National Company Law Appellate Tribunal
Avant Garde Clean Room &Engg. Solutions ... vs Hll Biotech Limited on 13 March, 2026
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
Company Appeal (AT) (CH) (Ins) No.26 / 2023
In the matter of:
Avant Garde Clean Room & Engg. Solutions Pvt. Ltd.
Having its Registered Office at D-1/1, Ground Floor,
Opp. Meri College, Janak Puri,
New Delhi South West Delhi-11-58
Rep. by its Director Mr. Gaurav Thakral .... Appellant
V
HLL Biotech Ltd.
Having its Registered Office at HLL Bhavan,
Mahilamandiram Road, Pookappura,
Thiruvananthapuram, Kerala - 695 012 .... Respondent
Present :
For Appellant : Ms. Ramya, Advocate
For Respondent : No Appearance
ORDER
(Hybrid Mode) 13.03.2026:
Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):
The Appellant is an Applicant to the proceedings under Section 9 of I & B Code, 2016, which stood registered, as CP(IB) No. 02 / KOB / 2021, before the NCLT, Kochi Bench.
2. The reason for initiation of those proceedings, as against the Corporate Debtor had been that there was an inability on part of the Corporate Debtor to pay an amount due to be remitted amounting to Rs.7,93,49,287/- being the outstanding Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 1 of 16 debt and due payable to the Operational Creditor, owing to the fact that there has been a failure to respond to the notices issued by the Operational Creditor, the proceedings thus stood initiated accordingly, under Section 9 of the I & B Code, 2016.
3. When the process of those proceedings were being carried before the Ld. Adjudicating Authority its that, on 11.01.2021 a Deed of Settlement was arrived at between the Operational Creditor and the Corporate Debtor, which was duly signed and verified by the parties including the witnesses who was signatories to the document.
4. It's based upon the said Settlement Deed, that the Ld. Tribunal proceeded to pass an order on 29.01.2021 observing thereof that, qua the recovery of the said amount, which is said to be treated as debt and due amounting to Rs.7,93,49,287/-, which according to the Operational Creditor was shown to have been falling due as on 26.10.2020.
5. It was observed that since the parties have filed a memo, seeking withdrawal of the Application and in the memo, which was thus preferred by the Appellant herein, the Appellant had submitted that owing to the mutual discussions, which had been taken place between the parties, a settlement has been arrived at under the terms as narrated in the Settlement Deed of 11.01.2021 wherein the Corporate Debtor had agreed to make the payment of Rs.2,20,00,000/- on the date of the signing of the Memorandum and the balance Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 2 of 16 amount of Rs.3,55,27,260/- was to be remitted within a period of one year by way of four instalments, which would be ending on 31.03.2022.
6. It was further agreed, that in an event of default in the payment of balance amount as per the Memorandum of Settlement ``the Operational Creditor reserved its rights to initiate proceedings before the NCLT or any other remedy available to him for recovery of the amount''. Clause 8 of the Settlement dated 11.01.2021 is extracted hereunder:
``Clause 8:
Notwithstanding the above, in the event of default in balance payment as per clause 6 hereinabove or any part thereof by HBL, Avant shall be at liberty to adopt appropriate proceedings before the NCLT and / or any other legal remedy available at that time for recovery of the original amount outstanding including interest after deducting the payment of INR 2,20,00,000/- (Rupees Two Crore Twenty lakh only) made under the present Deed of Settlement''.
7. The Ld. Tribunal on the basis of the terms of settlement dated 11.01.2021 as extracted in the order passed by it on 29.01.2021, directed the closure of the CP(IB) No. 02/KOB/2021, holding it to be dismissed as withdrawn and it was observed that, it was left open for the Appellant to ``initiate'' appropriate proceedings before the ``Competent Authority'', if there was a failure on part of the Corporate Debtor to honor any of the terms of the settlement dated 11.01.2021. Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 3 of 16
8. Its based upon the aforesaid conditions, the Company Petition was laid to rest and thereafter, the present controversy arose when the Appellant / Applicant / Operational Creditor filed a Restoration Application (IBC) No. 02/KOB/2022.
