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TMI Blog2024 (6) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ult (as on 16.06.2020); and (c) Balance sheet of the Corporate Debtor for FY 2017-18. Further, it is not hit by Section 10A, as the date of default as per Part IV of Section 7 petition is 15.12.2019. Impact of the One Time Settlement Agreement - HELD THAT:- While the OTS agreement shows the Corporate Debtor s intent to settle the dues, the failure to adhere to its terms, even considering external factors such as the High Court s order, cannot nullify the Financial Creditor's right to pursue insolvency proceedings. The terms of the OTS required strict compliance, and the Corporate Debtor's failure to meet these terms justified the Financial Creditor's decision to terminate the agreement. Assessment of Financial Creditor s Conduct - HELD THAT:- The Financial Creditor acted within its rights by accepting the initial OTS payment and subsequently seeking to recover the remaining dues through insolvency proceedings when the Corporate Debtor defaulted. There is no evidence of bad faith or unfair obstruction by the Financial Creditor. The acceptance of partial payments does not negate the default or the legitimacy of the insolvency proceedings. Adjudicating Authority s Decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pharma SEZ, though substantial interest from prospective buyers was not forthcoming. Sublease Agreements 3. In 2013, the Corporate Debtor entered into two Deeds of Sublease (dated 18th March 2013 and 23rd August 2013) with M/s. HBS City Pvt. Ltd., subleasing portions of the Project land. In 2017-2018, Mahansaria Tyres Pvt. Ltd. expressed interest in acquiring land for automobile operations. Consequently, the Corporate Debtor sought and obtained approval for a change in manufacturing items and subleased approximately 127 acres to Mahansaria Tyres Pvt. Ltd. on 6th December 2018. Fundraising and Loan Agreements 4. Seeking funds for further development, the Corporate Debtor approached Respondent No. 1 (the Financial Creditor) in 2017. The Financial Creditor, through an Offer Letter dated 1st July 2017, provided a loan facility of Rs. 60 Crores. This was formalized in the Rupee Loan Agreement dated 19th July 2017, which included terms such as repayment in 54 instalments and conditions for default and notice. It is noted that this agreement was insufficiently stamped. A second loan of Rs. 6 Crores was secured via another agreement dated 15th September 2019, which also contained specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or were operating on a partial basis. Due to which, the third party purchaser/financer could not comply with the OTS letter dated 1st December, 2021 and also further could not get the requisite permissions from the Competent Authorities, because of which the Corporate Debtor and/or the purchaser/financer were not in position to pay a sum of Rs. 34,00,00,000/- (Rupees Thirty Four Crores Only) on or before 31.03.2022, as specified in the OTS letter dated 1st December, 2021. 11. Consequently, the Corporate Debtor on 24.05.2022 filed IA No. 1473 of 2022, placing the OTS Agreement on record and seeking dismissal of the Company Petition. The Financial Creditor did not respond to this application. 12. Despite agreeing to execute a Settlement Agreement and file it with the Adjudicating Authority, the Financial Creditor obstructed the process and failed to record that the parties had settled the purported debt. Other attempts at Settlement 13. The CD has given details of his efforts for settlement of the dues. These efforts are being captured herein in next few paragraphs, as they have some bearing on the settlement of the dues of the CD, even though of not much assistance. Expression of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was in principle accepted. Respondent No. 1 communicated its conditional approval of the revised OTS on April 3, 2023, subject to incorporating certain terms and conditions. 20. Subsequently, all the endeavours and efforts of the Corporate Debtor and the purchaser/financer went futile and in vain, as the Financial Creditor vide its letter dated 16.05.2022 purported to move ahead with the termination of the said OTS Agreement dated 1st December, 2021. 21. The Corporate Debtor vide its letter dated 23.05.2022 once again requested the Financial Creditor to revisit the timelines of the OTS letter dated 1st December, 2021 and proposed payment of the remaining outstanding due to the Financial Creditor in two tranches viz. Rs. 5 crores on or before 30th June, 2022 and Rs. 29 Crores on or before 31st July, 2022. Respondent's Defense: 22. The Corporate Debtor's appeal against the initiation of insolvency proceedings appears misguided for the reasons in below mentioned paragraphs. 23. A Clear Admission of Debt : Throughout this process, the Corporate Debtor has repeatedly acknowledged their outstanding debt and inability to pay: o Their application to dismiss the insolvency petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Petition filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) on September 14, 2020, claiming a default amount of Rs. 58.38 Crores. The Appellant claims that it is an inflated claim. However, it is belied by proper calculation sheets on record, which provide for the details for distribution of Rs.58.38 crores. One Time Settlement ( OTS ) Agreement 31. In an attempt to settle the outstanding dues, the parties entered into negotiations resulting in an OTS agreement on December 1, 2021. According to this agreement, the Financial Creditor agreed to accept Rs. 55.6 Crores as a full and final settlement, structured in a phased payment schedule. The Corporate Debtor made an initial payment of Rs. 6 Crores, which the Financial Creditor accepted. Failure to Adhere to OTS Terms 32. The Corporate Debtor failed to pay Rs. 34 Crore in Tranche 1 of the First OTS, which was supposed to be paid by 31.03.2022. Thus, Corporate Debtor failed to adhere to the terms of the OTS. This has been accepted by the Corporate Debtor in its I.A. No. 1473 of 2022 which he filed before the Adjudicating Authority on 24 May 2022, in which it is claimed that the Appellant on 12.04.2022 requested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case did not novate the debt under the original loan agreements. The First OTS was terminated by the Respondent No. 1 and the original loan obligations stood revived. The revival of original loan obligations in case of default was further reiterated in the Second OTS, which also stood terminated. 38. Despite several requests for extensions, the Financial Creditor found the Corporate Debtor s performance unsatisfactory, leading to the termination of the OTS agreement and the continuation of the insolvency proceedings. Analysis and Judgment 39. The appeal challenges the Adjudicating Authority s order on several grounds, arguing bad faith by the Financial Creditor, misleading claims of default amount, and obstruction in the settlement process. However, the appeal does not hold upon a thorough examination of the facts and legal principles. Legality and Validity of the Demand Notice and Company Petition : 40. The Demand Notice and the subsequent Company Petition were issued in accordance with the provisions of the IBC. The Financial Creditor's claim of Rs. 58.38 Crores is backed by the loan agreements and the Corporate Debtor's admitted inability to repay the loans as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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