Archangles Distributors Private ... vs Ideal Financing Corporation Limited

IN THE MATTER OF: Archangles Distributors Pvt. Ltd. ...Appellant

Versus

Ideal Financing Corporation Ltd. ...Respondent Present: For Appellant: Mr. Joy Saha, Sr. Advocate, Mr. Kaushik Banerjee, Ms. Kriti Gera, Mr. Sourav Roy, Mr. Pranav Bafna, Mr. Anshu Deshpande, Mr. Shayak Chakraborty, Advocates. For Respondent: Mr. Shaunak Mitra, Mr. Saubhik Chowdhury, Mr. Dripto Majumdar, Ms. Priyata Chakraborty, Advocates.

ORDER

(Hybrid Mode)

Per: Justice Rakesh Kumar Jain (Oral)

19.12.2024: This appeal is directed against the order dated

03.04.2024 by which RST.A (IBC)/16(KB) 2023 filed in C.P. (IB) No.

598/KB/2019 by the appellant for revival of the main Company Petition

i.e. C.P. (IB) No. 598/KB/2019 has been dismissed.

2. The brief facts of this case are that the appellant filed a petition

under Section 7 of the Insolvency & Bankruptcy Code, 2016 (in short

'Code') read with Rule 4 of the Insolvency & Bankruptcy (application to

the Adjudicating Authority) Rules, 2016 against the Corporate Debtor

namely, 'Ideal Real Estates Private Limited' for the resolution of an

Cont'd..../ -2-

amount of Rs.2,31,60,579/- before the National Company Law Tribunal,

Kolkata Bench.

3. During the pendency of the application the parties entered into an

agreement on 07.06.2022 for the settlement of their dispute in which

both the parties had agreed as follows:

"3. It is hereby recorded, declared and confirmed that both

parties agree and accept that the Second Party shall make

payment amount of Rs. 2,31,60,579.00 (Rupees Two Crore

Thirty One Lakhs Sixty Thousand Five Hundred Seventy Nine

Only) (hereinafter referred to as the 'Settlement Amount') to the

First Party in 27 (Twenty Seven) instalments. It is also agreed

between the parties that no payment other than above is due

whatsoever and cannot and shall not be claimed by the First

Party.

4. The First Party confirm that upon payment of the above said

settlement amount, the First Party shall have no claim and/or

demand in any manner whatsoever in respect of the loan given

by the First Party to the second party and as claimed by the

First Party.

5. The Parties to this agreement agree that the Second Party

will transfer the Instalment amount to the First Party by way of

NEFT/RTGS. The details of payment schedule is as follows: -

Company Appeal (AT) (Ins) No. 1143 of 2024 -3-

Date of payment Amount

10.08.2022 2,50,000 20.09.2022 2,50,000 10.10.2022 2,50,000 20.11.2022 2,50,000 10.12.2022 2,50,000 20.01.2023 2,50,000 10.02.2023 2,50,000 20.03.2023 2,50,000 10.04.2023 2,50,000 20.05.2023 2,50,000 10.06.2023 11,72,981 30.06.2023 12,50,000 20.07.2023 12,50,000 10.08.2023 12,50,000 30.08.2023 12,50,000 20.09.2023 12,50,000 10.10.2023 12,48,078 30.10.2023 12,50,000 20.11.2023 12,50,000 10.12.2023 12,50,000 30.12.2023 12,50,000 20.01.2024 12,37,483 10.02.2024 12,50,000 28.02.2024 12,50,000 20.03.2024 12,50,000 10.04.2024 12,56,563 30.04.2024 7,45,474 Total 2,31,60,579

6. The Second Party shall undertake to strictly ensure that all

the instalments are paid on or before their respective due date

Company Appeal (AT) (Ins) No. 1143 of 2024 -4-

as per above schedule and further undertake it shall not seek

any delay, re-schedulement, remission on any ground

whatsoever.

7. The parties to this agreement agree that in case of default of

payment by the Second Party in above mentioned payment

schedule an interest of 18% of the default amount will be

payable immediately to the First Party.

