CIRP proceedings were to be restored where corporate debtor breached the terms of Settlement: NCLAT

  • Blog|News|Insolvency and Bankruptcy Code|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 21 June, 2022

Recent Posts

Blog, News, Income Tax

No TDS on Payments to Credit Guarantee Fund Trust for MSEs Referred in Section 10(46B) | CBDT

Blog

Assessee to Pursue Pending Proceedings Before Appellate Authority Instead of Filing Writ Petition | HC

Latest from Taxmann

corporate debtor; CIRP proceedings

Case Details: ICICI Bank Ltd. v. OPTO Circuits (India) Ltd - [2022] 139 taxmann.com 348 (NCLAT-Chennai)

Judiciary and Counsel Details

    • M. Venugopal, Judicial Member & Kanthi Narahari, Technical Member
    • V. Suresh, Dev Eshwaar, Sivakumar & Suresh Advs. for the Appellant.
    • Samarth Shreedhar, Navaneetha Krishnan, N.P. Vijaya Kumar, Advs. & P. Srivastava Erstwhile R.P., for the Respondent.

Facts of the Case

In the instant case, the appellant bank (the financial creditor) had extended some credit facilities to the corporate debtor. The corporate debtor defaulted on payment of the amount of Rs. 107.86 crores. The appellant bank filed CIRP against the corporate debtor.

The corporate debtor challenged the order by filing a writ petition before the High Court of Karnataka and the order admitting the above application was stayed by the High Court. During the pendency of the writ petition, the corporate debtor approached the appellant bank with a one-time settlement (OTS) proposal, agreeing to pay a sum of Rs. 22.7 crores as a full and final settlement, which was accepted by the appellant bank vide OTS letter.

Subsequently, an application under section 12A was filed by the corporate debtor before NCLT, seeking termination of CIRP as one time settlement was entered between the parties. During the course of the hearing, the appellant bank filed a memo, thereby, seeking liberty to revive/restore the CIRP admission order as passed by the Adjudicating Authority, in the event of failure of the corporate debtor to adhere to the terms of the settlement.

The NCLT, vide impugned order, refused to allow the request made in the memo and instead granted liberty to the appellant to file a fresh application in accordance with the provisions of the IBC.

An appeal was filed before the Hon’ble National Company Law Appellate Tribunal (NCLAT) against the order of the NCLT.

NCLAT Held

NCLAT observed that the Adjudicating Authority committed a grave error in giving liberty to the appellant to file a fresh company petition instead of giving liberty to revive the CIRP Proceedings in case the corporate debtor failed to adhere to comply with the terms of settlement in the strict sense. Even the Adjudicating Authority failed to take note of the decision of the Appellate Tribunal being the Appellate Authority as a precedent in a similarly situated case.

Accordingly, it was held that in the event of default not adhering to the terms of the ‘settlement agreement’ as regards the payment of the outstanding installments, the ‘financial creditor’ shall be at liberty to seek revival of the CIRP proceedings before the Adjudicating Authority.

List of Cases Reviewed

    • Order passed by NCLT, Bengaluru Bench, Bengaluru in I.A. No. 273 of 2020 in CP (IB) No. 199/BB/2018, dated 17-8- 2020 (para 23) reversed.

List of Cases Referred to

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied