Chikali Nagaraju (Suspended Director ... vs Mstc Limited (Government Of India ...

Comp. App. (AT) (Ins) No. 878 of 2025 & I.A. No. 4007, 4374 of 2025

IN THE MATTER OF:

Chikali Nagaraju, (Suspended Director of Balasore Alloys Ltd.) ...Appellant(s)

Versus

MSTC Ltd. (Government of India Enterprise) & Anr. ...Respondent(s)

Present: For Appellant : Mr. P. Chidambaram, Sr. Adv., Mr. P. Nagesh, Sr. Adv. alongwith Naveen Kumar, Geetika Sharma, Ujjaval Kumar Rai, Utkarsh Chandra, Sudhanshu Pathak, Rishabh Chaudhary, Mahesh Aggarwal, Uday Aditya Jaitley, Avnish Kumar, Mr. Rishi Agarwal, Adv. Mr. Anand Kumar Shrivastava, Rishabh Dua, Mudassir, Amritesh, Mohanty, Ayan Rai, Adv. for Intervenor/Tata Power For Respondents : Mr. Abhijeet Sinha, Sr. Adv. a/w Pallavi Pratap, Saikat Sarkar, Yashvi Aswani, Adv. for MSTC/R1 Mr. Naman Tandon, IRP Mr. Sandeep Bajaj, Aakanksha Nehra, Devansh Jain, Adv. for Intervenor I.A No. 4374 of 2025

ORDER

(Hybrid Mode)

Per: Justice Rakesh Kumar Jain (Oral)

25.08.2025: This appeal is filed by the suspended director of the CD,

namely, Balasore Alloys Ltd. against the order dated 12.06.2025 by which an

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

2016 (in short 'Code') r/w Rule 6 of the Insolvency and Bankruptcy

(Application to Adjudicating Authority) Rules, 2016 on 07.08.2022 by MSTC

Ltd. / Operational Creditor for the resolution of an amount of Rs.

18,69,06,540/- as on 31.03.2022 which included the principal amount of Rs.

13,15,90,266/-, interest of Rs. 5,19,83,780/- and warehouse custodian

Comp. App. (AT) (Ins) No. 878 of 2025 2

charges to the tune of Rs. 33,32,494/- with the date of default as mentioned

in part IV of the application as 31.03.2022, has been admitted and Mr. Sikhar

Chand Jain was appointed as the Interim Resolution Professional.

2. The appeal was listed for preliminary hearing on 18.06.2025. On the

said date, the following order was passed by this Court :-

"18.06.2025: Heard Ld. Sr. Counsel for the Appellant, Ld. Counsel appearing for the IRP and Mr. Abhijeet Sinha, Ld. Sr. Counsel appearing for MSTC Ltd. Ld. Counsel appearing for the appellant submits that the dispute between the parties has been settled and in this regard a settlement deed has also been executed. A copy of the same has been placed for the perusal of this bench. Ld. Counsel for the appellant submits that they would also like to bring on record the settlement deed in due course with an affidavit. The terms of the settlement have not been disputed by Ld. Counsel appearing for the Respondents. Having regard to the request made by the Ld. Counsel for the appellant, let this appeal be listed on 01.07.2025 under the same caption. In the meantime, the operation of the impugned order shall remain stayed."

3. During the pendency of the application i.e. CP (IB) No. 36/CB/2022,

the CD paid the principal amount to the Operational Creditor/MSTC.

However, before the matter could have been finally settled between the CD

and OC/MSTC, the application under Section 9 filed by the OC/MSTC was

admitted on 12.06.2025.

4. After the appointment of the IRP on 12.06.2025, he made the

publication in terms of Section 13 and 15 of the Code on 15.06.2025

prescribing the last date for submission of claims by the creditors as

25.06.2025. However, before the appeal could have been filed and the order

of stay could have been granted by this Court on 18.06.2025, the interest was

also paid on 16.06.2025 by the CD to the OC/ MSTC.

