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 That application was withdrawn after the parties entered into a settlement for payment of the principal operational debt and interest.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.
Before the NCLAT, the appellant contended that the consent terms and settlement agreement permitted revival of the application in the event of any breach. It was also submitted that post-dated cheques had been dishonoured and that the Section 9 application had been filed for recovery of the unpaid balance interest.
After hearing the parties, the NCLAT held that the Adjudicating Authority had committed no error in rejecting the Section 9 application. Referring to the Supreme Court’s decision in Swiss Ribbon Pvt. Ltd. Vs. Union of India, the Appellate Tribunal observed that the IBC is not a recovery proceeding. It found that the application filed by the appellant was only for recovery of the balance interest amount and had not been filed for resolution of any insolvency of the Corporate Debtor.
Holding that the appeal lacked merit, the NCLAT dismissed the appeal and affirmed the rejection of the Section 9 application.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
Heard Learned Counsel for the parties.
2. This is an Appeal filed against the Order dated 03.11.2022 passed by the Adjudicating Authority (National Company Law Tribunal, Indore Bench) by which Application filed under Section 9 of the IBC, 2016 by the Appellant has been rejected.
3. The Appellant had filed earlier an Application under Section 9 in the year 2017 which was withdrawn on settlement entered into between the parties for payment of certain principal amount and the interest. After the settlement between the parties, the Corporate Debtor had made a payment of operational debt of Rs. 1,74,16,527/- as per settlement amount of total principal amount and out of interest for Rs. 48 Lacs, amount of Rs. 16 Lacs was paid. There being some default in payment of the interest amount, Section 9 Application was filed which has been rejected by the Adjudicating Authority. The Adjudicating Authority has made following observations in paragraphs 8,9 and 10 of the Impugned Order:
“8. At the outset, we note that this application is filed by the Operational Creditor for execution of terms of settlement agreement dated 07.11.2017. In our considered opinion, the amount arising out of some settlement agreement cannot be termed as operational debt within the meaning of Section 5(21) of the IBC, 2016.
9. Apart from above, it is not in dispute that the Corporate Debtor paid the Operational Creditor the entire operational debt (principal). The Corporate Debtor has also paid a sum of Rs. 16 Lakhs towards the interest on principal sum. It is a case of the Operational Creditor that the Corporate Debtor has to pay additional sum of Rs. 1,28,00,000/- towards the interest which amount is disputed by the Corporate Debtor. Earlier an application was disposed of on the ground of settlement. In pursuance to the settlement arrived at, the operational debt of Rs. 1,74,16,527/ – (principal amount) and the interest to the extent of Rs. 16,00,000/ – has already been paid. The balance amount of Rs. 32,00,000/ – remained unpaid against Rs. 48,00,000/- towards interest as per settlement agreement. However, now the Operational Creditor is before us to claim a sum of Rs. 1,28,00,000/ – (Rs. 1,44,82,040-Rs. 16,00,000/) towards the interest. We sincerely feel that the Operational Creditor has been using the IBC proceeding for recovery of disputed amount and which is not object of the Insolvency and Bankruptcy Code, 2016. On this ground alone, this application is not maintainable.
10. Moreover, there appears to be a dispute about the terms of settlement agreement as far as calculation of interest amount is concerned. It cannot be resolved before this Adjudicating Authority.”
4. Learned Counsel for the Appellant challenging the order contends that liberty was granted in the consent terms/settlement agreement that in event any breach is committed, the Application be revived. He further submits that post dated cheques were bounced and Appellant filed Application under Section 9 was for recovery of the balance interest amount which was unpaid.
5. Having heard Learned Counsel for the parties, we are of the view that Adjudicating Authority did not commit any error in rejecting Section 9 Application. It has been laid down by the Hon’ble Supreme Court in “Swiss Ribbon Pvt. Ltd. Vs. Union of India” ((2019) 4 SCC 17 , IBC is not a recovery proceeding and the Application which has been filed by the appellant in the present case is only the application for recovery of balance amount of the interest and application was not filed for resolution of any insolvency of the Corporate Debtor. We are of the view that no error has been committed by the Adjudicating Authority in rejecting Section 9 Application filed by the Appellant. There is no merit in the Appeal, the Appeal is dismissed.
