Court Accepts Joint Memo of Settlement Amid Liquidation Proceedings of Construction Firm
In a notable ruling, the Karnataka High Court has approved a settlement agreement facilitated under the "Vivad se Vishwas - III Scheme," resolving a long-standing dispute between the National Highways Authority of India (NHAI) and M/s. A.L. Sudershan Construction Co. Ltd. The judgment was rendered by a division bench comprising Justice Mrs. Anu Sivaraman and Justice Venkatesh Naik T. on June 15, 2026.
The case stems from a commercial appeal filed by NHAI against an arbitral award dated September 6, 2014, which favored the respondent construction company. The appeal challenged an order passed on March 6, 2021, by the LXXXII Additional Civil & Sessions Judge, Bengaluru.
A significant development in the proceedings was the initiation of the Corporate Insolvency Resolution Process against M/s. A.L. Sudershan Construction Co. Ltd. in May 2022, leading to its liquidation as per the Insolvency and Bankruptcy Code, 2016. Consequently, Shri Kalvakolanu Murali Krishna Prasad was appointed as the Liquidator by the National Company Law Tribunal (NCLT).
Amidst these proceedings, a joint memo was filed indicating an amicable settlement between NHAI and the liquidator of the respondent company. The settlement involved the payment of Rs. 40,80,09,348/- by NHAI, which amounts to 65% of the net award, including interest from December 5, 2014, to May 19, 2026. This was agreed upon under Section 73(2) of the Arbitration and Conciliation Act, 1996.
The High Court acknowledged the settlement, allowing the respondent company to withdraw the deposited sum in its Canara Bank account, with the remaining balance to be returned to NHAI. This decision was taken despite objections raised by an erstwhile director of the respondent company, who argued that the settlement could harm the company's interests.
Justice Anu Sivaraman emphasized that the liquidation process renders the erstwhile director's objections inadmissible in the High Court, noting that any concerns should have been addressed before the NCLT. The court upheld the agreement, recognizing the legitimacy of the stakeholder's consultation committee's decision and the resolution professional’s representation.
This judgment underscores the efficacy of the "Vivad se Vishwas - III Scheme" in resolving disputes and highlights the judicial system's role in facilitating settlements within the framework of insolvency proceedings.
Bottom line:-
Settlement of dispute under Arbitration and Conciliation Act, 1996 facilitated through "Vivad se Vishwas - III Scheme" and upheld by the court during liquidation proceedings under Insolvency and Bankruptcy Code, 2016.
Statutory provision(s):
- Arbitration and Conciliation Act, 1996, Section 37
- Insolvency and Bankruptcy Code, 2016