Comp. App. (AT) (Ins) No. 878 of 2025 3

5. According to the Appellant, all the dues of the OC/MSTC were thus

paid, however, during the pendency of this appeal, one claim was filed on form

D by the OC, namely, Guru Nanak Road Lines on 15.07.2025. It is also

submitted that during the pendency of this appeal, the CD also entered into

a settlement with another OC, namely, Tata Power Northern Odisha

Distribution Ltd. on 02.08.2025. But there was one more claim filed on

16.07.2025 by one Rajadhiraj Tirupati Vinayak Natraj Pvt. Ltd. for an amount

of Rs. 6,16,95,106 alongwith interest of Rs. 4,67,93,864/-. The said claim was

revised on 29.07.2025 by adding a sum of Rs. 84,96,46,170/- in respect of

unpaid consideration for claimant's share in sale of specified goods. The said

claim filed by the alleged FC has not been verified by the IRP because of the

stay granted by this court on 18.06.2025.

6. It is also pertinent to mention that the FC has also filed his own

company petition no. IB-58 of 2024 before the Tribunal at Cuttack for the

resolution of an amount of Rs. 9,23,94,154/- against the CD. It is also

submitted that the pleadings in the said petition no. 58 of 2024 are complete

and it is at the advanced stage of final disposal.

7. Mr. Chidambaram, Sr. Counsel has submitted that the present CIRP,

which was initiated by an order of admission dated 12.06.2025, may be closed

by allowing the appeal and setting aside the impugned order because the CD

has already paid the outstanding dues of all the OCs.

8. It is pertinent to mention that while this appeal was pending, the FC

filed I.A No. 4374 of 2025 in order to bring to the notice of this Court about

its claim, having been filed, but not verified by the IRP because of the stay by

this Court.

Comp. App. (AT) (Ins) No. 878 of 2025 4

9. Mr. Chidambaram has also submitted that since the CD has already

settled the outstanding dues with all the three OCs, namely, MSTC,

Gurunanak Roadlines and Tata Power Northern, therefore, this Court by

invoking Rule 11 of the NCLAT Rules, 2016, may allow the appeal and close

the CIRP initiated by the order dated 12.06.2025. In support of his

submission, he has relied upon a decision of the Hon'ble Supreme Court in

the case of State Bank of India & Ors. Vs. the Consortium of Mr. Murari Lal

Jalan & Mr. Florian Fritsch & Anr., Civil Appeal Nos. 5023-5024 of 2024

decided on 7.11.2024 and referred to para 163 of the said judgment to

contend that it has been held by the Hon'ble Supreme Court that in the

extraordinary circumstances, the procedure laid down under the Code and

Regulations i.e. Section 12A and Regulation 30A of the IBBI (Insolvency

Resolution Process for Corporate Person) Regulations, 2016 (in short

'Regulations) may not necessarily be followed otherwise Article 142 of the

Constitution of India and Rule 11 of the NCLAT Rules would render otiose

and meaningless. It is submitted that this observation has been made by the

Hon'ble Supreme Court after noticing the earlier order passed by it in the case

of Glass Trust Company LLC Vs. Byju Raveendran & Ors., 2024 SCC OnLine

SC 3032 decided on 23.10.2024.

10. Mr. Chidambaram has further submitted that in a recent decision of

the Hon'ble Supreme Court in the case of Romi Datta Vs. Sigma Supply Chain

Solutions Pvt. Ltd. & Anr., Civil Appeal No. 2601 of 2025 decided on

24.02.2025 it has been held that if the matter is settled with the OCs and

somebody raises an objection to the settlement for the first time before the

Hon'ble Supreme Court then he may take his remedy available to him in

Comp. App. (AT) (Ins) No. 878 of 2025 5

accordance with law. This judgment has been cited by him on the issue raised

by the Intervenor in this case, who has not only filed his own application

under Section 7, bearing CP No. 58 of 2024, but also filed his claim before the

IRP but the same has not been verified by the IRP because of the stay of the

admission order.

11. He has further submitted that the amount which has been claimed in

the CP No. 58 of 2024 is almost 10 Cr. which the Appellant, being a solvent

company, is ready and willing to deposit either in this court or before the

Tribunal where the matter is pending because a solvent company should not

be pushed into CIRP and in this regard, he has relied upon a decision in the

case of Shitanshu Bipin Vora Vs. Shree Hari Yarns P. Ltd. & Anr., (2025) 257

Cop Cas 697 and pressed para 50 which is reproduced as under:-

50. Further we are also inclined to agree with the submission of the Appellant that IBC aims at resolution and not recovery and cannot be used to push a healthy and solvent company into CIRP.

