Revival Of Insolvency Proceedings Permissible Despite Absence Of Revival Clause In Settlement Agreement: NCLAT New Delhi

The NCLAT, Principal Bench, New Delhi, comprising Justice Rakesh Kumar Jain (Member-Judicial), Justice Mohammad Faiz Alam Khan (Member-Judicial), and Indevar Pandey (Member-Technical), has allowed the revival of the insolvency proceedings despite the absence of a revival clause in the settlement agreement. The appeal was filed against the dismissal of the restoration application filed by the appellant. While rejecting the application, the adjudicating authority noted that there was no clause for revival of the application in case of breach of the terms and conditions of the settlement by the respondent. The appellant filed the Section 9 IBC petition for a debt of Rs. 1.49 Cr. During the pendency of the petition, the parties agreed to a settlement, and the tribunal disposed of the application with a liberty to revive the same if the settlement fails. It was the case of the appellant that the respondent had breached the terms of the settlement MoU, which led him to file the restoration application. However, the adjudicating authority dismissed the application due to the absence of a clause that the application can be restored if the terms and conditions are breached. The appellant contended that the respondent acted dishonestly by signing the MoU to avoid the CIRP and then breaching the terms and opposing the restoration of the application. The respondent argued that the entire payment has been made; therefore, the revival of the application is not needed. However, the appellant in its rejoinder highlighted that the amount of Rs. 1.10 Cr. is still due. The NCLAT allowed the appeal while observing that the adjudicating authority had committed a patent error in dismissing the restoration application. It was observed that the NCLT had itself granted the liberty to revive the application in case of failure of settlement. The tribunal also criticised the conduct of the respondent while observing that it cannot be allowed to blow hot and cold in the same breath. The bench observed that to avoid the admission of the CIRP, the respondent entered into an MoU agreeing to the payment of the debt and later on stopped the payment. The tribunal also mentioned that it had dealt with similar circumstances in the case of Archangels Distributors Pvt. Ltd. vs. Ideal Financing Corporation Ltd.', CA (AT) (Ins) No. 1143 of 2024. Accordingly, the appeal was allowed. The impugned order was set aside, and the application was restored. Case Name: Dnyaneshwar Shankar Unde, Proprietor of Swadarshan Dairy v. Shukla Dairy Pvt. Ltd. Case Number: Comp. App. (AT) (Ins) No. 1269 of 2024 Bench: Justice Rakesh Kumar Jain (Member-Judicial), Justice Mohammad Faiz Alam Khan (Member-Judicial), and Indevar Pandey (Member-Technical) For Appellant: Mr. Malak Bhatt, Ms. Neeha Nagpal, Mr. Shreyansh Chopra, Advocates. For Respondents: Mr. Jha Amlendu Kumar, Ms. Disha Choudhary, Advocates. Order Date: 22.09.2025Click Here To Read/Download The Order

Revival Of Insolvency Proceedings Permissible Despite Absence Of Revival Clause In Settlement Agreement: NCLAT New Delhi

Mohd.Rehan Ali

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