Appellate Tribunal Upholds Insolvency Process, Rejects Settlement Proposal. Corporate Debtors' Compliance at Issue.

The Appellate Tribunal upheld the Adjudicating Authority's decision to admit Section 7 Applications and initiate Corporate Insolvency Resolution Process against the Corporate Debtors. The Tribunal dismissed appeals regarding the rejection of the One Time Settlement proposal and the High Court's status quo order, emphasizing the Corporate Debtors' failure to comply with OTS terms and the absence of a direct restraint on NCLT proceedings in the High Court's order.

---

---

Issues Involved:
1. One Time Settlement (OTS) Proposal Rejection
2. Adjudicating Authority's Admittance of Section 7 Applications
3. High Court's Status Quo Order and Its Impact on NCLT Proceedings

Issue-wise Analysis:

1. One Time Settlement (OTS) Proposal Rejection:
The Corporate Debtors had applied for OTS with the Bank in March 2018, which was approved for Rs. 60 Crores by letter dated 27.12.2018. However, the Corporate Debtors failed to comply with the OTS terms, depositing only Rs. 6.79 Crores instead of the required Rs. 16.50 Crores by July 2019. Consequently, the Bank declared the OTS failed on 31st July 2019. The Adjudicating Authority noted this failure and proceeded with the Section 7 Applications. The Appellate Tribunal upheld this decision, stating that although settlements should be encouraged, the Tribunal cannot compel the Bank to accept an OTS proposal.

2. Adjudicating Authority's Admittance of Section 7 Applications:
The Bank filed Section 7 Applications under the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtors after they were declared Non-Performing Assets (NPA). The Adjudicating Authority admitted these applications and initiated the Corporate Insolvency Resolution Process (CIRP) on 23rd August 2019. The Appellate Tribunal found no fault in this decision, emphasizing that the Corporate Debtors had defaulted on their liabilities and failed to comply with the OTS terms.

3. High Court's Status Quo Order and Its Impact on NCLT Proceedings:
The Corporate Debtors filed a writ petition in the High Court of Meghalaya, which directed the parties to maintain status quo till 26th August 2019. However, the Adjudicating Authority proceeded to pronounce its order on 23rd August 2019, as the matter had been heard and reserved for orders on 14th August 2019. The Appellate Tribunal noted that the High Court's order did not explicitly restrain the NCLT from proceeding. The Tribunal held that there was no breach of judicial discipline by the NCLT, as the High Court's status quo order was directed at the parties and not the NCLT proceedings.

Conclusion:
The Appellate Tribunal dismissed all three appeals, upholding the Adjudicating Authority's decision to admit the Section 7 Applications and initiate CIRP against the Corporate Debtors. The Tribunal found no merit in the arguments regarding the OTS proposal and the High Court's status quo order.

---