Once Claims Are Received By Investors Under Settlement Agreement, They Are Prohibited From Claiming Same Amount Under Resolution Plan: NCLAT
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Mohd. Faiz Alam Khan (Judicial Member) and Mr. Naresh Salecha (Technical Member), has held that once an investor of the Corporate Debtor receives payment under a settlement agreement and provides an unconditional undertaking to forgo all claims under the Resolution Plan, such an investor is prohibited from claiming the same amount under the plan. The Tribunal observed that dual recovery in such circumstances is impermissible.
The appeal before the NCLAT was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), challenging an order dated 11.06.2024 passed by the National Company Law Tribunal (NCLT), Kolkata Bench, which had dismissed the appellants’ application.
Background
The Corporate Insolvency Resolution Process (CIRP) of Ashiana Landcraft Realty Pvt. Ltd. was initiated on 11 January 2022, and Mr. Jayesh Sanghrajka was appointed as the Interim Resolution Professional (IRP), later confirmed as the Resolution Professional (RP). The appellants, along with other investors—188 in total—were Non-Convertible Debenture (NCD) holders who had invested around ₹80.53 crore in the Corporate Debtor through a Portfolio Management Scheme managed by Piramal Fund Management Pvt. Ltd. (the Fund Manager), with IDBI Trusteeship acting as the trustee for the NCD holders.
During the CIRP, the claim of the NCD holders was admitted for ₹146.92 crore, and under the approved Resolution Plan, a sum of ₹16.10 crore and 2,14,800 Class B equity shares were to be distributed to them in proportion to their admitted claim. The plan was approved by the Committee of Creditors (CoC) with a 78.56% vote share and subsequently approved by the NCLT, Kolkata, on 11 August 2023.
Settlement Before Delhi High Court
Parallel to the insolvency proceedings, certain NCD holders had lodged an FIR against the Fund Manager and the trustee, alleging fraud and misrepresentation. In response, the Fund Manager approached the Delhi High Court by filing Criminal Writ Petition No. 2555 of 2023 seeking quashing of the FIR.
During the hearing, the Fund Manager, as a goodwill gesture, offered to deposit ₹80.53 crore—the entire principal amount invested by 188 investors—with the Registry of the High Court, for disbursement under the supervision of a retired judge. The proposal required each investor, before receiving the settlement amount, to furnish an irrevocable undertaking not to initiate or pursue any proceedings relating to the investment, including those before the NCLT or any other forum. The Court accepted the proposal and appointed Justice (Retd.) Pradeep Nandrajog as Administrator to oversee disbursement.
By a subsequent order dated 20 September 2023, the Court permitted the Fund Manager to issue demand drafts directly to the investors. All 188 NCD holders received their principal investment amounts after submitting undertakings that they would not pursue any claim under the Resolution Plan.
On 5 April 2024, after being informed that the entire amount had been disbursed, the Delhi High Court recorded that since the Fund Manager had paid all amounts due to investors, the amount receivable from the CIRP would be disbursed to the Fund Manager. A subsequent modification application filed by the investors seeking release of ₹16.10 crore under the Resolution Plan was rejected by the High Court on 19 July 2024. The Supreme Court later dismissed the Special Leave Petition against this order on 10 January 2025, making the High Court’s decision final.
NCLAT’s Findings
Before the NCLAT, the appellants contended that the money paid under the High Court settlement was independent of their entitlement under the Resolution Plan and that the NCLT had erred in holding that they had received more than their due. They also argued that they were not properly represented before the CoC since IDBI Trusteeship and the Fund Manager acted without their consent.
The Respondents countered that the appellants had voluntarily received amounts far exceeding their entitlement under the plan and had given written undertakings to withdraw all claims. Hence, no further payment was due under the Resolution Plan.
The NCLAT observed that the record clearly established that the investors were duly represented before the CoC by their authorized representative as provided under Section 21(6A)(a) of the IBC. Since they had not challenged the approval of the Resolution Plan earlier, their claim of improper representation carried little weight.
The Bench reproduced portions of the Delhi High Court’s orders, noting that the settlement was made on the express condition that any investor opting for payment under it would not be entitled to receive any amount under the Resolution Plan. The Tribunal remarked that “the appellants, after receiving their dues under the settlement agreement and furnishing an unconditional undertaking to forgo all claims under the Resolution Plan, cannot now seek dual recovery.” It was also noted that after the High Court confirmed the disbursement of the settlement funds, it had specifically directed that the CIRP proceeds of ₹16.10 crore would be payable to the Fund Manager, not to the investors.
Holding that the appellants had already received the entire investment amount under the settlement and were thus precluded from claiming any amount under the Resolution Plan, the NCLAT upheld the NCLT’s order. The Tribunal concluded that: “The investors were given the choice to either receive payment under the settlement by filing an undertaking to forgo all claims under the Resolution Plan, or to forfeit rights under the settlement and pursue claims under the plan — but not both. Dual recovery is impermissible.” Accordingly, the appeal was dismissed as devoid of merit, affirming the NCLT’s rejection of the appellants’ application.
Appearance
For Appellant: Mr. Vinod Chaurasia & Mr. Prince Sethi, Advocates
For Respondent: Mr. Sakal Bhushan, Mr. Vasu Bhushan & Mr. Nipun Bhushan, for R-1 to 3.
Cause Title: Shobhana Thakkar Versus Monitoring Committee of Ashiana Landcraft Realty Pvt. Ltd. and Ors.
Case No: Company Appeal (AT) (Insolvency) No. 2156 of 2024
Coram: Justice Mohd. Faiz Alam Khan (Judicial Member), Mr. Naresh Salecha (Technical Member)
