NCLT admitted CIRP plea against corporate debtor for failing to make payment under terms of a settlement agreement

Case Details: Satish Sadashiv Rane v. Shah Group Builders Ltd. - [2021] 131 taxmann.com 270 (NCLT - Mum.)

Judiciary and Counsel Details

• • Rajesh Sharma, Technical Member and Mrs. Suchitra Kanuparthi, Judicial Member
  • Ansh Bhanot, Adv. and Ms. Priyanka Zaveri, Adv. for the Petitioner. 
  • Nitin Thakker, Adv. for the Respondent.

Facts of the Case

In the instant case, an application under section 7 of the Insolvency and Bankruptcy Code, 2016 was filed by the financial creditor against the corporate debtor for failing to make payment under the terms of the settlement agreement, and the said application was admitted by NCLT.

The financial creditor and corporate debtor subsequently executed a settlement agreement to settle outstanding loan obligations of the corporate debtor and to bring the corporate debtor out from the Corporate Insolvency Resolution Process (CIRP) and accordingly, the corporate debtor issued post-dated cheques to the financial creditor.

After entering into the settlement agreement, the corporate debtor approached NCLAT to record said settlement agreement and to set aside the CIRP proceedings.

NCLT Held

The NCLT after hearing both the parties set aside an admission order. However, when the financial creditor deposited cheques issued by the corporate debtor, and same were dishonored. Upon the occurrence of such default in repayment, the financial creditor filed an instant petition to set in motion the CIRP process against the corporate debtor.

NCLT held that the parties had executed the settlement agreement and the corporate debtor was obligated to strict adherence of terms and conditions of payment which he obliterated and committed default of payment terms.

Since the corporate debtor has committed default of payment terms under the settlement agreement. Hence, the financial creditor exercised his rights under the settlement agreement and has filed the instant petition. The petition filed by the financial creditor which was in compliance with provisions was admitted declaring a moratorium.