NCLAT Overturns Dismissal of Restoration Application in Swadarshan Dairy's Insolvency Case
Tribunal Restores Main Petition, Citing Breach of MoU by Shukla Dairy Pvt. Ltd.
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has overturned a previous order dismissing the restoration application filed by Dnyaneshwar Shankar Unde, proprietor of Swadarshan Dairy, against Shukla Dairy Pvt. Ltd. The appellate tribunal, comprising Judicial Members Rakesh Kumar Jain and Mohammad Faiz Alam Khan, along with Technical Member Indevar Pandey, restored the main petition CP (IB) 239 of 2020 on grounds of breach of the Memorandum of Understanding (MoU) by Shukla Dairy.
The contentious issue arose after the appellant, Swadarshan Dairy, filed a restoration application following the alleged breach of settlement terms by the respondent, Shukla Dairy. Originally filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, the application aimed to resolve a debt amounting to Rs. 1 Crore 49 lakhs. The Tribunal had earlier disposed of the case in 2021, allowing revival of the petition in case of a settlement failure.
Despite the absence of a specific revival clause in the MoU, the NCLAT asserted that the appellant had the liberty to restore the petition due to the Tribunal's prior order granting such rights in the event of a settlement breach. The Tribunal criticized Shukla Dairy for attempting to evade its obligations after benefiting from the MoU, emphasizing that the respondent could not dismiss the restoration application solely based on the absence of a revival clause.
Counsel for Swadarshan Dairy argued that Shukla Dairy had not fulfilled its payment commitments, having paid only Rs. 39,40,000 out of the agreed amount, leaving Rs. 1,10,22,721 unpaid. The respondent's counsel contended that the entire payment had been made, a claim which the appellant disputed.
The appellate tribunal highlighted the error in dismissing the restoration application, reinforcing the earlier order that permitted the revival of the main petition if the settlement failed. Drawing parallels with previous cases, such as 'Archangles Distributors Pvt. Ltd. v. Ideal Financing Corporation Ltd., the tribunal underscored the importance of honoring settlement agreements and criticized the respondent's conduct.
Consequently, the NCLAT allowed the restoration application and reinstated the main petition to its original status. The tribunal directed both parties to appear before it on 27.10.2024, granting Shukla Dairy the liberty to address its payment claims in the main proceedings.
Bottom Line:
Dismissal of restoration application due to absence of a revival clause in the MoU - Held, the Tribunal had earlier granted liberty for revival of the main petition in case of breach of the settlement, and the respondent cannot avoid liability by citing absence of a revival clause in the MoU.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Section 9