8. The parties to this agreement agree that in case of more than

one instance of default by the Second Party in above mentioned

payment schedule full amount will stand payable immediately.

9. In default of the performance of the agreed terms of

settlement by the second party the first party will be free to

apply to the National Company Law Tribunal, Kolkata Bench,

Kolkata to restore the Company Petition being C.P.(IB) No.

598/KB/2019 and/or instigate any further legal action as per

the laws of the land over and above the steps in regards to this

default.

13. The parties to this agreement agree that upon execution of

this agreement the First Party will forthwith withdraw the

instant application being C.P.(I.B.) No. 598/KB/2019 pending

before the Hon'ble National Company Law Tribunal, Kolkata

Bench, Kolkata.""

Company Appeal (AT) (Ins) No. 1143 of 2024 -5-

4. When the case was listed for hearing before the Tribunal on

08.06.2022, counsel for both the parties were present and they jointly

submitted that the total amount of Rs.2,31,60,579/- has been agreed to

be paid in instalments. Meaning thereby the Corporate Debtor accepted

the debt and since it was not in a position to pay the amount in lump

sum, therefore, agreed to pay the same in instalments to the Financial

Creditor/ Appellant who accepted the same.

5. The said settlement agreement dated 07.06.2022 was also

produced before the court which was taken on record by the Tribunal

and thereafter in view of the statement made that the respondent shall

pay the amount of Rs.2,31,60,579/- in instalments, the Financial

Creditor having been satisfied with the said statement, believing the

Corporate Debtor that he will honour his words, allowed the withdrawal

of petition and as such the following order was passed:

"ORDER

1. Ld. Counsel on both sides present.

2. Ld. Counsel appearing for the parties jointly submit that

the total amount of Rs.2,31,60,579/-has been agreed to be

paid in instalments. Let the settlement agreement be taken on

record. In view of the above statements, Ld. Counsel

appearing for the Financial Creditor seeks permission to

Company Appeal (AT) (Ins) No. 1143 of 2024 -6-

withdraw this petition. Permission is granted. C.P. is

disposed of as withdrawn.

3. File be consigned to the records."

6. The case set up by the appellant is that there was default in the

payment of the instalment by the respondent, therefore, the appellant

filed RST.A (IBC)/16(KB) 2023 before the Tribunal in which the following

prayers were made:

"a) Company Petition Number being C.P. (I.B) No.

598/KB/2019 be revived and restored to its original file

and number against the Corporate Debtor in view of the

settlement having being failed;

b) Adjudicate and dispose off the pending C.P. (I.B) No.

598/KB/2019 against the Corporate Debtor."

7. In the application for restoration notice was issued and reply was

filed by the respondent. Ld. Tribunal dismissed the application on the

ground that the main petition i.e. C.P. (IB) No. 598/KB/2019 was

withdrawn without obtaining liberty to get it revived in case of any

breach. The relevant part of the impugned order read as under:

"6. In as much as no liberty was sought for on 08.06.2022

and the CP(IB)/598(KB)2019 was dismissed as withdrawn

without liberty to get it revived, in our considered opinion, the

Company Appeal (AT) (Ins) No. 1143 of 2024 -7-

prayer for restoration of CP(IB)/598(KB)2019 is not

maintainable and hence not entertainable.

The CP(IB)/598(KB)2019 was dismissed as withdrawn

recording settlement between the parties. No liberty was

granted by this Tribunal to revive the CP(IB)/598(KB)2019 in

case the Corporate Debtor fails to acknowledge the terms of

settlement or fails to pay in terms of the settlement."

8. Aggrieved against the aforesaid impugned order, the present appeal

has been filed.

