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TMI Blog2024 (2) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... the security was to be released only on payment of the entire settlement amount. Furthermore, when the security provided by the Corporate Debtor had been charged to the Financial Creditor to secure the loan facility, the Financial Creditor cannot be compelled to accede to issue of NoC for sale of these mortgaged properties prior to payment of debt and that too sans any such specific arrangement provided for in the Settlement Agreement. When the Financial Creditor had repeatedly made it clear that they were strictly relying on the terms and conditions of the Settlement Agreement and that NoC would be released only after settlement amount was received, levelling of allegation by the Corporate Debtor that the Financial Creditor was responsible for their default is devoid of force and substance. It is a well settled proposition of law that only two alternative courses of action are available to the Adjudicating Authority under Section 7(5) of the IBC which is to either admit the application under Section 7(5)(a) or reject the petition under Section 7(5)(b). The moment the Adjudicating Authority is satisfied that a default has occurred, the Application is to be admitted unless it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utbreak of Covid pandemic, which affected their business of construction activities and resultant loss of revenue, the Corporate Debtor faced some difficulties in making payments and hence proposed restructuring of its term loan. It was further submitted that while settlement talks were going on between the Appellant-Corporate Debtor and Respondent No.1-Financial Creditor, the latter had filed a Section 7 application seeking initiation of CIRP against the Corporate Debtor. As a part of the settlement process, a communication was sent by the Corporate Debtor to the Financial Creditor on 03.12.2022 by which they agreed to pay Rs. 17 crore to the Financial Creditor upon issuance of provisional No Objection Certificates ( NoC in short) in respect of their 3 properties mortgaged with them. The Adjudicating Authority on being apprised that the parties had reached an out of court amicable settlement, the Adjudicating Authority permitted the Financial Creditor to withdraw the Section 7 application vide its order dated 29.03.2023. 3. The Learned Counsel for the Appellant further submitted that following the Settlement Agreement between the two parties dated 08.02.2023, the Corporate Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Corporate Debtor never disputed their debt liability even after receipt of the loan recall letter. No reply was either sent by the Corporate Debtor to the loan recall which shows admission of debt and default. 5. While admitting that the two parties had entered into a Settlement Agreement on 08.02.2023, it was asserted that the Settlement Agreement did not make any mention about grant of NoC or release of security by the Financial Creditor before the payment of the settlement amount. It was further stated that the Financial Creditor was secured by way of mortgage over the properties and personal, corporate guarantees and contractual comforts given by the Corporate Debtor and hence the question of their release before settlement amount was paid did not arise. 6. It has been contended that the Appellant does not have any intention to repay the debt which is clear from their default of the loan facility agreement which persisted even under the Settlement Agreement. It was strenuously contended that the Appellant having continued to default and failed to pay the settlement amount contained therein within the agreed timelines, the Adjudicating Authority correctly allowed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Learned Counsel for the Respondent No. 1 that in terms of the Settlement Agreement of 08.02.2023, the charge on the mortgaged properties was clearly to be released only upon the receipt of the settlement amount of Rs.17 crore within 90 days from the date of the Settlement Agreement. That this amount was not received from the Appellant within the negotiated time-frame of 90 days tantamount to a default. Thus, having violated the Settlement Agreement, the Corporate Debtor is trying to cover up the breach on their part by craftily shifting the blame on the Financial Creditor that they did not issue the provisional NoCs. It was emphatically asserted that the Settlement Agreement did not bind the Financial Creditor to issue provisional NoCs and any such interpretation amounts to be in the nature of mis-constructing the provisions of the Settlement Agreement. It was also pointed out that the conduct or the bonafide of the Financial Creditor cannot be put to question in the light of the fact that they had agreed to ink the Settlement Agreement even after having filed a Section 7 application thereby offering ample latitude and opportunity to the Corporate Debtor to liquidate their deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and severally, unconditionally and unequivocally, agree and confirm that as on January 25, 2022, the total outstanding amounts owed to ICICI Bank under the Facility is INR 1,928,722,629.0 (Rupees One Thousand Nine Hundred and Twenty Eight Million Seven -Lakh Twenty Two Thousand Six Hundred and Twenty Nine) ( Outstanding Dues ). 