2020 (4) TMI 316 - Tri - Companies Law

Settlement Agreement Resolves Corporate Debt Issue

Mangal Electrical Industries (P.) Ltd. Versus Kerala Electrical and Allied Engg Co. Ltd.

The application under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate ... Permission for withdrawal of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- During the hearing on 27.11.2019, the counsel for both the parties stated that the matter has been settled and sought time for filing settlement memo and the matter was Reserved for Orders to 05.12.2019. A copy of the settlement agreement arrived between them was submitted before this Bench and sought short time for filing the original agreement along with withdrawal petition - Today when the matter was taken up for consideration, a joint Memo of withdrawal/settlement has been filed stating that the Operational Creditor and the Corporate Debtor have entered into a mutual settlement pertaining to the debt due to the Corporate Debtor. Hence they prayed before this Tribunal to permit them to withdraw the above application. Application dismissed as withdrawn. Issues:Application under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against a Corporate Debtor. Settlement reached between the Operational Creditor and the Corporate Debtor leading to the withdrawal of the application.Analysis:1. The application was filed by the Operational Creditor under section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for non-payment of outstanding debts. The Corporate Debtor, a company incorporated under the Companies Act, 1956, had failed to pay for materials supplied by the Operational Creditor despite various reminders and requests. The Operational Creditor had also charged interest on the delayed payments. The Corporate Debtor acknowledged its liability towards the Operational Creditor through email and subsequent communications, admitting the outstanding debt.2. The Operational Creditor detailed the total amount of outstanding debt, comprising the invoices raised along with accrued interest. The application claimed a total outstanding amount of Rs. 6,41,79,17/- owed by the Corporate Debtor to the Operational Creditor. The Operational Creditor substantiated its claim with evidence of invoices, communications, and acknowledgments of liability from the Corporate Debtor.3. In response, the Counsel for the Corporate Debtor filed a detailed counter/objection challenging the maintainability of the application under section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code. However, during the hearing, both parties informed the Tribunal that they had reached a settlement. A joint Memo of withdrawal/settlement was filed, stating the terms of the agreement between the Operational Creditor and the Corporate Debtor.4. The settlement agreement outlined that the Corporate Debtor agreed to pay Rs. 2,00,00,000/- within 30 days of signing the agreement and Rs. 50,00,000/- on a monthly basis thereafter. Post-dated cheques were issued as per the agreed payment schedule. The parties requested the Tribunal to permit the withdrawal of the application in light of the settlement reached between them.5. Considering the mutual settlement between the Operational Creditor and the Corporate Debtor, the Tribunal disposed of the application as withdrawn, with no order as to costs. The settlement agreement facilitated the resolution of the outstanding debt issue, leading to the closure of the insolvency proceedings initiated by the Operational Creditor against the Corporate Debtor.