9. Counsel appearing on behalf of the appellant has vehemently

argued that the Tribunal has committed a patent error of law in

dismissing the application on the pretext that at the time when the main

petition was withdrawn, in terms of the order dated 08.06.2022, the

appellant did not seek liberty to file application for its revival. Ld. Senior

counsel appearing on behalf of the appellant has submitted that in the

settlement agreement, taken on record by the Tribunal, there is a

condition that in case of breach by the Corporate Debtor of the terms

and conditions of the settlement, the appellant shall have an automatic

right to revive the main petition. In this regard, he has relied upon two

decisions of this Court in the case of "Pooja Finlease Ltd. v. Auto Needs

(India) Pvt. Ltd. & Anr." in Company Appeal (AT) (Ins.) No. 103 of 2022

Company Appeal (AT) (Ins) No. 1143 of 2024 -8-

decided on 18.07.2022 and IDBI Trausteeship Services Ltd. Vs. Nirmal

Lifestyle Ltd. [2023 SCC Online NCLAT 225].

10. On the other hand, counsel for the respondent, while vehemently

opposing the present appeal, has submitted that there is no error in the

impugned order which may call for any interference by this court. He has

submitted that though the settlement agreement was taken on record

but there was no application filed by the appellant with a prayer that in

case of breach of any part of the settlement much less the payment of

amount as agreed, the appellant shall be at liberty to seek revival nor

any such liberty was granted by the Tribunal. In support of his

submission, he has relied upon a decision of this Court in the case of

"SRLK Enterprises LLP v. JALAN Transolutions (India) Ltd. in Company

Appeal (AT) (Ins) No. 294 of 2021 decided on 08.04.2021. He has also

relied upon a division bench Judgment of the Hon'ble Delhi High Court

in the case of "Mohd. Amin v. Mohd. Iqbal [2009 SCC Online Del 861:

(2009) 158 DLT 531].

11. We have heard counsel for the parties and perused the record with

their able assistance.

12. Filing of the petition by appellant under Section 7 and the disposal of

the said petition by Tribunal on 08.06.2022 is not in dispute and that there

is a settlement agreement between the parties dated 07.06.2022. It is also

not in dispute that the appellant, but for the settlement agreement, would

Company Appeal (AT) (Ins) No. 1143 of 2024 -9-

not have withdrawn the application filed under Section 7. It is also a fact

that the settlement agreement was taken on record. It is also not in dispute

that at the time when the settlement agreement was taken on record there

was no objection raised by the respondent that the settlement agreement

cannot be taken on record in court rather the appellant should have filed an

application in this regard. The only thing missing is that the Tribunal, while

taking on record the settlement agreement and recording the statement that

the parties have settled their dispute at Rs.2,31,60,579/- and respondent

has agreed to be pay did not record that the appellant can get the main

case revived in case respondent do not honour its commitment in terms

of settlement agreement.

13. This is not the first case before this court in which such type of

situation has arisen where a dishonest Corporate Debtor has raised all

sorts of pleas to seek dismissal of the application filed by the appellant.

In the case of Pooja Finlease Ltd. v. Auto Needs (India) Pvt. Ltd. & Anr.

(supra) the same situation had arisen and this court had allowed the

appeal and set aside the impugned order. The relevant paragraphs of the

said order are as under:

"4. The case of the Appellant is that there is default

committed by the Corporate Debtor, consequently, he filed

application seeking revival of the Corporate Insolvency

Resolution Process is terms of Clause 8 of the Consent Terms,

Company Appeal (AT) (Ins) No. 1143 of 2024 -10-

which application has been rejected by the Adjudicating

Authority. Learned counsel for the Appellant submits that

when Clause 8 of the Consent Terms contemplate revival of

CIRP in the event of any default of the terms of the Consent

Terms on the part of the Corporate Debtor, the Adjudicating

Authority ought to have revived the Section 7 petition and

Adjudicating Authority has committed error in rejecting the

revival application.

5. Learned counsel for the Respondent submits that there was

no liberty granted in the order dated 05.02.2020 to revive

CIRP, hence, the Adjudicating Authority has rightly rejected

the application for revival. He has also referred to judgment of

this Tribunal in 'Krishna Garg and Anr. vs. Pioneer

Fabricators Pvt. Ltd.' which has also been relied by the

Adjudicating Authority in Para 7 of the impugned order.

