Case Note & Summary
The case involved an appeal against the initiation of Corporate Insolvency Resolution Process (CIRP) against Shri Girija Alloy & Power (I) Private Limited by Jajoo Rashmi Refractories Limited, claiming to be an operational creditor. The operational creditor initiated proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016, alleging default in payment of Rs.3,70,41,755.50. The operational creditor had placed three purchase orders with the corporate debtor and made advance payments, but the corporate debtor failed to supply the goods or refund the advance. A demand notice was issued, and the corporate debtor acknowledged the liability but did not provide proof of payment. The Tribunal allowed the Section 9 application, leading to the initiation of CIRP. The appellant argued that a settlement was reached between the parties before the initiation of CIRP, which the Tribunal failed to consider. The court noted that both parties agreed on the settlement terms and that the Tribunal should have deferred the order to allow for the settlement to be placed on record. The court referred to a precedent where a settlement prior to CIRP initiation was deemed sufficient to close the CIRP process. Ultimately, the court quashed the impugned order and disposed of the appeal in terms of the settlement agreement, emphasizing the importance of allowing corporate debtors to remain operational and achieve the objectives of the I & B Code.
Headnote
A) Insolvency Law - Corporate Insolvency Resolution Process - Justification for CIRP - Insolvency and Bankruptcy Code, 2016, Section 9 - The Appellant contended that a settlement was reached prior to the initiation of CIRP, which should have been considered by the Tribunal. The Tribunal's refusal to acknowledge the settlement led to an unjust initiation of CIRP against a viable corporate entity. Held that the settlement should have been accepted, quashing the CIRP order (Paras 5-10).
Issue of Consideration
Whether the initiation of Corporate Insolvency Resolution Process (CIRP) was justified given the settlement reached between the parties.
Final Decision
The court quashed the impugned order of 08.06.2026, allowing the appeal and disposing of the matter in terms of the settlement agreement dated 07.06.2026, emphasizing that the Appellant undertook to abide by the terms of the settlement.
Law Points
- Insolvency proceedings
- Operational creditor
- Corporate debtor
- Settlement agreement
- CIRP process