12. In reply, Mr. Abhijeet Sinha, Sr. Counsel appearing on behalf of MSTC

has submitted that he has no objection to the disposal of this appeal as prayed

for by the Appellant because of the settlement between the parties.

13. Counsel appearing for RP has given only the facts of what has

transpired after the application under Section 9 filed by the OC was admitted,

about the publication of the notice and receipt of claims from two OCs and

the intervenor as FC. He has also submitted that he has not verified the claim

of the FC because of the order of stay passed by this Court.

14. The prayer made by Mr. Chidambaram is basically contested by Mr.

Sandeep Bajaj, Adv. who has appeared on behalf of the said FC. His

Comp. App. (AT) (Ins) No. 878 of 2025 6

contention is that the judgment in the case of Glass Trust Company LLC

(Supra) is fully applicable to the facts of this case and the judgment relied

upon by the Appellant in the case of State Bank of India (Supra) and Romi

Datta (Supra) are not applicable and are distinguishable on its own facts.

15. Mr. Bajaj has contended that in the case of Glass Trust Company LLC

(Supra), the Hon'ble Supreme Court has noticed four stages of settlement in

which it has observed in respect of stage (b) that once the application has

been admitted, proceedings are no longer the sole preserve of the creditor and

the CD. They are now in rem and at this stage, NCLT must hear the concerned

parties and consider all relevant factors before approving or rejecting the

application for withdrawal.

16. He has further submitted that in the same judgment it has been held

by the Hon'ble Supreme Court that once the CIRP is admitted the proceedings

became collective and all the creditors of the CD became stakeholders. It is

further submitted that it has been held in para 80 that the correct course of

action by the NCLAT would have been to stay the constitution of CoC and

direct the parties to follow the course of action in Section 12A r/w Regulation

30A.

17. In so far as the judgment in the case of State Bank of India (Supra) is

concerned, he has submitted that the observation made in para 163 relied

upon by the Appellant will not apply to the present case because there is no

such extraordinary circumstances shown by the Appellant except that it had

made the payment of the three OCs but the payment to the FC which is

substantial in nature, has not been made.

Comp. App. (AT) (Ins) No. 878 of 2025 7

18. It is further submitted that the decision in the case of State Bank Of

India & Ors. (Supra) may not be considered to be a precedent because the

said decision has been taken by the Hon'ble Supreme Court while applying

Article 142 of the Constitution of India and the judgment has not been passed

under Article 141 of the Constitution of India.

19. He has further submitted that the decision in the case of Romi Datta

(Supra) is also distinguishable because in the said case it has been pointed

out to the Hon'ble Supreme Court that the entire outstanding of the OC was

settled alongwith other OCs who were part of the CoC. In this background,

the Hon'ble Supreme Court has held that nothing remains further to be done

and the NCLAT order was set aside. As regards para 15 of the said judgment,

he has submitted that in that case somebody had appeared online before the

Supreme Court when the order had already been passed. In those

circumstances, the Hon'ble Supreme Court has said that he may pursue his

remedy before the appropriate forum in accordance with law but in so far as

the proceedings which were closed by the Hon'ble Supreme Court in the case

of Romi Datta (Supra) are concerned, were not be reopened on the asking of

the said Intervenor. It is submitted that in the present case, the applicant (FC)

had already filed its claim in form C on 16.07.2025 which was further revised

on 29.07.2025 with additional amount.

20. He has further submitted that this court, in the case of Gaurav Bhatia

Vs. Smriti Bhatia & Ors., CA (AT) (Ins) No. 882 of 2025, has interfered by

invoking Rule 11 and distinguished the judgment of the Hon'ble Supreme

Court rendered in the case of Glass Trust Company LLC (Supra) because the

settlement was arrived at with the only OC / FC and there was no one else.

