IBC Although A Codified Code but Still Remains Unclear at Several Parts of Provi

1. IBC ALTHOUGH A CODIFIED CODE BUT STILLREMAINSUNCLEARATSEVERAL PARTSOFPROVISIONS https://taxguru.in/corporate-law/ibc-codified-code-remains-unclear-parts-provisions.html IBC has come into effect in the year of 2016. However, there are several landmark judgments passed by the Hon’ble Supreme Court but the same still needs a crystal clear picture on several aspects of the provisions of IBC. The Hon’ble Supreme Court still requires to give us insight into the aspects of IBC provisions and the mannerof its applicability. Today,wearegoingtotalkaboutSettlementAgreemententeredbetweentheOperationalCreditorand CorporateDebtor under Section 9 of IBC. A financial Creditor is defined under Section 5 (7) of IBC which states that a financial creditor is a creditor to whomfinancial debt is owed. An Operational Creditor is definedunder Section 5 (20) of IBC which states that an operational creditor is a person who provides supplies to the Corporate Debtor for its daily functioning on the credit basis or may be an employeeworking under theCorporate Debtor whohas not receivedits salary. A Corporate Debtor is defined under Section 3 (8) of IBC which states that a corporate debtor means a corporate personwho is indebtedwith the sum ofothers and isunable to pay ofits debt. WhenaCorporateInsolvencyResolutionProcessapplicationisfiledbytheFinancialCreditororbyan Operational Creditor against the Corporate Debtor under Section 7 or 9 of IBC, respectively, then the Corporate Debtor and the Operational Creditor or the financial creditor, respectively, can enter into settlement agreement at any point of time and thereafter an application for withdrawal for withdrawal is filed before the Hon’ble Tribunal. Now the question arises that in the situation of the failure of the Corporate Debtor abiding by the terms of the Settlement Agreement can the outstanding in Settlement Agreement be termed as a debt under the provisions of IBC? ThereareconflictingjudgmentspassedbytheHon’bleNationalCompanyAppellateLawTribunalinthis regard. TheHon’bleNationalCompanyLawTribunal,NewDelhiinBrandRealtyServicesLimitedvsSirJohn Bakeries India Private Limited[i]rejected the application on the ground that outstanding debt cannot be regarded as an operational debt. That the Hon’ble National Company Law Appellate Tribunal, New Delhi in the appeal overturned the judgment passed by the Hon’ble NCLT and passed the Judgment made by the Hon’ble NCLT is erroneous.

2. Whereas the Hon’ble National Company Appellate Law Tribunal, New Delhi in Amrit Kumar Agarwal vs Tempo Appliances Pvt Ltd[ii]wherein an application was filed under Section 7 of IBC has held that the outstanding in settlement agreement does not come within the purview of IBC and hence the same cannot be regardedas debt in the provisions ofIBC. Thus, whether the settlement agreement is a debt or not within the purview of IBC needs a clear picture by the Hon’bleSupremeCourtagainsttheconflictingviewsoftheHon’bleNationalCompanyAppellateLaw Tribunal. CompanyAppeal(AT)(Insolvency)No.958of2020 CompanyAppeal(AT)(Insolvency)No.1005of2020