Tribunal halts CIRP, urges settlement amid COVID-19 impact. Parties advised to collaborate for resolution.

The tribunal concluded that initiating Corporate Insolvency Resolution Process (CIRP) against the corporate debtor was not justified at present. It directed parties to explore settlement possibilities due to the impact of the COVID-19 pandemic on the economy. The petitioners were given liberty to take legal action if settlement efforts failed, and both parties were instructed to cooperate in settlement endeavors.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Financial status and ongoing viability of the corporate debtor.
3. Settlement proposals and their consideration.
4. Impact of the COVID-19 pandemic on the corporate debtor and the broader economy.

Detailed Analysis:

1. Initiation of CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The petitioners, M/s. India Asset Growth Fund and two others, filed C.P. (IB) No. 233/BB/2019 under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate CIRP against CMRS Projects P. Ltd. due to a default amounting to Rs. 18,58,04,039. The petitioners claimed that the corporate debtor issued non-convertible debentures (NCDs) and defaulted on repayment. The financial creditors subscribed to NCDs amounting to Rs. 13,00,00,000, disbursed in three tranches. The corporate debtor defaulted on payments, and the debt fell due on August 24, 2018.

2. Financial Status and Ongoing Viability of the Corporate Debtor:
The corporate debtor, engaged in real estate development, argued that it is a commercially solvent company. It proposed a settlement of Rs. 12,00,00,000, detailing payments linked to specific projects. The financial creditors, however, rejected this proposal, citing the corporate debtor's failure to honor previous settlement commitments. The tribunal noted that the corporate debtor has made partial payments and is currently incurring expenses for its employees and projects.

3. Settlement Proposals and Their Consideration:
The tribunal observed that the corporate debtor proposed a one-time settlement of Rs. 14,50,00,000, which was initially accepted by the financial creditors but could not be implemented due to the COVID-19 pandemic. The tribunal emphasized that the corporate debtor is still willing to settle and urged the financial creditors to consider the prevailing economic situation. The tribunal highlighted the importance of exploring settlement options before initiating CIRP, given the severe economic conditions.

4. Impact of the COVID-19 Pandemic on the Corporate Debtor and the Broader Economy:
The tribunal acknowledged the devastating impact of the COVID-19 pandemic on the economy, particularly the real estate sector. It noted that initiating CIRP would be a "civil death" for the corporate debtor, affecting various stakeholders, including employees, home-buyers, and vendors. The tribunal referenced recent amendments suspending provisions of the Insolvency and Bankruptcy Code for initiating CIRP due to the pandemic, although the default in this case occurred before the suspension date.

Conclusion:
The tribunal concluded that initiating CIRP against the corporate debtor was not justified at present. It directed both parties to explore settlement possibilities, considering the current economic situation. The petitioners were granted liberty to take appropriate legal action, including invoking the provisions of the Code, if settlement efforts failed. The petition was disposed of with directions for both parties to cooperate in settlement efforts.

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