2022 (2) TMI 1221 - Tri - Insolvency and Bankruptcy

Maintainability of application - seeking to declare the Applications filed under Section 7 and 95 of IBC, 2016 filed by the Respondents as Applications filed with malicious intent - HELD THAT - The crux of the contention pertains to the indecision of the Financial Creditor in not taking a decision on the CTS proposal given by the Applicants. In any case, this Tribunal cannot pass any direction to the Financial Creditor to accept or reject an OTS proposal. Also the non-acceptance of the OTS proposal by the Financial Creditor would not act as an embargo for this Tribunal to pass an order n an Application filed under Section 7 and 95 of IBC, 2016. Application dismissed.

Summary

Issues:
Application to declare applications filed with malicious intent under Sections 7 and 95 of IBC, 2016.

Analysis:
The judgment by the National Company Law Tribunal, Chennai, involved an application seeking to declare applications filed under Sections 7 and 95 of the Insolvency and Bankruptcy Code, 2016 as having malicious intent. The Corporate Insolvency Resolution Process (CIRP) for the Corporate Debtor was initiated earlier, with the Applicants being Personal/Corporate Guarantors. The Financial Creditor, exercising a significant vote share in the Committee of Creditors (CoC), received an One Time Settlement (OTS) proposal from the Applicants for withdrawal of the CIRP. Despite a revised OTS proposal submitted by the Applicants, the CoC did not communicate its decision within the stipulated time frame, leading to allegations of malice by the Financial Creditor.

The Applicant contended that the CoC's failure to respond to the OTS proposal within the prescribed period indicated malice on the part of the Financial Creditor. However, the Tribunal noted that it cannot compel the Financial Creditor to accept or reject an OTS proposal. The non-acceptance of the OTS proposal does not prevent the Tribunal from adjudicating on applications under Sections 7 and 95 of the IBC, 2016. Ultimately, the Tribunal dismissed the application seeking to declare the Respondents' applications as having malicious intent, citing the inability to direct the Financial Creditor's decision on the OTS proposal as a key factor in the decision.

Therefore, the judgment underscores the Tribunal's limited authority in influencing the acceptance or rejection of OTS proposals by Financial Creditors and affirms that such decisions do not impede the Tribunal's jurisdiction to rule on insolvency applications under the IBC, 2016. The dismissal of the application highlights the importance of adherence to statutory timelines and the separation of powers between the Tribunal and the CoC in insolvency proceedings.