2023 (7) TMI 887 - AT - Insolvency and Bankruptcy

Validity of admission of application for initiation of CIRP - Prayer for intervention in the Appeal - One Time Settlement (OTS) proposal submitted by the Corporate Debtor before the UCO Bank on the basis of Expression of Interest received from Lemongrass was already under consideration when the order dated 28.10.2022 was passed admitting Section 7 Application - Applicant s case is that the Applicant is ready and willing to propose a better offer to the Banks in the best interest of Respondent No.1 - HELD THAT - In the present case, the Adjudicating Authority has noticed in the impugned order that there was admission on behalf of the Corporate Debtor of the debt of Rs.50 Crores, which was noticed in paragraphs 8.9 and 8.10 of the order. The present is a case where, there is no denial to the debt and default. On the date when Adjudicating Authority heard the matter and reserved the order, there was no OTS proposal under consideration before the UCO Bank, since according to the Appellant, the letter submitting OTS proposal of Rs.41 Crores was given on 26.10.2022, after it received the Expression of Interest from Lemongrass. Thus, no error can be found in the order of the Adjudicating Authority, admitting Section 7 Application by its order dated 28.10.2022. We, however, cannot be oblivious to the facts and sequence of events, which took place during the pendency of the Appeal. This Tribunal in its order dated 21.11.2022 noticed several difficulties in the running of the Corporate Debtor. This Tribunal noticed that a strategic investor namely M/s. Lemon Grass Organic Tea Limited has entered into an Agreement with the Corporate Debtor to take over three Tea Gardens, which are charged with the UCO Bank subject to entering into and funding the OTS. By the order dated 21.11.2022, certain interim arrangements were made to enable the Corporate Debtor to run as a going concern. The difficulty of payments of wages to the workers, ration to be distributed by the Company to the worker, electricity dues and other dues were taken note of and for mitigating the difficulty in running of the Corporate Debtor, certain directions were issued. The Corporate Debtor is being run as per the said directions till date. The impugned order dated 28.10.2022, admitting Section 7 Application was an order, which cannot be faulted in law - In event of a settlement accepted by the Bank, the Bank is permitted to file an application through IRP to close the CIRP. Coming to the Application filed by the Indian Bank, in event any settlement is entered between the parties and CIRP terminated, the Indian Bank will be free to take its recourse to its rights, either by reviving the Section 7 Application filed earlier or to take up any proceedings in accordance with law. Appeal disposed off.

Issues Involved:
1. Admission of Section 7 Application by UCO Bank.
2. Consideration of One Time Settlement (OTS) Proposal.
3. Impact on the Corporate Debtor's operations and workers.
4. Rights and claims of Indian Bank.
5. Intervention applications by other parties.

Summary of Judgment:

1. Admission of Section 7 Application by UCO Bank:
The National Company Law Tribunal (NCLT), Kolkata bench admitted the Section 7 Application filed by UCO Bank against the Corporate Debtor, M/s Darjeeling Organic Tea Estates Pvt. Ltd., and appointed Mr. Santanu Brahma as Interim Resolution Professional (IRP). The Corporate Debtor admitted a principal amount of Rs.50 Crores payable to UCO Bank, and no One Time Settlement (OTS) had materialized at the time of the order.

2. Consideration of One Time Settlement (OTS) Proposal:
The Corporate Debtor proposed an OTS to UCO Bank, initially offering Rs.41 Crores, which was later increased to Rs.46 Crores. UCO Bank requested an improvement of the OTS offer to Rs.50.79 Crores, which was the Outstanding Ledger Balance (OLB). The Corporate Debtor accepted this offer during the appeal proceedings and communicated its willingness to pay Rs.50.79 Crores. The Tribunal directed UCO Bank to consider this OTS proposal within 60 days.

3. Impact on the Corporate Debtor's Operations and Workers:
The Corporate Debtor operates several Tea Gardens employing over 7000 workers. The Tribunal noted the difficulties in running the Corporate Debtor as a going concern and issued interim directions to ease these difficulties. The Corporate Debtor has been running with financial assistance from M/s Lemongrass Organic Tea Estates Pvt. Ltd., which has invested in the company.

4. Rights and Claims of Indian Bank:
Indian Bank filed a petition under Section 7 against the Corporate Debtor for non-payment of dues amounting to Rs.74.17 Crores. The Tribunal noted that Indian Bank's claims would be addressed if the CIRP continues or if a settlement is reached with UCO Bank. Indian Bank can revive its Section 7 Application or take other legal steps if the CIRP is terminated.

5. Intervention Applications by Other Parties:
Several intervention applications were filed, including by Axis Overseas Ltd. and Ex-Promoters of the Corporate Debtor. These applications were disposed of, with the Tribunal noting the readiness of Axis Overseas Ltd. to propose a better offer to the banks.

Final Directions:
1. The order dated 28.10.2022 admitting the Section 7 Application is not interfered with.
2. The implementation of the order dated 28.10.2022 is stayed for 60 days to allow UCO Bank to consider the OTS proposal of Rs.50.79 Crores.
3. If a settlement is not reached within 60 days, the CIRP proceedings will commence, and the interim directions will become inoperative.
4. Indian Bank can revive its Section 7 Application or take other steps if the CIRP is terminated or continue its claims if the CIRP proceeds.
5. All other intervention/interlocutory applications are disposed of, and parties will bear their own costs.

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