NCLT had agreed for not approaching for revival at

subsequent stage there was no reason for allowing the appellant to maintain the

petition for restoration. She submits that by the impugned order the Ld. NCLT

has committed no error warranting any interference.

12. Besides herein Ld. Counsel for the parties we have perused the materials

available on record. Before proceeding it would be appropriate to re produce the

order dated 29.10.2021 whereby the application filed under Section 9 of the Code

was dismissed by the NCLT, of course, noting the fact regarding outside

settlement which is as follows:

"1. Ld. Counsel for the petitioner is represented by Ms. Anshumala Bansal & Mr. Vijay Nath Jha, Ld. Counsel for Respondent. Both parties state that the matter has been settled out of the court.

2. It was mentioned that the Settlement Agreement has been arrived at between the parties and part payment of the amount has been paid by the Corporate Debtor. However, some more instalments are due and payable. At the request for the petitioner the application stands dismissed.

CA (AT) (Ins) No. 933 of 2022 8 3. No liberty is granted to the petitioner on the revival of the CP (IB)/1751(KB) 2019. Hence, CP (IB)/1751(KB) 2019 dismissed as settled out of court".

13. On perusal of the aforesaid order it is very much clear that the right for

revival of main application was forfeited by the Ld. NCLT. Once with open mind

the appellant has agreed on the terms and thereafter he preferred to keep his

application dismissed, there was no reason to again approach the NCLT for filing

an application for restoration. Of course, Ld. NCLT while dismissing the

restoration petition had examine the question of threshold, we are of the opinion

that those facts are not required to be taken note of at the moment particularly

in view of the fact that restoration application has also been dismissed on the

ground that no liberty was granted for revival.

14. So far as submission made by Mr. Aggarwal, Ld. Counsel for the Appellant

that by committing fraud the Respondent had obtain the order of dismissal on

the ground of settlement and conditions of the agreement was not fulfilled,

subsequent act of the Respondent amounts to committing fraud and as such it

was necessary to restore the earlier proceeding, we are of the opinion that such

facts are not required to be examined by us in view of the fact that whatever

allegations are being advanced by the Ld. Counsel for the Appellant is pertaining

to a proceeding which was pending before the NCLT. In such situation we are

precluded to examine such issue.

15. In view of the facts and circumstances, particularly in the fact that while

dismissing the application on the ground of settlement, Ld. NCLT by its

implication had restrained the appellant for revival of the application, there is no

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reason to entertain the present application which has been filed against the

impugned order. The Appeal stands dismissed.

[Justice Rakesh Kumar] Member (Judicial)

[Dr. Alok Srivasatava] Member (Technical)

sr/gc

CA (AT) (Ins) No. 933 of 2022