9. The application as preferred by the Appellant, it was submitted by the Appellant that in view of the Clause, which was reserved in the settlement particularly that as contained under Clause 6, it was a liberty to adopt an appropriate proceedings before the NCLT or to resort to any recourse to any other remedy. It has been argued by Appellant that this Clause in itself will make the application to be maintainable because according to the averments made in the application for restoration of the proceedings, i.e. Restoration Application (IBC) No. 02/KOB/2022.
10. It was contended that, since there was no full and final settlement of all the payables as per the terms of the Settlement Deed dated 11.01.2021 and as directed to be followed in the light of the decision taken of closure of the proceedings of the Company Petition, by order dated 29.01.2021. Thereafter, the Appellant prayed that the proceedings of the Company Petition deserves to be revived.
11. It's this application, which has been rejected by the impugned order by the Ld. Tribunal observing thereof that in the light of the provisions contained under Section 425 of the Companies Act, since the provisions of the Code of Civil Procedure has been made applicable, in that eventuality, in the light of the provisions contained under Order 23 & Rule 3A of C.P.C., the recording of a Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 4 of 16 compromise and consequential withdrawal of the proceedings would make the subsequent proceeding as to be not maintainable.
12. While considering the implications contained under Order 23 Rule 3A, the Tribunal observed that, reserving of a liberty as per Order 23 Rule 3A of C.P.C., to institute a fresh suit could be only when there is a defect in the Plaint or the said restriction is subject to the aspect of limitation.
13. If we go through the language contained under Order 23 Rule 3 to be read with Order 23 Rule 3A, all the parameters prescribed therein as a consequence of the decision taken in the proceedings as a consequence of the implications of the compromise, none of the provisions contemplate or at all reserved the rights of filing of a Restoration Application, which is altogether independent in circumstances based upon the provisions contained under Order 9 Rule 9.
14. The provisions contained in Order 9 Rule 9 of C.P.C., cannot be placed at a common platform to that of the provisions contained under Order 23 Rule 3 of C.P.C., which is to be read with Rule 3A. As both the provisions of the Code of Civil Procedure, which has been made applicable to the proceedings under the I & B Code, 2016, are to be distinctly read in its applicability as it has got altogether different objective to be achieved at and that too particularly when it happens to be in context of the provisions contained under Order 9 Rule 9 of C.P.C., where it prescribes that where the suit is wholly or partly dismissed under Rule 8, due to default of any party to appear, he will be precluded to bring about the fresh case Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 5 of 16 in relation to the same cause of action but, could apply for restoration under the aforesaid provision contained under Order 9 Rule 9 of C.P.C. which is to be read with Section 151 of the C.P.C.
15. The liberty reserved under Order 23 Rule 3 of C.P.C. or even in terms of the compromise, which has been referred to i.e. 11.01.2021, if there was non-
adherence of any of the conditions contained in the settlement, which is basis of withdrawal of Company Petition, the restoration was not the recourse available to the Appellant for reviving the proceedings of the Company Petition due to non- compliance of the conditions of the compromise, which was flowing because of the events that has chanced after the withdrawal of Section 9 Application, under the Code, because, under any condition, the provisions contained under Order 23 Rule 3, in either of the circumstances does not reserve a right of filing of a Restoration Application, because, it's a mutually agreed conditions which is the basis of a final order of withdrawal, where there is no scope of argument that the closure of the Application under Section 9 of the Code was sought on the basis of a fraud having been played upon the Appellant, the rights reserved under Order 23 Rule 3A, barring institution of a fresh suit is only limited in the sense that, when it relates to the institution of the suit to ``set aside a decree'' on the ground that the compromise decree was unlawful.
