Dnyaneshwar Shankar Unde Vs Shukla Dairy Pvt. Ltd. (NCLAT Delhi)
The National Company Law Appellate Tribunal (NCLAT), Delhi, has delivered a crucial judgment clarifying the enforceability of settlement agreements within the framework of the Insolvency and Bankruptcy Code (IBC), 2016. In the case of Dnyaneshwar Shankar Unde Vs Shukla Dairy Pvt. Ltd., the NCLAT set aside an order passed by the National Company Law Tribunal (NCLT) which had refused to restore an admitted insolvency petition following a breach of settlement terms. The NCLAT ruled that where the NCLT’s own prior order explicitly grants liberty to revive the petition upon settlement failure, the absence of a specific revival clause within the settlement document (Memorandum of Understanding or MoU) cannot be used as a basis for rejection.
The Initial Insolvency Proceedings and Settlement
The dispute originated from an application filed by the Operational Creditor, Dnyaneshwar Shankar Unde, under Section 9 of the IBC, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against Shukla Dairy Pvt. Ltd. (the Corporate Debtor) for a debt amounting to approximately ₹1.49 crore.
During the pendency of the Section 9 application, the parties informed the Tribunal that they had reached an out-of-court settlement. Based on this mutual agreement, the NCLT passed an order on February 16, 2021, disposing of the petition. Crucially, the NCLT’s dispossession order contained an explicit and unconditional provision: “It appears that matter is settled, hence, matter stands disposed of with liberty to get this application revived, in case, settlement fails. Accordingly, CP (IB) 239 of 2020 stands disposed of.”
