Case Note & Summary
The appeal was filed by Mr. Rakesh Kumar Jain, a financial creditor, under Section 61 of the Insolvency and Bankruptcy Code, 2016, against an order dated 24.04.2023 passed by the National Company Law Tribunal-III, New Delhi, dismissing his petition CP (IB) No. 3083/ND/2019 for initiating Corporate Insolvency Resolution Process (CIRP) against M/s ADTV Communications Private Limited (formerly AEZ Infratech Private Limited). The background involved ongoing litigation between the parties, including a recovery suit in the Delhi High Court, which was referred to mediation at the Mediation and Conciliation Centre, Delhi High Court. During mediation, the appellant and respondent reached an agreement resolving all disputes. The appellant received consideration under the settlement. Despite the settlement, the appellant filed the CIRP petition, which was dismissed by the Adjudicating Authority. The NCLAT upheld the dismissal, holding that the settlement agreement barred the initiation of CIRP as the debt was no longer due. The appeal was dismissed with no order as to costs.
Headnote
A) Insolvency Law - CIRP Initiation - Settlement Agreement - Section 61, Insolvency and Bankruptcy Code, 2016 - The appeal challenged the dismissal of a CIRP petition by the Adjudicating Authority on the ground that the parties had settled their disputes through mediation. The NCLAT held that once a settlement agreement is reached, the financial creditor cannot pursue CIRP as the debt is no longer due and payable. The appeal was dismissed as the settlement was binding and the appellant had received consideration under the settlement. (Paras 2-4)
Issue of Consideration
Whether a settlement agreement reached in mediation between the financial creditor and corporate debtor bars the initiation of Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016.
Final Decision
The appeal is dismissed. The order of the Adjudicating Authority dated 24.04.2023 is upheld. No order as to costs.
Law Points
- Settlement agreement reached in mediation bars initiation of CIRP
- Financial Creditor cannot approbate and reprobate
- Section 61 IBC appeal dismissed
Case Details
2024 LawText (NCLAT) (01) 124
Company Appeal (AT) (Insolvency) No. 849 of 2023 & I.A. No. 2894, 2895 of 2023
Arun Baroka (Member Technical)
Mr. Sunil Dalal, Sr. Advocate with Mr. Tarun Diwan, Ms. Pyari, Mr. Chandra Prakash, Mr. Chiraayu Trehan and Mr. Nikhil Beniwal, Advocates for Appellant; Mr. Anish, Proxy Counsel for Respondent
M/s ADTV Communications Private Limited (Formerly Known as M/s AEZ Infratech Private Limited)
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Nature of Litigation
Appeal under Section 61 of IBC against dismissal of CIRP petition
Remedy Sought
Appellant sought to set aside the order dismissing CIRP petition and to initiate CIRP against respondent
Filing Reason
Appellant claimed that the Adjudicating Authority erred in dismissing the CIRP petition despite existence of debt and default
Previous Decisions
Adjudicating Authority (NCLT-III, New Delhi) dismissed CP (IB) No. 3083/ND/2019 on 24.04.2023
Issues
Whether the settlement agreement reached in mediation bars the initiation of CIRP
Submissions/Arguments
Appellant argued that the settlement was not a bar to CIRP as the debt remained unpaid
Respondent contended that the settlement resolved all disputes and the appellant had received consideration
Ratio Decidendi
A settlement agreement reached in mediation between a financial creditor and corporate debtor, under which the creditor receives consideration, bars the initiation of CIRP as the debt is no longer due and payable.
Judgment Excerpts
This is an Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016, against the Order dated 24.04.2023 passed by the Ld. Adjudicating Authority i.e., National Company Law Tribunal-III, New Delhi in CP (IB) No. 3083/ND/2019 in the matter of Rakesh Kumar Jain vs ADTV Communications Pvt. Ltd. wherein Appellant is Financial Creditor.
Appellant and Respondent reached an Agreement and resolved all their disputes in the Mediation
Procedural History
The appellant filed CP (IB) No. 3083/ND/2019 before NCLT-III, New Delhi seeking initiation of CIRP against the respondent. The NCLT dismissed the petition on 24.04.2023. The appellant then filed the present appeal before NCLAT under Section 61 of IBC.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: 61