16. Moving forward, there are two conditions which are to be existing that it should be a suit for setting aside of a decree; and Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 6 of 16 Secondly, the basis of decision of the decree had been a compromise which has been unlawfully arrived at.
Both the conditions as contemplated for the purposes of liberty for institution of a suit under Order 23 Rule 3A was not available because, it's not the case of the Appellant that the Compromise of 11.01.2021 was fraudulently entered into and further, the nature of the Restoration Application it was due to non- fulfilment of the conditions of withdrawal of Section 9 Application, particularly of the conditions as enshrined in the compromise of 11.01.2021 and that in itself will not attach a fraud towards the mutually agreed settlement though it could be said to be breach of Settlement, which is the basis of withdrawal of the suit, since the litigation consequence to the withdrawal has attained its finality, by its withdrawal, subsequent proceedings for the same cause of action would not lie, by restoring of old concluded proceedings.
17. As the proceedings under Section 9 of the Code, got terminated as a consequence of the order passed on 29.01.2021, in that eventuality, the order of 29.01.2021 takes a shape of a final order. If there was any violation of the same, it could be put to execution as per the known process under the I & B Code, 2016, but, there cannot be any restoration, sought for, as the provisions of the restoration will not be applicable, to seek a restoration to a proceedings, which has been finally disposed off as withdrawn.
Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 7 of 16
18. The Ld. Tribunal has also taken a view and rightly so, that filing of a Restoration Application, was not the liberty that was reserved by the Appellant, in an event of non-compliance of the order dated 29.01.2021, as passed on the basis of the settlement dated 11.01.2021.
19. In that eventuality, where the liberty to file an application is not reserved, it would not be opened to be reagitated based on a Restoration Application, particularly when the settlement of the issues between the parties, and the memo filed by the Ld. Counsel for the Applicant with prayer for withdrawal of the application after passing of the final order on the same, nothing survives on merits to be decided.
20. The Authorities before whom the proceedings under the I & B Code, 2016, stood initiated are quite specific in its terms as per the provisions contained under the Companies Act, where the Tribunal(s) have been constituted to deal with the issues pertaining to the controversy arising from the provisions contained under the I & B Code, 2016.
21. The I & B Code, 2016, it specifically defines the platform i.e. the Adjudicating Authority or the NCLAT or an appropriate Forum of an Appeal before Hon'ble Apex Court under Section 62 of the Code, which had been specifically defined under the Code itself.
Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 8 of 16
22. The clear distinction has been carved out that under the Code, when there are specific forums, which are created for redressal of the grievance by a party at different stage, who is aggrieved by an order passed by the Tribunal(s) created under the Code itself.
23. If that be the situation where the Authority quite specific in its term and description, any application which was reserved to be preferred by the Appellant in compliance of the order of the observations made in the order dated 29.01.2021, by observing thereof that it will be open for the Appellant to approach before the ``Competent Authority'' will not include within itself the Tribunal(s) created under the Code, Competent Authority as reserved by the Appellant in the order of 29.01.2021 would mean a Competent Authority other than the Authorities, which has been otherwise legally recognized to be created under the provisions of the Companies Act, to deal with the proceedings under the I & B Code, 2016, and since at the stage when the Appellant has preferred the Restoration Application it was before a Tribunal created under the I & B Code, it will not be treated as to be a Competent Authority before whom the Restoration Application at the behest of the Applicant could have been made applicable, when there was nothing left in the proceedings to be restored after its withdrawal.
24. The application for settlement, based on which the Company Petition was sought to be withdrawn, had particularly prescribed in Clause 8 of the said application, that if the Operational Creditor is unable to recover the amount as Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 9 of 16 settled, under the Agreement or there is default in payment of amount, which was payable along with the interest at 18%, that was a total debt of Rs.88,81,815/-, that was payable along with the interest payable on it amounting to a total outstanding amount of Rs.3,13,13,158/-, the process to be adopted thereafter was reserved under the terms of settlement.
