Case Details:
Court:
Ratio: In case of breach of the terms of settlement agreement, a creditor can revive/restore the Corporate Insolvency Resolution Process ('CIRP') before the adjudicating authority.
Judgment date:
Act/Law: Insolvency and Bankruptcy Code, 2016 ('IBC')
Facts:
OPTO Circuits (India) Limited ('CD') had approachedICICI Bank Limited ('FC') for various credit facilities and availed non-fund based working capital facilities of a stand-by letter of credit by way of Credit Agreement Letters.-
Thereafter, default was committed by the CD to the tune of
Rs. 1,07,85,59,340.96 /-. After the default, the FC filed an application under Section 7 of the IBC before the NCLT, Bangalore Bench ('Adjudicating Authority') to initiate the CIRP of the CD. The Adjudicating Authority admitted application by order datedMarch 18, 2020 and initiated the CIRP of the CD. -
The CD filed a writ petition before the
High Court of Karnataka challenging the order datedMarch 18, 2020 of the Adjudicating Authority admitting the insolvency petition and theHigh Court granted interim stay onMarch 24, 2020 , which was subsequently extended. -
During the subsistence of the interim stay, the CD approached the FC with a one-time settlement offer to pay a sum of
Rs. 22.7 crore towards full and final settlement. OnJuly 14, 2020 the FC accepted the CD's offer. Further to the said offer, the CD made a payment ofRs. 4.5 crores to the FC as an upfront payment and the balance amount ofRs. 18.2 crores was to be paid within a period of three months from the date of acceptance of one-time settlement. -
The CD filed an interim application before the Adjudicating Authority seeking termination of the CIRP initiated against it in view of the settlement arrived with the FC. The FC sought liberty to revive/restore the insolvency petition in case of any default by the CD in complying with the terms of settlement. The Adjudicating Authority vide order dated
August 17, 2020 instead of allowing the FC to revive/restore the insolvency proceedings, gave liberty to the FC to file a fresh petition seeking insolvency in accordance with the provisions of the IBC. -
The FC filed an appeal before the NCLAT against the order dated
August 17, 2020 seeking setting aside of the same to the extent it gave liberty to the FC to file a fresh petition instead of reviving/restoring the CIRP in case of default of settlement by the CD. -
In an earlier case of
Vivek Bansal vsBurda Druck India Pvt. Ltd. , the NCLAT gave liberty to an Operational Creditor to revive/restore the CIRP before the Adjudicating Authority. Accordingly, the order of the Adjudicating Authority, in the present case did not follow the precedent set by the NCLAT inVivek Bansal's case.
The NCLAT vide its judgment dated
"It is made clear that in the event of default not adhering to the terms of 'settlement agreement' as regards the payment of the outstanding instalments, the 'Financial Creditor' shall be at liberty to seek revival/restoration of the 'Corporate Insolvency Resolution Process' proceedings before the Adjudicating Authority."
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