6. We have considered submissions of learned counsel for the

parties and perused the record.

7. The Consent Terms in Clause 8 as has been extracted

above clearly entitle the Financial Creditor to revive the

Section 7 petition in event any default of the terms of the

Consent Terms. Further, the order dated 05.02.2020 cannot

be read as an order by which Consent Terms has not been

taken on record when by the said order application filed

Company Appeal (AT) (Ins) No. 1143 of 2024 -11-

alongwith the consent terms under Rule 11 of NCLT rules,

2016 was taken on record and was allowed. When the

application was allowed in terms of the consent terms, Clause

8 itself shall be treated to be part of the order which shall

entitle the Financial Creditor to revive the petition in the event

of any default.

8. Judgment of this Tribunal which has been relied by the

Respondent in 'Krishna Garg and Anr. vs. Pioneer Fabricators

Pvt. Ltd.' was a case where neither settlement terms were

filed nor the same were brought on the record. The facts in the

present case are distinguishable from the above case as

Consent Terms were filed and also were taken on record by

the Adjudicating Authority. When the Adjudicating Authority

allowed the application filed, the Consent Terms were also

taken record and the Financial Creditor was fully entitled to

seek revival of the Section 7 petition in event of default of

consent terms.

9. We, thus, allow this Appeal and set aside the impugned

order dated 10.11.2021 and revive the Section 7 petition i.e.

C.P. (IB) No. 2340 of 2019 which may be heard by the

Adjudicating Authority in accordance with law."

Company Appeal (AT) (Ins) No. 1143 of 2024 -12-

14. Similarly, in the case of IDBI Trausteeship Services Ltd. Vs. Nirmal

Lifestyle Ltd. (supra) this court had noticed that separate consent terms

were executed between the parties and the said consent terms were

brought on record and while allowing the appeal, this Court passed the

order as follows:

"17. The adjudicating Authority while rejecting the revival

application as noted above observed that the settlement was

arrived in between the parties outside the Tribunal. In the

present case, the Settlement was arrived and submitted

before the Adjudicating Authority which was noticed in the

Order dated 09.02.2022 hence the Judgment of SRLK

Enterprises LLP is clearly distinguishable from the facts of the

present case. In paragraph 6 of the Judgment, following has

been observed:

"6. Going through the Impugned Order dated 26th

February, 2021 which seeks to recall the Order dated

09th May, 2019 which also we have seen, we find it

difficult to take a different view from the Adjudicating

Authority. There is difference between withdrawal

simplicitor making statement that parties have settled.

It is different when bringing the settlement on record,

and making it a part of the Order of withdrawal liberty

is taken and brought on record to restore the

Company Appeal (AT) (Ins) No. 1143 of 2024 -13-

proceedings in case of default. IBC is not a recovery

proceeding where because the money or part of it has

not come, the party may repeatedly come to the Court.

Adjudicating Authority has rightly observed that no

liberty to revive was there and so declined to interfere.

The Appellant would be at liberty to pursue other

remedies in law"

18. What has been observed in paragraph 6 itself makes a

clear distinction between withdrawal simplicitor making

statement that parties have settled and bringing on record

settlement. This Tribunal itself has recognized two separate

categories. Present case falls in the category where settlement

has been brought on record. Thus, Judgment of this Tribunal

in SRLK Enterprises LLP does not help the Respondent.

19. We thus in the facts of the present case are of the view

that. Adjudicating Authority committed error in rejecting the

revival application 3196 of 2022 when the consent term itself

contemplates a clause for revival in event of default and

default having been committed by the Corporate Debtor,

rejection of revival is to deny the Financial Creditor rightful

remedy. Nan-mention of specific liberty in the Order is

inconsequential in view of the clear terms in the settlement

which was the basis of withdrawal of Company Petition.

