M/S Stallion vs M/S Mehar Steels Pvt Ltd

IN THE MATTER OF: M/s. Stallion ...Appellant

Versus M/s. Mehar Steels Pvt. Ltd. ...Respondent

Present: For Appellant: Mr. Rohan Jaitley, Mr. Akshay Sharma, Mr. Dev Pratap Shahi, Advocates For Respondent:

ORDER

(Virtual Mode)

13.07.2022: Heard Learned Counsel for the Appellant.

2. Mr. Rohan Jaitely, Advocate appearing for the Appellant submits that this

Appeal has been filed against the Order dated 04th May, 2022 by which the

Adjudicating Authority has rejected the Application filed by the Appellant for

contempt under Section 420 of the Companies Act. The Appellant was the

Operational Creditor and filed Section 9 Application under IBC which due to

Settlement entered between the parties came to be withdrawn by Order dated

28th February, 2019. The Order dated 28th February, 2019 reads as follows:

"CA No. 80/2019 is a joint application for withdrawal of the present application. Since the matter is settled and placing on record the settlement agreement duly executed 2

between the parties on 06.02.2019. The same is taken on record. In view of the same, prayer 'A' and 'B' are granted. Withdrawal is allowed. CA No. 80/2019 is disposed of thereby IB-12/ND/2018 is disposed of as withdrawn."

3. The Appellant thereafter filed Contempt Application stating that

Respondent has not complied the settlement and the cheques which were issued

have been dishonored except two cheques. The Contempt Application has been

rejected by the Adjudicating Authority vide Order dated 04th May, 2022.

Aggrieved by this Order, the Appellant has come up in this Appeal.

4. Mr. Rohan Jaitely submits that when the Settlement was taken on record

by the Court then the said Settlement acquired sanctity of the law and

contravention of that shall amount to committing contempt by the Respondent-

Corporate Debtor.

5. We have perused the Order dated 28th February, 2019 as well as the

Settlement. In the settlement, in paragraph 2(iii) following is provided:

"iii. That the Second Party undertakes that in case any of the aforesaid cheques are dishonored upon presentation. The First Party shall be entitled to recover the said sum along-with interest at the rate of 18% per annum from the date of dishonor of the cheque till the date of its payment."

6. The Order passed by the Adjudicating Authority at page 38 on 28.02.2019

does not contain any positive direction, willful disobedience of which can be

alleged by the Corporate Debtor. The proceeding for contempt can be drawn only

Company Appeal (AT) Ins. No. 732 of 2022 3

when there is willful disobedience of the Order. In the Order passed by the

Adjudicating Authority, there is no positive direction. Willful Disobedience can

not be alleged merely because settlement between the parties, could not be

honored by the Corporate Debtor. It goes without saying and it is always open to

the Appellant to take such consequential action as per the Settlement entered

between the parties. With these observations, the Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Justice M. Satyanarayana Murthy] Member (Judicial)

[Mr. Barun Mitra] Member (Technical) Basant/nn

Company Appeal (AT) Ins. No. 732 of 2022