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

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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

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