Admission of application under Section 7 of I&B Code even after settlement between parties declared illegal

National Company Law Appellate Tribunal (NCLAT): A Bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial) allowed an appeal filed against the order of National Company Law Tribunal, Chandigarh admitting respondent’s application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

It was submitted by the Corporate Debtor that a settlement was reached between the parties and the said fact was brought to the notice of NCLT, however, it declined to allow Financial Creditor to withdraw the application for the reason that the matter has been fixed for pronouncement. The parties brought on record the settlement deed and the Resolution Professional submitted that parties had paid fees and insolvency cost to him.

Perusing the record, the Appellate Tribunal found that parties had reached settlement much prior to the date of admission of the application. As such, there was no default of payment on part of Corporate Debtor and there was no occasion for NCLT to admit application under Section 7. Consequently, the actions taken by NCLT were declared illegal and were set aside. The proceedings were directed to be closed. The appeals were thus allowed. [Gaurav Pandey v. Eternity Investment Services (P) Ltd., Company Appeal (AT) (Insolvency) No. 714 of 2018, dated 30-11-2018]

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