No default in repayment occurred where corporate debtor paid portion as per settlement but failed to buy-back its shares

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  • Last Updated on 14 September, 2022

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Case Details: Stressed Assets Stabilization Fund v. Delta International Ltd. - [2022] 142 taxmann.com 55 (NCLT-Kolkata)

Judiciary and Counsel Details

    • Harish Chander Suri, Technical Member & Rohit Kapoor, Judicial Member
    • Ms Manju Bhuteria & Ms Gunja Pachisia, Advs. for the Appellant.
    • Joy Saha, Sr. Adv., Sarvapriya Mukherjee, Ms Rajshree Kajaria & Ms Uttam Sharma, Advs. for the Respondent.

Facts of the Case

The respondent-corporate debtor availed credit facilities of Rs. 7.5 crores from appellant-financial creditor. Thereafter, negotiation settlement was made between the financial creditor and the corporate debtor, in terms whereof the financial creditor agreed to accept Rs. 8.5 crores in full and final settlement consisting of cash portion of Rs. 7.5 crores and 10 lakh equity shares with face value of Rs. 10 per share of the corporate debtor. Said negotiation settlement was modified from time-to-time.

Thereafter, in view of the failure of the corporate debtor to make payment of the negotiated settlement, same was revoked and the financial creditor filed instant application to initiate corporate insolvency resolution process on account of the default of the corporate debtor in buying back the shares in terms of the negotiated settlement.

NCLT Held

The corporate debtor however submitted that there was no default in payment of the negotiated settlement amount of Rs. 7.5 crores in as much as the same had been fully paid and accepted by the financial creditor thus, the financial creditor could not disown and/terminate the said negotiated settlement agreement .

It was noted that cash portion of Rs. 7.5 crores had already been paid by corporate debtor and only default of corporate debtor was its failure to buy back its share of Rs. 1 crore with minimum yield of 13 per cent per annum.

Further, the corporate debtor was still ready and willing to pay amount of Rs. 1 crore on account of equity along with minimum yield at rate of 13 per cent. It was held that since there was no financial debt or default in repayment of debt in terms of provision of I&B Code, instant application filed under section 7 was to be rejected.

List of Cases Referred to

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