Comp. App. (AT) (Ins) No. 878 of 2025 8

He has also relied upon a decision of this court in the case of Nishit Sharma

Vs. Jana Small Finance Bank & Anr., 2025 SCC Online NCLAT 952 and Usha

Gupta Vs. Romy Bansal & Anr., 2024 SCC OnLIne NCLAT 1426 to contend

that wherever there is a FC or the OC who had not settled with the CD, the

matter has been referred by this Court to the Tribunal for a decision on an

application to be filed by the IRP under Section 12A.

21. Counsel for the Appellant has also relied upon a decision of this court

in the case of Vishwajeet Subhash Jhavar Vs. IDFC First Bank Ltd., CA (AT)

(Ins) No. 08 of 2023 in which this court has held that "we are of the view that

on account of objection raised by the Intervenor of his filing claim before the

IRP, the CIRP cannot be allowed to proceed since the debt for which CIRP has

been initiated, has been settled with the FC. The Intervenor is free to take

such legal proceedings as may be advised to protect his interest".

22. It is submitted that this decision was rendered by this Court on

15.05.2023, much before the decision of the Hon'ble Supreme court in the

case of Glass Trust Company LLC (Supra) delivered on 23.10.2024.

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

able assistance.

24. The only issue involved in this case is as to whether the present appeal

can be allowed and the impugned order by which the application under

Section 9 was admitted, on the ground that the Appellant/CD had already

paid the outstanding dues of the OC who had filed the petition, as well as

those OCs who had joined during the pendency of this appeal or the issue of

settlement has to be adjudicated upon by the Tribunal by to resorting an

Comp. App. (AT) (Ins) No. 878 of 2025 9

application filed in Form FA under Section 12A and Regulation 30A because

of the claim filed by one FC is not settled?

25. We have already given the facts in detail in the earlier part of this order.

There is no dispute that CD has already settled with MSTC in respect of

Principal amount and interest, Gurunanak Roadlines in respect of its

outstanding dues and with Tata Power Northern on 16.06.2025, 15.07.2025

and 02.08.2025 respectively. There is also no dispute that the Intervenor who

had filed the application i.e. I.A No. 4374 of 2025 has also filed CP No. 58 of

2024 but had also filed its claim in Form C on 16.07.2025 and further revised

the same. The contention of Mr. Chidambaram in respect of closing the CIRP

proceedings on the basis of the decision in the case of State Bank of India

(Supra) while referring to para 163 can not be accepted in view of the

observation made by the Hon'ble Supreme Court in the case of Glass Trust

Company LLC (Supra) in para 63(ii), 80 and 81 which are reproduced as

under:-

"63(ii). After an application under Sections 7, 9, or 10 is admitted, but before the CoC has been constituted: Although Section 12A continues to be silent on this aspect, after the decision in Swiss Ribbons (supra), Regulation 30A was amended to provide for this eventuality. An application for withdrawal in such cases may be made by the applicant through the IRP.46 The IRP will then place the application before the NCLT, which may pass an order either approving or rejecting the application. As noted above, once the application has been admitted, the proceedings are no longer the sole preserve of the applicant creditor and the corporate debtor. They are now in rem and at this stage, the NCLT must hear the concerned parties and consider all relevant factors before approving or rejecting the application for withdrawal. The NCLT being a quasi-judicial body, must not act as a mere post office, which stamps and approves every settlement agreement, without application of judicial mind.

Comp. App. (AT) (Ins) No. 878 of 2025 10

80.We are of the view that recourse to Rule 11 of the NCLAT Rules was not warranted in the present circumstances. As noted above, 'inherent powers' cannot be used to subvert legal provisions, which exhaustively provide for a procedure. To permit the NCLAT to circumvent this detailed procedure by invoking its inherent powers under Rule 11 would run contrary to the carefully crafted procedure for withdrawal. In the Impugned Judgement, the NCLAT does not provide any reasons for deviating from this procedure or the urgency to approve the settlement without following the procedure. The correct course of action by the NCLAT would have been to stay the constitution of the CoC and direct the parties to follow the course of action in Section 12A read with Regulation 30A of the CIRP Regulations 2016. This legal framework for such withdrawal was formulated after giving due consideration to the appropriate procedure for withdrawal and balancing it with the objectives of the IBC.

