NCLAT Revives CIRP against CD as its Directors Failed to Pay Instalments as per the Settlement Agreement

Case Details: Sojitz India (P.) Ltd. v. Rizwan Ahmad, Director OREN Hydrocarbons (P.) Ltd. - [2023] 149 taxmann.com 305 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan | Chairperson, M. Satyanarayana Murthy | Judicial Member & Barun Mitra, Technical Member
  • Arun Kathpalia, Sr. Adv. V. Rajasekaran & Akshay Sachthey, Advs. for the Applicant.
  • Viraj Datar, Sr. Adv., Abhishek Vikram & A. Muralidharan, Advs. for the Respondent.

Facts of the Case

In the instant case, the corporate debtor entered into an MoU cum strategic business alliance with the operational creditor. Thereafter, due to defaults committed by the corporate debtor, the operational creditor (i.e. contempt applicant) filed an application u/s 9 of the IBC. The same was admitted by the Adjudicating Authority (NCLT).

The respondents (i.e. directors of the corporate debtor) filed an appeal before the instant Tribunal against the said admission order and expressed their readiness to settle the dispute with the operational creditor.

The CIRP was kept on hold and parties were allowed to reach a settlement. In pursuance, the respondents including the corporate debtor and operational creditor entered into a settlement agreement under which the due amount was to be paid in 4 instalments.

It was also directed by the instant Tribunal that in case of non-compliance with the terms of settlement by respondents, it was open to the operational creditor to file an application for contempt against the respondents and liberty was also granted to the operational creditor to revive prayer of the CIRP.

The first instalment became due and the same was not paid by the respondents. The operational creditor via the instant application contended that the respondents blatantly disobeyed the directions of the instant Tribunal and committed a wilful breach of the terms of the settlement agreement. The operational creditor also prayed for the revival of CIRP against the corporate debtor.

NCLAT Held

The NCLAT held that the respondents including the corporate debtor were guilty of wilful disobedience of the order passed by the instant Tribunal and were liable for punishment under section 12 of the Contempt of Court Act. Therefore, the CIRP proceedings were to be revived against the corporate debtor.

List of Cases Reviewed

• • Rizwan Ahmad v. Sojitz India (P.) Ltd. [2019] 107 taxmann.com 478 (NCL – AT – New Delhi ) (para 73) set aside.
  • Patel Rajnikant Dhulabhai v. Patel Chandrakant Dhulabhai [2008] 10 Scale 349
  • Niaz Mohammad v. State of Haryana [1994] 6 SCL 332 (para 59) followed.

List of Cases Referred to

• • Oren Hydrocarbons (P.) Ltd. v. Asstt. CIT [W.P. No. 9789/9925 of 2019, dated 3-4-2019] (para 15)
  • Kalyaneshwari v. Union of India [2011] 6 Scale 220 (para 44)
  • Kanwar Singh Saini v. High Court of Delhi [2012] 4 SCC 307 (para 46)
  • Mrityunjoy Das v. Sayed Hasibur Rahman [2001] 3 SCC 739 (para 46)
  • Dr. U. N. Bora (CEO) v. Assam Roller Flour Mills Association [2022] 1 SCC 101 (para 46)
  • Rama Narang v. Ramesh Narang [2009] 16 SCC 600 (para 46)
  • Debabrata Bandhopadhyay v. State of West Bengal [1969] 1 SCR 304 (para 46)
  • Prithawi Nath Ram v. State of Jharkhand AIR 2004 SC 4277 (para 48)
  • Priya Gupta v. Addl. Secretary, Ministry of Health and Family Welfare JT 2013 (1) SC 27 [2012] 12 Scale 289 (para 50)
  • Chairman, West Bengal Administration Tribunal v. SK Monobbar Hossain [2012] 3 Scale 534 (para 51)
  • Lakshman Prasad Agarwal v. Syed Mohammed Kareem [2009] 6 Scale 413 (para 58)
  • Mrs. Pushpalata v. Bhimrao Dinkar Fadtare [C.P. No. 97 of 2006, dated 15-9-2009] (para 58)
  • Patel Rajnikant Dhulabhai v. Patel Chandrakant Dhulabhai [2008] 10 Scale 349 (para 59)
  • Ram Kishan v. Tarun Bajaj [2014] 16 SCC 204 (para 61)
  • Bordevri Samaj of Sri Sri Maa Kamakhya v. Riju Prasad Sarma [Civil Appeal Nos. 3276-3278 of 2013, dated 15-12-2021] (para 62)
  • Niaz Mohammad v. State of Haryana [1994] 6 SCC 332 (para 64).