Fresh Section 7 Petition Under IBC Code Not Barred By Settlement Agreement Entered During The Earlier Section 7 Petition

Introduction

In a recent decision¹, the National Company Law Appellate Tribunal ("NCLAT") has held that a second Section 7 Petition under Insolvency and Bankruptcy Code, 2016 ("IBC") is maintainable even if same is based on the settlement agreement entered during the pendency of earlier Section 7 Petition.

Brief Facts

Angel Promoters Private Limited ("Corporate Debtor") availed loan of Rs. 3,25,00,000/- on interest in 2015 from Financial Creditors ("Financial Creditors"). Since, the Corporate Debtor defaulted in repayment of the loan, Financial Creditors filed a Section 7 Petition² ("First Petition"). However, during the pendency of the Section 7 Petition, one settlement agreement was entered between the parties. As per the agreement, Corporate Debtor had agreed to pay to the Financial Creditor, the principal amount along with the interest by way of Post-Dated Cheque.