Full Settlement During Appeal Leads to Termination of Revived CIRP: NCLAT Closes Proceedings Against Aksa Paper Mills

Full Settlement During Appeal Leads to Termination of Revived CIRP: NCLAT Closes Proceedings Against Aksa Paper Mills

Introduction

The Principal Bench of the National Company Law Appellate Tribunal examined whether Corporate Insolvency Resolution Process (CIRP), revived on account of partial non-payment under a settlement, ought to continue after the balance amount was paid during pendency of the appeal. The Tribunal terminated the CIRP upon full satisfaction of the settlement dues and directed payment of the IRP’s fees.

Factual Background

The dispute arose from a Section 9 application filed by the Operational Creditor against Aksa Paper Mills Pvt. Ltd., leading to initiation of CIRP on 29.08.2024. The earlier CIRP order was set aside on 03.09.2024, granting liberty to the Operational Creditor to revive the petition in case of default under settlement.

Pursuant to a settlement, a total amount of ₹2,69,38,653/- was agreed to be paid. However, a balance amount of ₹39,38,653/- remained unpaid. On this basis, the Operational Creditor filed Restoration Application No. 33 of 2025 seeking revival of the Section 9 petition. The Adjudicating Authority (NCLT, Ahmedabad Bench) revived the CIRP by order dated 03.02.2026.

Aggrieved by the revival of CIRP for non-payment of the balance amount, the Appellant approached the NCLAT.

Procedural Background

When the appeal was taken up on 05.02.2026, the Appellant submitted that the outstanding amount under the settlement would be paid by RTGS or bank draft before the next date. The Tribunal granted time and directed that no further steps be taken pursuant to the revival order in the meantime.

On the next date of hearing, the Appellant handed over a bank draft for ₹39,38,787.77/- to the Respondent, representing the balance settlement amount along with applicable calculations. The entire settlement amount thus stood paid.

The Interim Resolution Professional (IRP) appeared and submitted that there were no other claims against the Corporate Debtor and requested payment of fees and expenses.

Issues

1. Whether CIRP revived on account of partial non-payment under a settlement should continue after full payment is made during pendency of appeal?

2. Whether any further insolvency process is warranted in absence of surviving claims?

Contentions of the Parties

The Appellant contended that revival of CIRP was solely on account of non-payment of ₹39,38,653/- under the settlement and assured payment of the outstanding amount. Upon payment, it was submitted that continuation of CIRP would serve no purpose.

The Operational Creditor accepted the bank draft handed over in court, acknowledging receipt of the balance amount.

The IRP submitted that no other claims had been received against the Corporate Debtor and sought payment of ₹1.95 lakhs towards fees and expenses incurred during the CIRP period.

Reasoning and Analysis

The NCLAT observed that the very basis for revival of CIRP was the non-payment of a portion of the agreed settlement amount. Since the entire settlement sum had now been paid, the substratum of the insolvency proceedings no longer survived.

The bench of Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) noted that insolvency proceedings under the IBC are not meant to operate as a punitive or recovery mechanism once the debt stands fully discharged. In the absence of any subsisting claim and in light of confirmation from the IRP that no other creditors had lodged claims, continuation of CIRP would be unwarranted.

The Appellate Tribunal further directed that the IRP be compensated with ₹1.95 lakhs towards fees and expenses, to be paid within four weeks by the Appellant.

Decision

The appeal was disposed of, and the CIRP against Aksa Paper Mills Pvt. Ltd. was terminated. The Corporate Debtor was declared free from the CIRP process, subject to payment of the IRP’s fees and expenses within four weeks.

In this case the appellant was represented by Mr. Sunil Fernandes, Sr. Advocate with Mr. Atul Sharma, Ms. Aditi Sharma, Ms. Srishti Agarwal and Mr. Kailash Ram, Advocates.Meanwhile the respondent was represented by Mr. Himanshu Satija, Mr. Harsh Saxena, Mr. Anshul Rao, and Mr. Karan Valecha, Advocates.