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2022 (9) TMI 222 - AT - Insolvency and BankruptcyApplication for CIRP admitted - One Time Settlement - Corporate Debtor failed to comply with the terms and conditions of OTS Proposal - HELD THAT - There is no dispute between the parties that offer of 60 Crores made by the Appellants in regard to the dues of all the three Companies was accepted by the Bank and deposit of Rs. 3 Crore was also noticed by the Bank. Under the OTS, Appellants were to deposit Rs. 1.5 Crore each month. The OTS Proposal has been cancelled on 31st July, 2019. The Adjudicating Authority in paragraph 3 of the Order has noticed that Corporate Debtor has failed to comply with the terms and conditions of OTS Proposal. The Adjudicating Authority held that the Corporate Debtor defaulted in making payment towards the liability of the Bank, Company Petitions deserve to be admitted. It is well settled that although settlement between the parties to be encouraged but the Court/this Tribunal cannot direct the Bank to accept the OTS as claimed for by the Corporate Debtors. Principle of Judicial Discipline is to be adhered to by all to ensure hierarchical discipline and for proper dispensation of justice but as noticed above in the present case, there is no breach of any judicial discipline by the NCLT as claimed by the Appellants. There was no Interim Order of the High Court restraining the NCLT to proceed with the concerned applications or not to pronounce any Judgment when the matter was heard and reserved for order even prior to passing of the Interim Order of the High Court. Further the Interim Order of the High Court directed to maintain status quo by both the parties i.e. Bank and the Corporate Debtors that cannot be read as any restraint to the NCLT. No error has been committed by the Adjudicating Authority in admitting Section 7 Applications against the Corporate Debtors - Appeal dismissed.
Issues Involved:
1. One Time Settlement (OTS) Proposal Rejection 2. Adjudicating Authority's Admittance of Section 7 Applications 3. High Court's Status Quo Order and Its Impact on NCLT Proceedings Issue-wise Analysis: 1. One Time Settlement (OTS) Proposal Rejection: The Corporate Debtors had applied for OTS with the Bank in March 2018, which was approved for Rs. 60 Crores by letter dated 27.12.2018. However, the Corporate Debtors failed to comply with the OTS terms, depositing only Rs. 6.79 Crores instead of the required Rs. 16.50 Crores by July 2019. Consequently, the Bank declared the OTS failed on 31st July 2019. The Adjudicating Authority noted this failure and proceeded with the Section 7 Applications. The Appellate Tribunal upheld this decision, stating that although settlements should be encouraged, the Tribunal cannot compel the Bank to accept an OTS proposal. 2. Adjudicating Authority's Admittance of Section 7 Applications: The Bank filed Section 7 Applications under the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtors after they were declared Non-Performing Assets (NPA). The Adjudicating Authority admitted these applications and initiated the Corporate Insolvency Resolution Process (CIRP) on 23rd August 2019. The Appellate Tribunal found no fault in this decision, emphasizing that the Corporate Debtors had defaulted on their liabilities and failed to comply with the OTS terms. 3. High Court's Status Quo Order and Its Impact on NCLT Proceedings: The Corporate Debtors filed a writ petition in the High Court of Meghalaya, which directed the parties to maintain status quo till 26th August 2019. However, the Adjudicating Authority proceeded to pronounce its order on 23rd August 2019, as the matter had been heard and reserved for orders on 14th August 2019. The Appellate Tribunal noted that the High Court's order did not explicitly restrain the NCLT from proceeding. The Tribunal held that there was no breach of judicial discipline by the NCLT, as the High Court's status quo order was directed at the parties and not the NCLT proceedings. Conclusion: The Appellate Tribunal dismissed all three appeals, upholding the Adjudicating Authority's decision to admit the Section 7 Applications and initiate CIRP against the Corporate Debtors. The Tribunal found no merit in the arguments regarding the OTS proposal and the High Court's status quo order.
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