Tribunal overturns order, directs fresh consideration of One-Time Settlement application

The Tribunal allowed the appeal, setting aside the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, and remanded the matter for a fresh order. The Adjudicating Authority was directed to allow parties to consider renewing the One-Time Settlement (OTS) and rectifying application defects. Parties were to appear before the NCLT, Guwahati Bench, on 29th June 2020.

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Issues Involved:
1. Admission of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Allegation of arbitrary action by the Respondent Bank regarding the One-Time Settlement (OTS).
3. Compliance with Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016.
4. Impact of the status quo order by the Hon’ble Guwahati High Court.
5. Bar of limitation under the Limitation Act.

Issue-wise Detailed Analysis:

1. Admission of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The appeal arises from the order dated 23rd August 2019 by the NCLT, Guwahati Bench, admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, and appointing an Interim Resolution Professional. The Corporate Debtor had availed credit facilities amounting to Rs. 35.8 crores from the Respondent Bank, which filed an application claiming Rs. 45,33,35,395.58 due to defaults, and the account was declared NPA on 31st March 2016.

2. Allegation of arbitrary action by the Respondent Bank regarding the One-Time Settlement (OTS):
The Appellant argued that during the pendency of the petition, the Respondent Bank entered into an OTS but did not withdraw the petition, later revoking the OTS on 31st July 2019. The Appellant claimed that the Respondent Bank acted arbitrarily by not providing reasonable time and by accepting part payment of Rs. 1 crore on 19th August 2019, which indicated a settlement. The Respondent Bank countered that the Appellant failed to adhere to the OTS terms, leading to its revocation. Despite further attempts by the Appellant to revive the OTS, the Bank did not consider it due to non-compliance with earlier terms.

3. Compliance with Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016:
The Appellant emphasized non-compliance with Section 7(5)(a), arguing that the declaration by the proposed Insolvency Resolution Professional (IRP) was incomplete and not in the prescribed Form 2. The Tribunal noted that the proposed IRP did not declare the absence of disciplinary proceedings, and the Adjudicating Authority should have issued a notice to rectify the application within seven days, which was not done.

4. Impact of the status quo order by the Hon’ble Guwahati High Court:
The Appellant pointed out that the Hon’ble Guwahati High Court had directed parties to maintain status quo till 26th August 2019. However, the Adjudicating Authority passed the admission order on 23rd August 2019 without considering the status quo order. The Tribunal acknowledged this oversight, indicating that the Adjudicating Authority should have respected the High Court’s directive.

5. Bar of limitation under the Limitation Act:
The Appellant contended that the petition was barred by limitation, as the loan was sanctioned in 2004, with enhancements up to 2012 and restructuring in 2014, while the petition was filed in 2018. The Tribunal noted that the Corporate Debtor had acknowledged the debt in writing on 13th March 2018, which extended the limitation period as per Section 18 of the Limitation Act. Thus, the petition was filed within the extended limitation period and was not time-barred.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order and remanding the matter back to the Adjudicating Authority for a fresh order, considering the directions in the judgment. The Adjudicating Authority was directed to provide an opportunity for the parties to consider the renewal of the OTS and to rectify any defects in the application. The parties were directed to appear before the NCLT, Guwahati Bench, on 29th June 2020. No order as to costs.

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