81.Even if the procedural infirmity is kept aside, once the CIRP was admitted, the proceedings became collective, and all creditors of the Corporate Debtor became stakeholders. As noted in Swiss Ribbons (supra), even while invoking Rule 11 to allow withdrawal, the NCLT must hear all the concerned parties and consider all relevant factors on the facts of each case. The appellant raised detailed objections before the NCLAT to the source of the funds for the settlement and a reasonable apprehension that there was round tripping of funds, in violation of the order passed by the Delaware Court on 18 March 2024. These objections were summarily dismissed by the NCLAT, relying solely on the undertaking filed by Riju Raveendran. The only finding in this regard is found in paragraph 44. The NCLAT relies entirely on the undertaking filed by Riju Raveendran and states that "although, the Applicant is not satisfied about the undertaking but the Applicant has also not brought on record any evidence to the contrary that the money which is being offered has actually been brought by Riju Raveendran from the money disbursed to the borrower in terms of credit agreement or has been taken out of the coffers of the CD." Alleged facts such as the fraudulent transfer of USD 533 million to a hedge fund in the United States; the orders of the US Court restraining the brothers from transferring or dissipating the amount; the contempt proceedings against Mr Riju Raveendran; the ongoing investigation by the Enforcement Directorate against the first respondent and the Corporate Debtor; and other attempts by the

Comp. App. (AT) (Ins) No. 878 of 2025 11

Corporate Debtor to dissipate assets, were not adequately addressed by the NCLAT."

26. In so far as the decision in the case of Romi Datta (Supra) is concerned,

that too is also not applicable to the facts of this case because in that case

the settlement was arrived at with the OCs who were members of the CoC

whereas the intervenor had appeared for the first time when the matter was

finally being closed by the Hon'ble Supreme Court and the order was dictated.

In the present case, however, Intervenor/FC has not only filed its claim on

16.07.2025 to the IRP which was further revised on 29.07.2025 but had also

filed his own CP No. 58 of 2024. Meaning thereby, the FC has been thoroughly

vigilant in respect of his right for the purpose of resolution of its debt.

27. We do not agree with the contention of the Appellant that since the FC

has already filed CP No. 58 of 2024, therefore, he may pursue the said petition

instead of intervening in the present case. At this stage, we would observe

that in the present case the claim set up by the FC is more than the threshold

amount of Rs. 1 Cr., therefore, he is in a position to file the application under

Section 7 but in case, the claim of the FC, hypothetically, is less than 1 Cr.

then he would not be in a position to file his own petition under Section 7 and

in that situation the only course available to the FC is to file the claim on

Form C before the IRP. In that scenario, he would be a 'concerned person' as

observed by the Hon'ble Supreme Court in 63(ii) of the judgment in the case

of Glass Trust Company LLC (Supra), therefore, in our considered opinion, in

the presence of the FC/concerned person, this matter cannot be disposed of

by this Court by way of a settlement with the other three OCs and the

procedure which has been laid down under the Code and Regulation i.e.

Comp. App. (AT) (Ins) No. 878 of 2025 12

resorting to Section 12A and 30A has to be followed as held by the Hon'ble

Supreme Court in the case of Glass Trust Company LLC (Supra).

28. With these observations, we do no find any merit in the contention of

the Appellant, however, while disposing of this appeal, we relegate the

Appellant to take its remedy in accordance with law much less by filing an

appropriate application through IRP before the Tribunal in terms of Section

12A and 30A. If any such effort is made by the Appellant within a period of

15 days, the IRP may file the application before the Tribunal. The order of stay

dated 18.06.2025 shall continue till the application, intended to be filed by

the Appellant through the IRP, is decided in one way or other. The said FC

shall also be at liberty to file an appropriate application before the Tribunal

to contest the said application in accordance with law.

29. While parting with this order, the Tribunal before whom the application

is likely to be filed, shall make all efforts to decide the application as early as

possible but preferably within a period of 8 weeks.

30. With these observations, the appeal is disposed of. I.As, if any, pending

are hereby closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Justice Md. Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical)

sc/rr

Comp. App. (AT) (Ins) No. 878 of 2025