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2021 (7) TMI 855 - Tri - Companies LawMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditors - existence of debt and dispute or not - breach of payment terms by the corporate Debtor under the Settlement Agreement - HELD THAT - It is an undisputed fact 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. Post admission of CIRP against the Corporate Debtor on 14.02.2019, the parties executed the Settlement Agreement dated 28.02.2019 and the Corporate Debtor filed the same before the Hon ble NCLAT. The Corporate Debtor has committed default of payment terms and cheques for the month of April and May were dishonored. The corporate Debtor vide letter dated 22 May, 2019 promised to pay an amount of ₹ 50,00,000/ and requested not to take any legal action. All the terms of payment were again defaulted and the cheque in June were also dishonored. Hence the petitioner exercised his rights under the Settlement Agreement and has filed the present petition - There is a debt and default of payment terms of settlement Agreement dated 28.02.2019 and all ingredients of Sec7 of I B code are thus satisfied and petition is thus admitted. The matter was listed on 9.08.2019, when the corporate debtor failed to appear and notice was issued, thereafter on 26.08.2019, the corporate debtor appeared and handed over a cheque of ₹ 1 Crore to the petitioner prove his bonafides and explore the possibilities of settlement. On 17.09.2019, the Learned Senior Counsel for the Corporate Debtor sought three weeks time to make a clear proposal and handed over a demand draft of ₹ 1 crore in lieu of the bounced cheque - The Corporate Debtor failed to file any reply. On 05.05.2021, the matter was posted for pronouncement of orders, however, in view of orders passed in application seeking extension of time for the undertaking of payment of monies, the pronouncement of orders was deferred till 05.07.2021. On 05.07.2021, the matter was adjourned to 08.07.2021, the counsels from both sides were present and it was informed that the amounts were not paid. There is a clear default of non- payment of monies by Corporate Debtor and hence the petition is admitted. Petition admitted - moratorium declared.
Issues Involved:
1. Breach of payment terms under the Settlement Agreement. 2. Default in repayment obligations by the Corporate Debtor. 3. Revival of Corporate Insolvency Resolution Process (CIRP). Issue-wise Detailed Analysis: 1. Breach of Payment Terms under the Settlement Agreement: The primary issue addressed is whether the Corporate Debtor breached the payment terms outlined in the Settlement Agreement dated 28.02.2019. It is undisputed that the parties executed the Settlement Agreement, and the Corporate Debtor was obligated to adhere strictly to the payment terms. The Corporate Debtor defaulted on these terms, as evidenced by the dishonored post-dated cheques for the months of April and May. The Hon'ble NCLAT had set aside the CIRP admission order on 07.03.2019, contingent on the Corporate Debtor's compliance with the Settlement Agreement, including the encashment of post-dated cheques. 2. Default in Repayment Obligations by the Corporate Debtor: The Corporate Debtor issued post-dated cheques totaling ?6,25,00,000 to the Financial Creditor and agreed to clear the bank loan account by 31.08.2019. However, multiple cheques were dishonored due to insufficient funds, and the Corporate Debtor failed to meet the repayment milestones outlined in the Settlement Agreement. Despite repeated assurances and revised payment schedules, the Corporate Debtor continued to default on its repayment obligations. The Corporate Debtor's actions, including the dishonoring of cheques and failure to adhere to revised payment promises, constituted a material default under the Settlement Agreement. 3. Revival of Corporate Insolvency Resolution Process (CIRP): The Settlement Agreement explicitly stated that any default in repayment, including dishonored cheques, would allow the Financial Creditor to revive the CIRP proceedings. Given the repeated defaults by the Corporate Debtor, the Financial Creditor exercised this right and filed the present petition. The Tribunal found that the Corporate Debtor had committed a default of payment terms under the Settlement Agreement, satisfying all the ingredients of Section 7 of the Insolvency & Bankruptcy Code (IBC). Consequently, the petition was admitted, and the CIRP was revived. Findings and Order: The Tribunal concluded that there was a clear breach of payment terms by the Corporate Debtor under the Settlement Agreement. The Corporate Debtor's defaults, including dishonored cheques and failure to adhere to revised payment schedules, were irrefutable evidence of the default. The Tribunal admitted the petition, declared a moratorium, and appointed an Interim Resolution Professional (IRP) to carry out the functions under the Code. The moratorium prohibits the institution or continuation of suits against the Corporate Debtor and ensures the supply of essential goods or services is not interrupted during the moratorium period. The order of moratorium will remain in effect until the completion of the CIRP or approval of a resolution plan. Conclusion: The Tribunal's judgment comprehensively addressed the breach of payment terms by the Corporate Debtor, the subsequent default in repayment obligations, and the revival of the CIRP. The Tribunal admitted the petition, declared a moratorium, and appointed an IRP, ensuring compliance with the provisions of the Insolvency & Bankruptcy Code.
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