NCLAT Overturns NCLT Order, Remands CIRP Settlement Case Back for Reconsideration
Appellate Tribunal Emphasizes Right to Hearing, Orders Remand to Address Settlement in Athena Constructions Dispute
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) has set aside an order by the National Company Law Tribunal (NCLT), Mumbai Bench-II, which had admitted M/s. Athena Constructions Ltd. into the Corporate Insolvency Resolution Process (CIRP). The case, titled Mehul Harish Gosar v. M/s. Athena Constructions Ltd., was heard by the Principal Bench of the NCLAT in New Delhi, comprising Justice N. Seshasayee and Mr. Arun Baroka.
The appeal, filed by Mehul Harish Gosar, challenged the NCLT's decision on the grounds of not being afforded a hearing. The appellant asserted that prior to the NCLT's order, the financial creditor's dues had already been settled, a fact that was allegedly overlooked by the adjudicating authority.
Representing the appellant, Senior Advocate Mr. Krishnendu Datta argued that the appellant had communicated the likelihood of a settlement to the NCLT as early as February 2025, and subsequently, the financial creditor's claims were fully settled. These contentions were supported by the precedent set in the case of Abhishek Singh, Suspended Director of Manpasand Beverages Ltd. v. Yoginkumar Ashokbhai Patel.
The NCLAT observed two key aspects in the appeal: whether the CIRP should be closed following a settlement, and the merits of the appellant's claim of not being heard. Upon reviewing the case, the appellate tribunal concluded that the appellant indeed was not given a fair opportunity to present his case. Consequently, the tribunal decided to set aside the NCLT's order.
However, the NCLAT refrained from directly recording the settlement and terminating the CIRP, citing the need for the adjudicating authority to address any claims that may have been filed during the interim resolution process. The tribunal emphasized the importance of following due process as outlined in the Glas Trust Company. LLC v. Byju Raveendran case, which requires careful consideration of all claims and settlements.
In its judgment dated October 13, 2025, the NCLAT has remanded the matter back to the NCLT, directing it to handle the issue of settlement in accordance with the law. The tribunal further noted that the parties involved are free to present their settlement pleas before the adjudicating authority.
The decision highlights the appellate tribunal's commitment to ensuring that all parties in insolvency proceedings are granted a fair hearing, underscoring the procedural rights of stakeholders in CIRP cases.
Bottom Line:
The appellate tribunal emphasized the importance of giving an opportunity of hearing to all parties involved in CIRP proceedings and held that the matter should be remanded to the Adjudicating Authority to deal with the issue of settlement as per law.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016