25. If we look into the expressions contained in Clause 8 of the settlement, which is extracted hereunder, the right of re-agitating the proceedings was only in an event of default, as reserved by the Appellant, was for approaching before a Competent Forum, before the Competent Authority; or before any other legal remedy as available:
````Clause 8:
Notwithstanding the above, in the event of default in balance payment as per clause 6 hereinabove or any part thereof by HBL, Avant shall be at liberty to adopt appropriate proceedings before the NCLT and / or any other legal remedy available at that time for recovery of the original amount outstanding including interest after deducting the payment of INR 2,20,00,000/- (Rupees Two Crore Twenty lakh only) made under the present Deed of Settlement''.
26. But, the Ld. Tribunal had proceeded to pass the final order on 02.11.2022 based on the settlement and after considering the terms of the settlement dated 11.01.2021, which obviously including the consideration of Clause 8 of the settlement also.
Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 10 of 16
27. The Ld. Tribunal in its order of 29.01.2021 did not reserve the rights of the Appellant to file a Restoration Application in an event where there was a default in payment of the amount under the terms of settlement and rightly so, because those right was not reserved because, under the terms of settlement, the Company Petition itself was closed as withdrawn, that means the principal proceeding was withdrawn on a consensus between the parties and no lis was pending, which have been permitted to be restored.
28. If the proceedings are closed on merits by a consensus, it cannot be restored, because restoration could have been only in a situation when there is a default in diligent pursuing of the proceedings.
29. The restoration could have been when there was some procedural flaw in the proceedings of the Company Petition itself, where restoration was required to be preferred to restore the Company Petition on its original number, which has not been adjudicated on merits. But, in the instant case since, the Company Petition was withdrawn, by the Petitioner, in fact, there was no principal lis pending and if that be so, there could not have been any restoration of the Company Petition, which has been otherwise withdrawn by the Appellant himself and that too, particularly in the light of the fact when no such right was reserved by the Ld. Tribunal, while passing the order on 29.01.2021 by leaving it open for the Appellant or reserving the rights of Appellant, to file restoration, particularly Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 11 of 16 when the right reserved was to approach before the Appropriate Forum before the Competent Authority.
30. Upon closure of proceedings of the Company Petition based on settlement, the appropriate proceedings that would be open for the Appellant, would be the proceedings for the purposes of recovery of the defaulted amount by filing appropriate execution and not the total amount, which was actually falling due and was the basis of initiation of proceedings under Section 9 of the Code.
31. If under the settlement part of the amount has been paid and the balance was left to be paid due to default, in that eventuality, in accordance with the rights reserved by the Appellant, it will amount to the recovery of balance amount that has been settled under a Decree or an Order passed by the Court and that was reserved to be resorted to before the Competent Forum, that Clause in itself was making the Restoration Application to be not maintainable.
32. There could be yet another reason, why the restoration would not lie, for the reason being that in the Company Petition there was altogether a different relief which was sought, even if it is read in context of the settlement dated 11.01.2021 and the relief, which was granted by the Ld. Tribunal while passing the order of 29.01.2021, that was quite distinct to the one that was claimed and reserved by Clause 8 of the settlement of 11.01.2021. Thus, the liberty to initiate an appropriate proceedings before the NCLT or any other legal remedy given in Clause 8 of the settlement would be limited to the restrictions, which has been Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 12 of 16 observed by the Ld. Tribunal at the time of closing of the Company Petition by an order of 29.01.2021.
33. We are of the view that, under the given set of circumstances, the appropriate proceedings referred to therein, will not be a restoration of the proceedings before the NCLT, as admittedly major part of the amount that was payable under the terms of settlement was already remitted and there was no principal cause surviving, which had been the basis for initiation of the proceedings under Section 9 of the Code and even the cause by the time of filing of restoration has already undergone a change and the reference of the word ``Competent Authority'' in the Settlement will not include within it the Ld. Adjudicating Authority for the reason being that, the Ld. Adjudicating Authority, has not been described or taken under law as to be the Competent Authority to recover an amount falling due because of the default that has had to be recovered by resorting to drawing of an appropriate proceedings before an Appropriate Forum and that Appropriate Forum will not be inclusive of the Adjudicating Authority and that too, by filing Restoration Application, which could result into the revival of the Company Petition, to be passed on a Restoration Application.
