NCLAT: Settlement Cannot Be Recorded Post CIRP Admission; Case Remanded to NCLT for Fresh Consideration
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice N. Seshasayee (Member–Judicial) and Arun Baroka (Member–Technical), has held that once the Corporate Insolvency Resolution Process (CIRP) has been admitted by the National Company Law Tribunal (NCLT), the appellate tribunal cannot directly record the settlement between the parties. Instead, the matter must be remanded to the adjudicating authority for appropriate consideration.
The appeal arose from an order passed by the NCLT admitting the respondent company into CIRP without granting an opportunity of hearing to the appellant. The appellant contended that before the admission of the insolvency petition, it had already informed the adjudicating authority that the matter was likely to be settled and sought time to file a reply. It was further submitted that the entire dispute with the financial creditor had now been settled.
The appellant placed reliance on the ruling in Abhishek Singh, Suspended Director of Manpasand Beverages Ltd. v. Yoginkumar Ashokbhai Patel & Another [Company Appeal (AT) (Ins.) No. 1863 of 2024], to argue that the NCLAT is competent to set aside the admission order and record the settlement itself.
The NCLAT, however, observed that the appellant was not heard on merits before the CIRP admission and, therefore, deserved an opportunity to be heard. Accordingly, the impugned order of the NCLT was set aside. The appellate tribunal further clarified that once a CIRP order is passed, the process is deemed to have commenced, and the Interim Resolution Professional (IRP) may have already received claims from creditors. These claims, having legal significance, cannot be ignored merely on the basis of a subsequent private settlement. The bench further explained that since the CIRP had already commenced, it would be inappropriate for the appellate tribunal to record or enforce the settlement directly. Instead, the matter must return to the NCLT, which will decide on the settlement and handle any claims already lodged in accordance with the Insolvency and Bankruptcy Code (IBC).
Concluding its judgment, the NCLAT allowed the appeal, set aside the NCLT’s order, and remanded the matter back to the adjudicating authority to deal with the settlement issue in line with legal procedure.
Appearance
For Appellant: Mr. Krishnendu Datta, Sr. Advocate with Mr. Apoorv Shukla, Mr. Prerak Sharma, Ms. Prabhleen A. Shukla and Mr. Ayush Acharjee, Advocates
For Respondent: Ms. Aakashi Lodha, Mr. Aditya Sharan and Mr. Rohit Gupta, Advocates for R-1
Cause Title: Mehul Harish Gosar vs. Athena Constructions Ltd. and Anr.
Case No: Company Appeal (AT) (Ins) No. 767 of 2025
Coram: Justice N. Seshasayee (Member-Judicial), Arun Baroka (Member-Technical)
