2018 (11) TMI 1689 - AT - Insolvency and Bankruptcy

Tribunal Upholds Insolvency Application Against Corporate Debtor: Focus on Debt Default and Resolution Efforts

Mr. Hemanth Meka Rao Versus L&T Finance Ltd. & Anr.  

The Tribunal upheld the Adjudicating Authority's admission of the application by 'L&T Finance Limited' against 'M/s. Meka Dredging Company Private ... Maintainability of application - Initiation of CIRP - Corporate debtor - Failure to pay the debt and having defaulted to pay the amount - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In view of the fact that there was a default on the part of the ‘Corporate Debtor’ and the application filed by the ‘Financial Creditor’- ‘L&T Finance Limited’ was in order, the Adjudicating Authority having admitted the application, we find no ground to interfere with the said impugned order. Settlement with the ‘Financial Creditor’- ‘L&T Finance Limited’ - HELD THAT:- If Settlement has been made, on the basis of such settlement, we cannot grant any relief. It is informed that in the meantime, the order of liquidation has been passed on 20th September, 2018 against which the Appellant has also moved an appeal before this Appellate Tribunal and is pending consideration. While we do not grant any relief to the Appellant, we make it clear that this order will not come in the way of the parties to settle the matter, if they do not want liquidation and may move before the appropriate forum for appropriate relief - Appeal disposed off. Issues:1. Failure to pay debt by 'M/s. Meka Dredging Company Private Limited' leading to initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Settlement with one Financial Creditor but failure to settle with another Financial Creditor, 'ARCIL'.3. Revocation of settlement agreement with 'ARCIL' and its impact on the insolvency resolution process.4. Adjudicating Authority's admission of the application by 'L&T Finance Limited' and the subsequent order of liquidation.Analysis:1. The case involved the failure of 'M/s. Meka Dredging Company Private Limited' to pay its debt, prompting 'L&T Finance Limited' to file an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority admitted the application due to the default in payment by the Corporate Debtor.2. 'L&T Finance Limited' claimed a principal amount of Rs. 19,60,00,000/- along with interest totaling Rs. 22,74,42,271/- as of 9th November 2016. Subsequently, the Appellant expressed a desire to settle with 'L&T Finance Limited', which was successfully done, leading to the receipt of a no due certificate. However, no settlement was reached with 'ARCIL', another Financial Creditor.3. The Appellant's failure to settle with 'ARCIL' raised questions about a prior settlement agreement that was allegedly revoked due to non-payment by the Corporate Debtor. The Tribunal refrained from delving into the specifics of the settlement revocation, focusing instead on the default by the Corporate Debtor and the validity of the application by 'L&T Finance Limited'.4. Despite the settlement with 'L&T Finance Limited', the Tribunal noted that the order of liquidation had already been passed, with the Appellant appealing the decision. While no relief was granted to the Appellant in this instance, the Tribunal emphasized that the order should not hinder the parties from seeking further resolution through appropriate channels to avoid liquidation.In conclusion, the Tribunal disposed of the appeal and Interlocutory Application with the mentioned observations, allowing the parties to pursue further settlement options without hindrance from the current order.