34. We are further of the view that, a default under the Settlement Agreement does not constitute to be a default of the Operational Debt, more particularly when it is an admitted case of the Parties that major amount payable under the Settlement Agreement had already been paid.
Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 13 of 16
35. Since, the settlement takes the shape of a final order, it will be executable as per the provisions contained Order 22 Rule 11 of C.P.C. and further law of restoration will not apply, because, the lis has been given a quietus owing to the termination of cause of action by withdrawal of the Company Petition which, was sought for by the Appellant himself by filing of an Application before the Tribunal on the basis of the settlement of 11.01.2021.
36. Even under the normal connotation, a breach in payment of the amount under the terms of the settlement at the most would give a fresh cause of action altogether but, it will not give a cause of action to restore the proceedings, which has been already been settled between the parties by the withdrawal as by an order of 29.01.2021 and particularly when there was no reservation of rights to file a Restoration Application under law was reserved under the binding terms of settlement.
37. A restoration cannot be an appropriate recourse to recover the balance amount under the Settlement Decree or an order, as that order of settlement has to be exhausted in terms of the procedures contemplated under law, by approaching before a Competent Forum as available to the Appellant by resorting to the proceeding for recovery of the balance amount, as the consequential effect of the order of 29.01.2021 would be that, there was no default, but rather, there was a balance left to be recovered under a decree or an order which will not attract Section 9 of the Code, which could result into revival of the proceedings by filing Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 14 of 16 of a Restoration Application and that too, particularly in the absence of there being any liberty reserved or granted by the Ld. Tribunal.
38. The finding, that has been recorded by the Ld. Tribunal that, though there was a prayer made for revival of the proceedings at the stage when the Company Petition was dismissed as withdrawn. But, when the Ld. Tribunal has passed an order of 29.01.2021, there was a conscious refusal by the Ld. Tribunal of granting the liberty to the Appellant to re-approach the Ld. NCLT to revive the Company Petition, by not observing the same in the order that liberty is reserved to be exercised by the Appellant.
39. This conscious refusal at the time of dismissing the proceedings based on settlement as withdrawn in itself make the Restoration Application as not maintainable, because, the default in payment of the Settlement Agreement will not be a cause which would be falling within the definition of default of an Operational Debt as defined under the Code.
40. Because of the specific finding recorded in reference to the right being reserved for the Appellant to initiate a fresh Petition, that itself will not make the Restoration Application to be maintainable, as it would be misreading of the order, in an event of default in payment of an amount under the terms of the settlement order has chanced, under the terms of order, the refusal to restore the Company Petition on the Restoration Application preferred by the Appellant has been rightly made since it was falling beyond the ambit and the reasons, which Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 15 of 16 has been assigned in the terms of the settlement, based on which the Company Petition was dismissed as withdrawn, which rightly so could not have been restored. As the appropriate recourse, which was available to the Appellant was to either file a fresh proceedings, which was reserved to be resorted to under the terms of the Agreement itself or by filing of an appropriate proceedings before the Competent Authority, which the Appellant would have to decide in accordance with law, for the purposes of seeking an enforcement of the settlement order dated 29.01.2021.
41. The restoration will not be the recourse that would be sustainable under the law. Hence, the rejection of the same by the Ld. Tribunal by the impugned order is absolutely justified, which does not call for any interference, hence, the Company Appeal (AT) (CH) (INS) No. 26 / 2023 is accordingly rejected.
[Justice Sharad Kumar Sharma] Member (Judicial) [Jatindranath Swain] Member (Technical) SR/MS/AK Comp. App. (AT) (CH) (Ins) No. 26/2023 Page 16 of 16