Company Appeal (AT) (Ins) No. 1143 of 2024 -14-

20. We thus are of the view that the Adjudicating Authority

committed error in rejecting I.A. No. 3196 of 2022. Sufficient

cause has been made out for allowing this Appeal and setting

aside the Order dated 21.12.2022. Consequently, I.A. No.

3196 of 2022 is allowed and the C.P. (IB) No. 4412(MB)/2019

is revived before the Adjudicating Authority to proceed in

accordance with law."

15. There is a another case of this Court though cited by counsel for

the respondent i.e. "Desh Bhushan Jain, Erstwhile Director of Angel

Promoters Pvt. Ltd. v. Abhay Kumar, IRP of Angel Promoters Pvt. Ltd. &

Ors." in Company Appeal (AT) (Ins.) No.124 of 2024 decided on

20.05.2024 in which the issue was that the application under Section 7

was withdrawn on the ground of settlement between the parties and then

a fresh application was filed on the basis of settlement amount agreed in

the settlement agreement. The objection was raised that the application

under Section 7 cannot be filed on the basis of the amount settled in the

settlement agreement. In this regard, this Court has observed as under:

"19. We are not at all impressed with the argument of the

Appellant which has been raised with the support of the

decision in the case of Raj Singh Gehlot (Supra) that the

application under Section 7 cannot be filed on the basis of the

settlement because the said judgment is not applicable. In the

Company Appeal (AT) (Ins) No. 1143 of 2024 -15-

case of Raj Singh Gehlot (Supra) the petition under Section 7

was filed on the basis I of settlement agreement dated

07.04.2017 whereas in the present case, the first petition was

not filed on the basis of settlement agreement rather it was filed

on the basis of the debt due and default committed by the CD.

The debt and default was admitted by the Corporate Debtor

and hence, approached the Financial Creditors for entering into

a settlement to make the payment in instalments through post-

dated cheques both in regard to the principal as well as interest

component. The Financial Creditors believed the Corporate

Debtor and entered into the agreement and further on the

asking of the CD filed a joint application in the first petition not

only to bring on record the settlement but also to withdraw the

first petition being sanguine of the fact that CD would keep its

words and shall honour all the post-dated cheques in time but

they were not aware of the intention of the CD as it had not

made payment beyond Rs. 1,10,00,000 and were still in the

arrears of more than Rs. 3 Cr. The Financial Creditor then filed

the second petition of the reduced debt about which the default

is not in question, therefore, the Adjudicating Authority has

rightly admitted the application.

20. At this stage, we would like to observe that if this kind of

tricks, played by the CD with the FC are allowed and the plea

Company Appeal (AT) (Ins) No. 1143 of 2024 -16-

raised by the Appellant is accepted that the second petition on

the ground of settlement agreement is not maintainable then it

would give a premium to the unscrupulous CD to get the petition

filed under Section 7 withdrawn on the basis of the settlement

which was not to be ultimately followed., Definitely, this kind of

attitude and act on the part of the CD is not appreciated.

21. In so far as the issue raised by the Appellant about the

amount of Rs. 87 Lac. which has been paid out of the court

during the pendency of this appeal to be adjusted in the amount

which is stated to be due is concerned, suffice it to say that the

Appellant has not brought on record any writing/ agreement in

this regard that the said amount has been paid towards the

adjustment of the principal amount otherwise the Financial

Creditor is entitled to adjust the amount towards the payment

of interest component at the first instance.

22. Thus, in view of the aforesaid facts and circumstances, we

do not find any merit in the present appeal and the same is

hereby dismissed. The amount deposited by the Appellant in

this court by way of FDR is ordered to be returned to the

Appellant within a period of one month from the date of passing

of this order by the Registrar after due verification."

Company Appeal (AT) (Ins) No. 1143 of 2024 -17-

16. The argument of the respondent is that in both the cases, namely,

Pooja Finlease Ltd. v. Auto Needs (India) Pvt. Ltd. & Anr. (supra) and

IDBI Trausteeship Services Ltd. Vs. Nirmal Lifestyle Ltd. (supra), an

application was filed before the Court to bring on record the settlement

deed which is conspicuous by its absence in the present case. Therefore,

the said agreement cannot be looked into.

