NATIONAL COMPANY LAW APPELLATE TRIBUNAL ALLOWS FULL CLAIMS OF FINANCIAL CREDITORS UPON FAILURE OF CORPORATE DEBTOR TO COMPLY WITH SETTLEMENT TERMS

The Hon’ble National Company Law Appellate Tribunal, Principal Bench, New Delhi (NCLAT) has recently passed a Judgment dated 13-05-2024 in Niraj Rathore vs Mr. Partha Sarathy Sarkar and Anr. Company Appeal (AT) (Insolvency) No. 911 of 2023 and allowed submission of full claim of financial debt by the Financial Creditors of the Corporate Debtor, as the one-time settlement (OTS) was deemed to have been no longer effective, as the Corporate Debtor failed to comply with the OTS terms.

Facts

i) In the present case, the Administrator of Specified Undertaking of Unit Trust of India (SUUTI) and its sister concern, M/s UTI Trust Private Limited (UTI) filed an Application under Section 7 of the Insolvency and Bankruptcy Code 2016 (IBC) in CP No. (IB)- 39(PB)/2018 before the Ld. National Company Law Tribunal, Jaipur Bench (NCLT) in respect of corporate insolvency resolution process (CIRP) of M/s Modern Syntex (India) Limited (Corporate Debtor).

ii) The NCLT, vide Order dated 23-08-2022, allowed the Section 7 Petition and thereby, CIRP of Corporate Debtor commenced. The Respondent herein, Mr. Partha Sarathy Sarkar was appointed as the Interim Resolution Professional, who was later confirmed as the Resolution Professional (RP) by the Committee of Creditors (COC).

iii) The RP admitted the claim of SUUTI and its sister concern UTI totalling to Rs. 5791,17,15,425/- (Rupees Five Thousand Seven Hundred and Ninety-One Crores Seventeen Lakhs Fifteen Thousand Four Hundred and Twenty-Five only). Both the Financial Creditors were made Members of the CoC and altogether they had 88.67% of the voting rights.

iv) The Applicant, Mr. Niraj Rathore, the Erstwhile Director of the Corporate Debtor filed an Application bearing IA(IB) No. 152/JPR/2023 before NCLT in the aforesaid matter, on the ground that the RP had not verified the claim of SUUTI from the books of accounts of the Corporate Debtor and has ignored the One Time Settlement (OTS) dated 23-10-2008 executed between SUUTI and the Corporate Debtor. As per the OTS, only an amount of Rs. 34,80,96,657/- (Rupees Thirty-Four Crores Eighty Lakhs Ninety-Six Thousand Six Hundred and Fifty-Seven only) was payable by Corporate Debtor to SUUTI.

v) But the NCLT dismissed the IA filed by the Applicant, vide Order dated 15-06-2023, on the ground that the OTS sanctioned by SUUTI was revoked in August 2009 and all original liabilities of Corporate Debtor towards SUUTI were restored.

NCLAT Observations

Aggrieved by the NCLT Order dated 15-06-2023, the Applicant filed Company Appeal (AT) (Insolvency) No. 911 of 2023 before the NCLAT. The NCLAT, vide Order dated 13-05-2024, made the following observations:

1) That firstly, the Appellant- Applicant was an erstwhile independent director of the Corporate Debtor and hence would not in any manner be affected or be considered as aggrieved person regarding acceptance of claim of the Financial Creditor- SUUTI or the quantum of financial credit admitted.

2) Further, on merits, the NCLAT observed that as per the OTS terms, the Corporate Debtor had to pay Rs. 16 Crores to SUUTI, but as it failed to make the payment, the OTS was cancelled in 2009. The Financial Creditors constantly followed up with the Corporate Debtor regarding the outstanding payments, but the Corporate Debtor failed to pay such amounts.

3) Thus, all the original liabilities of the Corporate Debtor towards SUUTI were restored and accordingly, the said liabilities were noted in the NCLT Order admitting CIRP Application dated 28-03-2022.

4) Further, the said NCLT Order was not challenged by the Corporate Debtor itself or its ex-Management.

Conclusion

Thus, based on the aforesaid observations, the NCLAT dismissed the Appeal filed by the Appellant-Applicant and further considered the same as a frivolous litigation through proxy by the ex-Management to delay the resolution of the Corporate Debtor. Hence, the NCLAT levied costs on the Appellant to the tune of Rs. 50,000/- (Rupees Fifty Thousand only).

Harini Daliparthy

Lead Senior Associate

The Indian Lawyer & Allied Services