2021 (1) TMI 933 - Tri - Insolvency and Bankruptcy

Settlement Reached in CIRP Petition with Payment Agreement and Default Remedy Period

The case involved a petition to initiate Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 due to a default by ... Withdrawal of insolvency petition by operational creditor - settlement extinguishing claims between parties - liberty to refile on breach of settlement - initiation of CIRP under the Insolvency and Bankruptcy CodeWithdrawal of insolvency petition by operational creditor - settlement extinguishing claims between parties - liberty to refile on breach of settlement - Petition under Section 9 of the Insolvency and Bankruptcy Code permitted to be withdrawn pursuant to a joint settlement between the parties, with liberty to refile in case of non-adherence to settlement terms. - HELD THAT: - The petitioner and the corporate debtor filed a joint memo recording an amicable settlement whereby the debtor agreed to make an upfront payment and subsequent instalments, and both parties declared that they would have no claims against each other upon completion of the payments. The Company Petition had not been admitted. In view of the settlement and the parties' request for withdrawal, the Tribunal exercised its discretion to permit withdrawal of the unadmitted petition. The Tribunal preserved the operational creditor's remedy by expressly granting liberty to file a fresh petition in the event of default by the corporate debtor, thereby ensuring that the settlement does not preclude future adjudication if the agreed terms are not honoured. [Paras 6, 7]C.P.(IB)No.316/BB/2019 disposed of as withdrawn with liberty to the petitioner to file a fresh petition in case of non-adherence to the agreed payment schedule; no order as to costs.Final Conclusion: The Tribunal allowed withdrawal of the unadmitted Section 9 petition on the basis of the recorded settlement and granted liberty to the operational creditor to re-initiate proceedings if the corporate debtor fails to comply with the settlement terms. Issues:Initiation of Corporate Insolvency Resolution Process under IBC, 2016 for default in payment.Analysis:The judgment pertains to a case where a petition was filed seeking to initiate the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) due to a default committed by the Corporate Debtor. The Petitioner, an Operational Creditor, claimed an amount of USD 97,698.90, including interest at the rate of 12% per annum. The case witnessed multiple adjournments at the request of parties before the final hearing.The parties reached a settlement wherein the Corporate Debtor agreed to pay the Operational Creditor a total amount of USD 97,698, with an upfront payment of USD 4,429 and the remaining amount in fifteen installments spread over eight months. In case of default in payments, the Corporate Debtor was granted an 8-day remedy period to make the payment. Additionally, the Corporate Debtor provided security cheques to ensure payment compliance, which were to be held by an Escrow Agent.The settlement terms included the provision for the Operational Creditor to deposit the security cheques if the Corporate Debtor defaulted on payments after the remedy period. The judgment highlighted the detailed schedule of payment dates and amounts, emphasizing the mutual agreement for a full and final settlement between the parties.As the Company Petition was not admitted and the Petitioner filed a joint memo for withdrawal, the Tribunal permitted the withdrawal of the petition. The judgment disposed of the petition with liberty granted to the Petitioner to file a fresh petition if the Corporate Debtor failed to adhere to the agreed terms of payment, without imposing any costs.In conclusion, the judgment showcases the importance of settlement agreements in insolvency proceedings, highlighting the significance of mutual understanding and adherence to agreed terms to avoid the initiation of CIRP under the IBC, 2016.