17. In our considered opinion the argument raised is totally

unwarranted because the respondent has not denied that there was no

settlement between the parties. The respondent did not raise any

objection before the Tribunal when the settlement was produced before

the Tribunal and taken on record by the Tribunal, that it should have

been brought on record through a proper application. Though this

objection is raised before this court but it is for the sake of objection

otherwise there is no merit in this objection. In our considered opinion,

the respondent is a dis-honest person who has entered into settlement

with the appellant at that time when Section 7 application was filed

because he knew that if Section 7 application is pushed into CIRP then

he would face numerous other Financial Creditor once the CoC is

constituted. In order to avoid that situation to happen, he persuaded and

misled the appellant that he will make the entire payment in instalments.

It was the magnanimity of the appellant to have entered into the

Company Appeal (AT) (Ins) No. 1143 of 2024 -18-

settlement with such a dis-honest person at that time otherwise had it

been aware about his intentions that he is not likely to honour his

commitment, it would not have entered into settlement to face this kind

of unnecessary litigation to spend huge money.

18. The Judgment relied upon by the respondent in the case of SRLK

Enterprises LLP v. JALAN Transolutions (India) Ltd. (supra) is also of no

consequence because this Judgment has already been discussed in the

earlier decision of this court in the case of IDBI Trausteeship Services

Ltd. Vs. Nirmal Lifestyle Ltd. (supra).

19. The Judgment of Hon'ble Delhi High Court 'Mohd. Amin v. Mohd.

Iqbal' (supra), relied upon by the Respondent is also not applicable to the

facts of this case because that was a case regarding interpretation of

Order 23 Rule 3 of the CPC and in that case the Hon'ble Delhi High

Court has held that:

"We find that the basis of the compromise application is the

Agreement dated 25.2.1991. The compromise, thus, envisages

in Clause 11 that the Agreement between the parties that the

suit would be withdrawn. Thus, the parties were conscious of

the fact that having entered into the compromise, no decree

was to be prayed before the Court, but the suit was to be

withdrawn. The application filed by the parties, though EFA

(OS) No. 15 of 2008 Page No. 8 of 10 under Order 23 Rule 3 of

Company Appeal (AT) (Ins) No. 1143 of 2024 -19- the CPC, prayed for recording of the compromise between the

parties and disposal of the suit. The object of the parties was

clear that they wanted to place on record the compromise

arrived at between the parties, but did not seek to obtain a

decree in terms of the compromise, which would be executable,

It is in these circumstances that the suit has been dismissed

as withdrawn, though the parties were to be bound by the

terms of the compromise."

20. Thus, in view of the aforesaid facts and circumstances, we find merit

in present appeal, therefore, the appeal is hereby allowed and the impugned

order is set aside. Before parting with this order, we may record our

disappointment and anguish in the manner in which these type of cases are

pouring in. The respondent in this case had mislead the appellant to enter

into a settlement, to which he agreed, probably believing the respondent

that he would honour his commitments and pay the amount as agreed in

instalments. But at that time it was totally unaware of the intentions of

the respondent that he will not, ultimately honour his commitment and

force the appellant to pursue this kind of litigation.

21. In such circumstances, we are of the considered opinion that the

time has come when this court should strictly deal with this kind of

unscrupulous and dis-honest Corporate Debtor, by imposing heavy cost,

for the unnecessary litigation in which the appellant has been pushed by

Company Appeal (AT) (Ins) No. 1143 of 2024 -20-

the respondent/Corporate Debtor, therefore, we impose a cost of

Rs. 2 lakhs which shall be paid by the respondent by way of Bank Draft

to the appellant within one month from the date of passing of this order.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Indevar Pandey] Member (Technical)

sa/rr

Company Appeal (AT) (Ins) No. 1143 of 2024