Permali Wallace Pvt. Ltd. Vs Narbada Forest Industries Pvt. Ltd. (NCLAT Delhi)
The National Company Law Appellate Tribunal (NCLAT) dismissed the appeal against the order of the National Company Law Tribunal (NCLT), Indore Bench, which had rejected the appellant’s application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC).
The appellant had earlier filed a Section 9 application in 2017. That application was withdrawn after the parties entered into a settlement for payment of the principal operational debt and interest. Pursuant to the settlement, the Corporate Debtor paid the entire principal operational debt of ₹1,74,16,527. Out of the agreed interest amount of ₹48 lakh, the Corporate Debtor paid ₹16 lakh. Alleging default in payment of the remaining interest, the appellant filed a fresh application under Section 9, which was rejected by the Adjudicating Authority.
The NCLT observed that the application had effectively been filed for execution of the settlement agreement dated 07.11.2017. It held that an amount arising from a settlement agreement could not be treated as an operational debt within the meaning of Section 5(21) of the IBC, 2016. The Tribunal further noted that the entire principal operational debt had already been paid and that ₹16 lakh had been paid towards interest. While the settlement contemplated interest of ₹48 lakh, the Operational Creditor subsequently claimed ₹1,28,00,000 towards interest, which was disputed by the Corporate Debtor. The NCLT observed that the Operational Creditor was using the IBC proceedings for recovery of a disputed amount, which was not the object of the Code. It also found that there was a dispute regarding the calculation of interest under the settlement agreement that could not be resolved in proceedings before the Adjudicating Authority.
