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2021 (3) TMI 684 - AT - Insolvency and BankruptcyReinstating CIRP - Failure of corporate debtor to replay as per the settlement agreement - essence of time in the Settlement Agreement - Section 9 of IBC - debt due and payable by Operational Creditor - allegation is that Adjudicating Authority has gone beyond the mandate of Section 9 of the IBC in passing the Impugned Order - Appellant has claimed that the timeline of payment of instalments that was agreed by both the parties was the essence of the contract , as mentioned in Clause 8 of the Settlement with further stipulation that the Corporate Debtor would not seek any extension in these timelines - HELD THAT - The time was not of essence in the Settlement Agreement. Hence any consequence upon default due to delay in payments cannot fall on the Respondent. From the observation of facts presented above, we come to this inference that a fresh application under Section 9 of IBC cannot be triggered in accordance with Clause 11 of the Settlement Agreement. Since the Appellant accepted delayed payments of certain instalments without raising a demur or objection, his conduct led the Respondent to believe that some delay in payment was acceptable to the Appellant which would prima facie imply that time was not of essence in the Settlement Agreement. Thus, time was not of essence in the Settlement. Whether any compensation should accrue to the Appellant or not is not a matter for adjudication in this appeal. Also whether Section 62 of the Contract Act, 1872 will apply in the present case, which would change the contract to a new one is not relevant in the present appeal. If the Appellant has any grievance on this account, he could certainly approach the appropriate forum for redressal on this issue which relates to the enforcement of the Settlement Agreement and whether it will be substituted by a new one, if it so wishes. The Settlement Agreement, as has been operated by both the parties, does not show that time was of essence in it - appeal dismissed.
Issues Involved:
1. Whether the Adjudicating Authority went beyond the mandate of Section 9 of the Insolvency and Bankruptcy Code (IBC). 2. Whether the unpaid operational debt was fully settled under the Settlement Agreement. 3. Whether the Corporate Debtor defaulted on the payment schedule as per the Settlement Agreement. 4. Whether time was of the essence in the Settlement Agreement. 5. Whether the Appellant could initiate a fresh application under Section 9 of the IBC. Issue-wise Detailed Analysis: 1. Whether the Adjudicating Authority went beyond the mandate of Section 9 of the Insolvency and Bankruptcy Code (IBC): The Appellant argued that the Adjudicating Authority exceeded its mandate under Section 9 of the IBC by dismissing the application for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Adjudicating Authority held that it was not the forum for enforcing the Settlement Agreement and suggested other legal remedies for the Operational Creditor. 2. Whether the unpaid operational debt was fully settled under the Settlement Agreement: The Settlement Agreement dated 11.01.2018 was entered into between the parties, under which the Corporate Debtor agreed to settle the operational debt of ?8,82,11,723/- at a reduced amount of ?3.70 crores, payable in 37 instalments. The Hon'ble Supreme Court took the Settlement on record and set aside the earlier order initiating CIRP. 3. Whether the Corporate Debtor defaulted on the payment schedule as per the Settlement Agreement: The Appellant claimed that the Corporate Debtor defaulted on the payment schedule, making multiple delays between January 2018 to August 2018. As per Clause 9 of the Settlement, such defaults would revoke all concessions, making the total amount of ?8,82,11,723/- payable. The Respondent argued that payments were made, though some were delayed, and the Appellant accepted these payments without objection, indicating that time was not of the essence. 4. Whether time was of the essence in the Settlement Agreement: The Tribunal examined whether time was of essence in the Settlement Agreement. Clause 8 of the Settlement stated that the timeline was the "essence of the contract," and Clause 9 provided for the withdrawal of concessions upon default. However, the Tribunal found that the Appellant's acceptance of delayed payments without objection indicated that time was not of essence. The Tribunal referred to judgments that supported the notion that acceptance of delayed payments implies that time is not of essence. 5. Whether the Appellant could initiate a fresh application under Section 9 of the IBC: The Tribunal concluded that since time was not of essence in the Settlement Agreement and the Corporate Debtor had paid the full settlement amount by January 2021, the conditions for reinstating or filing a fresh application under Section 9 of the IBC were not met. The Tribunal upheld the Adjudicating Authority's decision to dismiss the application. Conclusion: The Tribunal found that the Appellant failed to establish that time was of essence in the Settlement Agreement and that the Corporate Debtor had paid the full settlement amount. Consequently, the conditions for initiating a fresh application under Section 9 of the IBC were not triggered. The appeal was dismissed, and the order of the Adjudicating Authority was upheld. There was no order as to costs.
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