2020 (12) TMI 807 - Tri - Insolvency and Bankruptcy

Maintainability of Application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - Since the dispute has been settled between the parties and in view of the withdrawal memo along with Memorandum of Understanding filed by the Operational Creditor to withdraw the IBA, nothing survives for further consideration. Application stands dismissed as withdrawn.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process under Section 9 of IBC.
2. Settlement between Operational Creditor and Corporate Debtor.

Analysis:

Issue 1: Initiation of Corporate Insolvency Resolution Process under Section 9 of IBC

The Operational Creditor filed an application under Section 9 of the Insolvency and Bankruptcy Code against the Corporate Debtor for non-payment of dues amounting to ?1,43,33,008. The Operational Creditor issued a Section 8 demand notice on 9.12.2019, and despite a partial payment of ?3,00,000 on 1.2.2020, a substantial balance remained unpaid. The Corporate Debtor did not respond to the demand notice within the stipulated timeframe, leading to the initiation of the insolvency resolution process. The matter progressed with delays from the Corporate Debtor's side, seeking time for settlement discussions. Eventually, a settlement was reached between the parties, leading to the withdrawal of the insolvency application.

Issue 2: Settlement between Operational Creditor and Corporate Debtor

A Memorandum of Understanding (MOU) was executed between the Operational Creditor and the Corporate Debtor for a full and final settlement of the outstanding dues. As per the MOU, the Corporate Debtor agreed to pay ?1,26,55,586 against the principal dues outstanding along with an interest rate of 12% per annum. The repayment was structured in installments over a specified schedule, with post-dated cheques provided as security. The MOU outlined the consequences of default, allowing the Operational Creditor to initiate fresh proceedings under the Insolvency and Bankruptcy Code if payments were not made as agreed. The MOU superseded all prior agreements and was deemed final upon execution.

In light of the settlement reached between the parties and the withdrawal of the insolvency application by the Operational Creditor, the Tribunal dismissed the application. Both parties were directed to adhere strictly to the conditions outlined in the Memorandum of Understanding. The judgment emphasized the importance of honoring the settlement terms to avoid further legal action.

Overall, the judgment highlights the significance of timely payments, adherence to legal procedures, and the effectiveness of settlements in resolving disputes and avoiding insolvency proceedings under the Insolvency and Bankruptcy Code.