2023 (8) TMI 1052 - AT - Insolvency and Bankruptcy

Seeking closing of CIRP process - HELD THAT - From the facts which have been recorded in the Settlement Agreement, it is clear that the Corporate Debtor has defaulted in making payment to the Operational Creditor since 2015 and the Settlement Agreement dated 27.09.2021 was also breached since payment as per the Settlement Agreement was not discharged by the Corporate Debtor. The Settlement Agreement, thus, clearly contemplates that in event of default, the Operational Creditor shall continue with the existing pending proceedings. The default having been committed by the Corporate Debtor, it is not open for the Corporate Debtor to insist that the Operational Creditor should not continue the proceedings. From the Settlement Agreement it is also clear that on account of breach the entitlement of Operational Creditor was Rs.92.70 Crores minus Rs.25 Lakhs with interest @12%. At time when the CoC was not constituted, there can be no impediment in power of Adjudicating Authority to exercise jurisdiction under Rule 11 to close the CIRP even if no application as per the procedure under Section 12A r/w Regulation 30A has been filed. The Adjudicating Authority itself has recorded finding that application filed by the Applicant was maintainable, which finding is recorded in Para 10 of the order. Thus, the mere fact that there are claims of other creditors against the Corporate Debtor are not impediment for closing the CIRP filed by an Applicant either under Section 7 or Section 9, if the Applicant enters into settlement with the Corporate Debtor and the debt is liquidated but present is a case where offer given by the Appellant in its application under I.A. No. 1571 of 2023 came after breach of the Settlement Agreement at the stage when Appeal against the admission order was dismissed by this Tribunal and the said order was upheld by the Hon ble Supreme Court - CIRP against the Corporate Debtor need not be closed and be allowed to complete its due course in accordance with law. Appeal dismissed.

Summary

Issues Involved:
1. Validity of the Settlement Agreement and its breach.
2. Admissibility of the application for closure of CIRP.
3. Role and rights of Homebuyers in the CIRP process.
4. Jurisdiction of the Adjudicating Authority to close CIRP before CoC constitution.

Summary:

Validity of the Settlement Agreement and its Breach:
The Corporate Debtor, Chandigarh Overseas Pvt. Ltd., acknowledged dues to the Operational Creditor, Kone Elevator India Pvt. Ltd., and entered into a Settlement Agreement on 27.09.2021 to settle for Rs. 60 Lakhs. Despite partial payments, the Corporate Debtor defaulted on subsequent payments, breaching the Settlement Agreement. The agreement stipulated that in case of default, Kone could continue with insolvency proceedings to claim the entire debt of Rs. 92.70 Lakhs with interest.

Admissibility of the Application for Closure of CIRP:
Tejinder Pal Setia filed I.A. No. 1571 of 2023 to close the CIRP, offering to liquidate the debt. Despite the offer, the Adjudicating Authority rejected the application, emphasizing the breach of the Settlement Agreement and lack of mutual agreement between the parties. The Tribunal upheld that the Corporate Debtor's failure to adhere to the Settlement Agreement and subsequent offers did not justify closing the CIRP.

Role and Rights of Homebuyers in the CIRP Process:
Homebuyers, who filed a Section 7 application for claims exceeding Rs. 121 Crore, were impleaded in the CIRP process. The Tribunal recognized their substantial claims and the necessity for insolvency resolution, reinforcing the decision to continue the CIRP.

Jurisdiction of the Adjudicating Authority to Close CIRP Before CoC Constitution:
The Tribunal acknowledged that the Adjudicating Authority has inherent jurisdiction to close CIRP before CoC constitution under Rule 11. However, it concluded that given the Corporate Debtor's history of defaults and substantial liabilities, the CIRP should proceed. The Tribunal noted that the CoC was constituted on 27.07.2023, and any closure of CIRP now would require 90% approval from the CoC.

Conclusion:
The Tribunal dismissed both appeals, affirming that the CIRP should continue due to the Corporate Debtor's repeated defaults, significant claims from Homebuyers, and the necessity for a comprehensive insolvency resolution process.