compromise

In the case of Uttara Foods and Feeds Private Limited v. Mona Pharmachem (CIVIL APPEAL NO. 18520 OF 2017 (Arising out of SLP(C) No. 26824 of 2017)) the Hon’ble Supreme Court recommended that competent authorities amend the relevant rules to include inherent powers of the tribunals.

The facts of the case were that Mona Pharmachem who was the operational creditor filed an application under Section 9 of the Insolvency and Bankruptcy code, 2016 (“IBC”) against the corporate debtor, Uttara Foods and Feeds Private limited, claiming a sum of Rs.22,26,672/- along with interest unpaid and stating that the first date of default happened on 9.08.2014. The sum is due for medicines supplied to the Corporate Debtor. The bench (NCLT Mumbai) after being satisfied that the application was in compliance with Section 8 & 9 of the Insolvency and Bankruptcy code, 2016 issued a moratorium. The matter was however settled between the parties themselves. They approached the NCLAT to set aside the order of the NCLT. The NCLAT refused to do so relying on the Rule 8 of the stated that the application cannot be withdrawn after admission.

The parties approached the Hon’ble Supreme Court against the NCLAT order. The Hon’ble Supreme Court stated that due to Rule 8 of the Insolvency and Bankruptcy Rules, 2016 the adjudicating authorities cannot prima facie use inherent powers under Rule 11 of the NCLAT Rules, 2016.

They recommended that instead of all the orders coming to the Supreme Court since only it can use its powers under Article 142 of the Constitution of India, relevant rules must be amended to include inherent powers of the tribunals. This will remove unnecessary filing of appeal when agreement has been reached between the parties. The settlement of the parties was recorded and the order of the NCLAT was set aside.[1]

Subsequently, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 was brought into force on June 6, 2018. It inserted section 12A which states that an application can be withdrawn after admission if ninety percent of the committee of creditors approve it.

[1] CIVIL APPEAL NO. 18520 OF 2017 (Arising out of SLP(C) No. 26824 of 2017))