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Uttara Foods And Feeds Private Limited (S) v. Mona Pharmachem (S)
Factual and Procedural Background
The appeal arose from an order dated 19-07-2017 passed by the National Company Law Tribunal (Mumbai Bench) in Company Petition No. 1081/2017. Uttara Foods and Feeds Private Limited filed a Special Leave Petition before the Supreme Court challenging a decision of the National Company Law Appellate Tribunal (NCLAT). During the hearing on 13-11-2017, both parties informed the Court that they had reached an amicable settlement. The Supreme Court had previously noted, in an order dated 24-07-2017, that under Rule 8 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, the NCLAT appeared unable to record compromises after admission of an insolvency petition by invoking its inherent powers under Rule 11 of the NCLAT Rules, 2016.
Legal Issues Presented
- Whether, after admission of an insolvency petition, the NCLAT can invoke inherent powers to record and give effect to a settlement between the parties.
- Whether the Supreme Court should exercise its powers under Article 142 of the Constitution to approve the settlement and set aside the NCLAT order.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court noted that both parties had resolved their dispute amicably. Referring to its earlier observation on 24-07-2017, it reiterated that Rule 8 of the I&B (Application to Adjudicating Authority) Rules, 2016 currently prevents the NCLAT from employing its inherent powers (Rule 11, NCLAT Rules, 2016) to approve compromises once an insolvency petition is admitted. The Bench expressed the view that amending the relevant rules would avoid the necessity of parties approaching the Supreme Court solely to invoke Article 142 powers in such settled matters. In the present case, exercising those constitutional powers, the Court recorded the settlement and set aside the NCLAT order.
Holding and Implications
HOLDING: The appeal is allowed; the NCLAT order is set aside, and the settlement between the parties is taken on record.
Implications: The decision finalises the parties’ settlement and terminates the insolvency proceedings against the appellant. While no new legal precedent is established, the Court explicitly urged the competent authority to amend the applicable rules so that tribunals themselves may approve settlements post-admission, thereby preventing similar appeals from reaching the Supreme Court. A copy of the order was directed to be sent to the Ministry of Law & Justice.
1. Leave granted.
2. Mr. Shyam Divan, learned senior counsel appearing on behalf of the appellant and the learned counsel appearing on behalf of the respondent both agree that the matter has since been settled amicably between the parties.
3. In an earlier order dated 24.07.2017, this Bench had observed that in view of Rule 8 of the I & B (Application to Adjudicating Authority) Rules, 2016, the National Company Law Appellate Tribunal prima facie could not avail of the inherent powers recognised by Rule 11 of the National Law Appellate Tribunal Rules, 2016 to allow a compromise to take effect after admission of the insolvency petition. We are of the view that instead of all such orders coming to the Supreme Court as only the Supreme Court may utilise its powers under Article 142 of the Constitution of India, the relevant Rules be amended by the competent authority so as to include such inherent powers. This will obviate unnecessary appeals being filed before this Court in matters where such agreement has been reached. On the facts of the present case, we take on record the settlement between the parties and set aside the NCLAT order.
4. As a result, the appeal is allowed in the aforesaid terms.
5. A copy of this order be sent to the Ministry of Law & Justice immediately.
SUPREME COURT OF INDIA
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (C) No(s). 26824/2017
(Arising out of impugned final judgment and order dated 19-07-2017 in CP No. 1081/2017 passed by the National Company Law Tribunal, Mumbai Bench)
Uttara Foods and Feeds Private Limited.….Petitioner(s)
v.
Mona Pharmachem.….Respondent(s)
Date : 13-11-2017 This petition was called on for hearing today.
(Before Rohinton Fali Nariman and Sanjay Kishan Kaul, JJ.)
For Petitioner(s) Mr. Shyam Divan, Sr. Adv.
Ms. Malini Sud, Adv.
Mr. Hemant Sethi, Adv.
Mr. Vikas Mishra, Adv.
Mr. S.P Singh Chawla, Adv.
Ms. B. Vijayalakshmi Menon, AOR
For Respondent(s) Mr. Diggaj Pathak, Adv. Ms. Shweta Sharma, Adv.
Ms. Vishaki Bhatia, Adv.
UPON hearing the counsel the Court made the following
6. Leave granted.
7. The appeal is allowed in terms of the signed order.
8. Pending applications, if any, shall stand disposed of.
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