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Tribunal upholds decision on Section 7 Application under Insolvency and Bankruptcy Code The Tribunal upheld the Adjudicating Authority's decision to admit the Section 7 Application under the Insolvency and Bankruptcy Code, 2016. The Tribunal ...
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Tribunal upholds decision on Section 7 Application under Insolvency and Bankruptcy Code
The Tribunal upheld the Adjudicating Authority's decision to admit the Section 7 Application under the Insolvency and Bankruptcy Code, 2016. The Tribunal determined that the Financial Creditor was justified in proceeding under Section 7 due to a default on a scheduled payment as per the terms of the OTS dated 28.05.2020, which included a Default Clause allowing action upon default. The Tribunal dismissed the appeal, emphasizing the Bank's right to pursue remedies under the law following the default on 30.06.2020.
Issues: Admission of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 based on an OTS dated 28.05.2020 between three companies.
Analysis: The appeal was filed against the order passed by the Adjudicating Authority admitting the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016, by the Financial Creditor. The Appellant challenged the order, arguing that an OTS dated 28.05.2020 was entered between three companies, including the Corporate Debtor, which meant there was no debt. The Respondent, Financial Creditor, acknowledged the OTS but highlighted that a scheduled payment was defaulted, allowing them to proceed under Section 7. The Tribunal examined the terms of the OTS, particularly the Default Clause, which allowed the Financial Creditor to cancel the settlement and exercise rights upon default. The Financial Creditor filed the Section 7 Application after the default on 30.06.2020, as per the terms of the OTS.
The Tribunal reviewed the submissions and the record, noting the Default Clause in the OTS which empowered the Financial Creditor to take action upon default. The Default Clause explicitly stated that in case of default, the Financial Creditor could cancel the settlement and pursue remedies available under the law. The Tribunal emphasized that the Bank had the right to proceed under Section 7 after the default occurred on 30.06.2020, as per the terms of the OTS. The Appellant argued that since the compromise OTS was not canceled, there was no debt due, but the Tribunal rejected this argument, emphasizing the Bank's right to act upon default as per the agreement.
The Tribunal found no merit in the appeal, upholding the Adjudicating Authority's decision to admit the Section 7 Application. The Tribunal concluded that the Bank was justified in proceeding under Section 7 due to the default, dismissing the appeal based on the clear terms of the Default Clause and the lack of evidence of payment on the scheduled date.
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