2. SETTLEMENT AMOUNT 2.1 The Borrower undertakes and agrees to make payment of INR 170.0 million(Rupees One hundred and seventy million only) ( Settlement Amount ) to ICICI Bank, towards full and final settlement of an amounts due and payable under the Facility, including the Outstanding Dues, within 90 (Ninety) days from the date the execution of this Settlement Agreement. Payment of the said settlement Amount shall be made by way of RTGS/NEFT. 3. TERMS OF SETTLEMENT i. Borrower shall make payment of the Settlement Amount within 90 (ninety) days from the date of execution of this Settlement Agreement, as per the provisions of clause 2.1 of this Settlement Agreement. ii. Post receipt of the entire Settlement Amount to the satisfaction of ICICI Bank, ICICI Bank shall: (a) issue no dues certificate in relation to the Facility. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the OTS proposal of the Financial Creditor dated 03.12.2022, the parties are desirous of entering into a Settlement Agreement on agreed terms and conditions. 12. The above recitals having been signed by both the parties willingly and consensually and not having been disputed, we notice that the Settlement Agreement has clearly noted that there was a debt qua the Financial Creditor and that the Corporate Debtor had clearly defaulted in discharging their debt obligations. Further with a view to settle the terms and conditions for repayment of this outstanding debt, the present Settlement Agreement was proposed to be entered. 13. Now coming to the specific clauses of the Settlement Agreement, a glance at Clause 1 thereof shows that the Corporate Debtor has again unconditionally and unequivocally admitted the debt of Rs. 192.87 crore as on 25.01.2022. Further, Clause 2.1 of the Settlement Agreement stipulates the full and final settlement amount to be Rs. 17 crore payable by the Financial Creditor within 90 days from the date of execution of the Settlement Agreement. More importantly, Clause 3(ii)(a) and (b) clearly mention that post receipt of settlement amount, the Financial C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compelled to accede to issue of NoC for sale of these mortgaged properties prior to payment of debt and that too sans any such specific arrangement provided for in the Settlement Agreement. 17. We also notice from the additional affidavit placed on record by the Respondent No.1 that the Financial Creditor had sent emails on 04.05.2023, 08.05.2023 and 26.06.2023 to the Corporate Debtor making it unambiguously clear that in terms of the Settlement Agreement of 08.02.2023 the charge on the mortgaged properties will be released only upon the receipt of the settlement amount of Rs. 17 crore within 90 days from the date of the Settlement Agreement and that this amount has not been received. Per contra, the Corporate Debtor has not placed anything on record to substantiate that the Financial Creditor had deviated/violated/contravened the terms and conditions of the Settlement Agreement. Thus, when the Financial Creditor had repeatedly made it clear that they were strictly relying on the terms and conditions of the Settlement Agreement and that NoC would be released only after settlement amount was received, levelling of allegation by the Corporate Debtor that the Financial Creditor was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Agreement had clearly acknowledged debt and default. We find that under Clause 1 of the Settlement Agreement, it has been admitted unconditionally and unequivocally by the Corporate Debtor that the amounts due and payable to the Financial Creditor as on 25.01.2023 was Rs.192.87 crore. In Clause 2 of the Settlement Agreement, the Corporate Debtor had agreed to pay Rs.17 crore within 90 days from the date of the Agreement. This clause was breached as the settlement amount was not paid by the Corporate Debtor within the prescribed time frame of 90 days. Hence, the Adjudicating Authority on 02.08.2023 had restored the main company petition which was in consonance with the understanding reached between the two parties as outlined in Clause 5 of the Settlement Agreement. On perusal of material on record, we find that during the hearing on the restoration of the main company petition, the Corporate Debtor was represented. After noting that the present Appellant/Corporate Debtor had sought time to file additional documents, the matter was reserved for hearing by the Adjudicating Authority on 25.09.2023. This order of 02.08.2023 having not been challenged has acquired finality and at this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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