Author DefaultOne Page 23-M/s Sree Bhadra Parks & Resorts Ltd V Sri Ramani Resorts & Hotels P Ltd
Is revival of an Application possible when CD fails to comply with the settlement deed?
Court: NCLT Kochi & NCLAT Chennai Bench AT# 6/2021
1. Background:
a. Appellant is the CD & Respondent is Sec 7 applicant (FC).
b. Sec 7 application is withdrawn U/R11 after a settlement happens between parties, with a liberty to file a fresh application in case CD fails to comply with the settlement deed.
c. CD fails & FC files IA#02 for revival of the Sec 7 application. NCLT revives the Sec 7 Application and CD/Appellant is aggrieved on the following grounds:
| SN | Averments by CD/Appellant | Averments of FC/Respondent |
| 1 | Sec 7 application is filed by incompetent persons, the directors who are disqualified as director’s u/s 164(2) | DINs of directors reactivated on 15.12.2020 by Madras HC while IA#02 was filed on 20.12.2020. |
| 2 | NCLT order states that fresh application has to be filed if CD does not comply. So, Applicant has to file a fresh application not an IA U/R 11 for revival of old order. | Only due to failure of the settlement, FC had to file IA#02 U/R 11 of NCLT rules to restore Sec 7 Application (IBA/13). |
| 3 | It is gross abuse of Rule 11 by NCLT since NCLT has no power under any statute to review its own orders. |
2. Case Laws:
a. SJS Fernandes VV Ranganayakulu Chetty (Madras HC)– It has been held repeatedly and has now become well settled law that the power to review is not an inherent power of a judicial officer but such a right must be conferred by Statute.
b. INUI Pulp & Paper Industries P Ltd. V M/s Roxcel Trading GMBH(NCLAT): NCLAT dealt with inherent powers of NCLAT U/R 11 & SC upheld it.
c. Ruchita Modi V Kanchan Ostwal:In exercise of inherent powers U/R 11 of NCLAT Rules, NCLT’s admission order is set aside and it is open for the OC to move NCLAT to recall the order & to revive CIRP process against CD, in case of default.
d. Ess Investments P Ltd V Lokhandwala Infrastructure P Ltd:NCLT can restore a petition which was dismissed as an infructuous one.
e. Swiss Ribbons (SC):@para 52 At any stage where COC is not yet constituted, party can approach NCLT directly, and NCLT using its ‘inherent powers’ U/R11may allow or disallow an application for withdrawal or settlement
3. NCLAT Evaluation & Judgment:
a. Debt arose out of share purchase agreement and the said amount was debt disbursed against consideration for advance payment as per the agreement and hence was covered within the definition of ‘financial Debt’ CD is duty bound to make good payments as proposed in the settlement.
b. Disqualification of directors was quashed by HC and also FC is protected u/s167(a) of Companies Act ie Office of the Director shall become vacant in all the Companies other than the Company which is in ‘Default’
c. To meet ends of justice an ‘inherent power’ of NCLT being ‘Co-extensive with need’ can be exercised to render justice to the litigants. IA#02 cannot be termed as review application. Undoubtedly, NCLT rightly allowed the IA#02. Appeal is dismissed with no costs.
Manik Tanwar