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Company & Insolvency LawSupreme Court of India

Abhishek Singh vs Huhtamaki PPL Ltd. & Anr.

Civil Appeal · 2023 INSC 308Decided 28 Mar 2023
Civil Appeal No. 2241 of 2023
B.R. Gavai · Vikram Nath

Background

Huhtamaki PPL Ltd., a packaging supplier, filed an insolvency petition against Manpasand Beverages Ltd. (the Corporate Debtor) for an unpaid dues of about Rs. 1.31 crore. The Tribunal admitted the petition on 1 March 2021, but within days the two sides settled and the full settlement amount (about Rs. 95.72 lakh) was paid before the Committee of Creditors (CoC) was even formed. When the suspended director (appellant) sought to withdraw the insolvency proceedings under Section 12A of the IBC, the Tribunal (NCLT) refused, citing alleged violation of the moratorium and claims filed by other creditors in the interim, and held that Regulation 30A of the IBBI Regulations was not binding on it.

Decision Breakdown

The Supreme Court held that the NCLT was wrong to treat Regulation 30A, which specifically allows withdrawal applications before the CoC is even constituted, as not binding, since IBBI regulations carry statutory force. Relying on its own earlier decisions (Swiss Ribbons, Kamal K. Singh, Ashok G. Rajani), the Court held that once a genuine settlement is reached before the CoC is formed, the NCLT should not let it be stalled merely because other creditors filed claims afterward or because of unproven allegations about how the settlement money was sourced: any wrongful transfer of funds could separately be pursued under Section 66 of the IBC in appropriate proceedings. The Court also rejected the "alternative remedy" objection given the long delay already caused. It set aside the NCLT's order, allowed the withdrawal application and the Regulation 30A application, and permitted the original insolvency petition to be withdrawn, while clarifying that other creditors remain free to pursue their own independent claims through proper channels.

Lesson Learnt

When a company and a creditor genuinely settle a dispute before the Committee of Creditors is formed in an insolvency case, the law favours letting that settlement go through and closing the case rather than keeping the company under insolvency proceedings on account of later-arriving third-party claims or technical objections.

Abhishek Singh vs Huhtamaki PPL Ltd. & Anr. – Legal Case Shots | LegalAware