Promoter's Appeal Deemed Inadmissible, CIRP Initiated, Settlement Proposal Dismissed

The appeal filed by the Appellant, a promoter of the Corporate Debtor, was deemed not maintainable as the Appellant was not considered an "aggrieved person." The restoration of the application by the Adjudicating Authority was found valid, and the application of Section 10A of the IBC was deemed inapplicable due to the default date preceding the COVID-19 period. The existence of debt and default by the Corporate Debtor was established, justifying the initiation of CIRP. The failure of the One Time Settlement proposal led to the dismissal of the appeal, with the Tribunal upholding the Adjudicating Authority's order.

---

---

Issues Involved:
1. Maintainability of the appeal by the Appellant.
2. Validity of the restoration of the application by the Adjudicating Authority.
3. Applicability of Section 10A of IBC during the COVID-19 period.
4. Existence of debt and default by the Corporate Debtor.
5. Validity and impact of the One Time Settlement (OTS) proposal.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal by the Appellant:
The appeal was filed by the Appellant, who is a promoter of the Corporate Debtor. The Tribunal held that the Appellant, being an investor, is not an "aggrieved person" under Section 61(1) of the IBC, 2016, and thus, the appeal is not maintainable. The Tribunal cited the case of Amod Amladi v. M/s. Sayali Rane & Anr., where it was established that an investor cannot claim to be an aggrieved person for preferring an appeal against an order admitting an application under Section 9 of the IBC.

2. Validity of the Restoration of the Application by the Adjudicating Authority:
The Tribunal noted that the Adjudicating Authority had granted liberty to revive the application if the OTS proposal failed. The restoration of the application was based on the default in payment under the OTS. The Tribunal held that the Adjudicating Authority acted within its inherent powers under Rule 11 of the NCLT Rules, 2016, to meet the ends of justice. Therefore, the restoration order was valid, and there was no violation of natural justice.

3. Applicability of Section 10A of IBC During the COVID-19 Period:
The Tribunal clarified that Section 10A of the IBC, which imposed a prohibition on initiating CIRP for defaults occurring during the COVID-19 period, was not applicable in this case. The default date was 31.03.2017, well before the COVID-19 pandemic. The application under Section 7 was filed on 03.10.2018, making the plea regarding Section 10A inapplicable.

4. Existence of Debt and Default by the Corporate Debtor:
The Tribunal found that there was an abundance of material evidence proving the existence of debt and default by the Corporate Debtor. The debt was more than Rs. 1 lakh (the threshold limit at the time of filing the application), and the default occurred well before the COVID-19 pandemic. The application filed by the Financial Creditor was complete in all respects, and the Adjudicating Authority was correct in admitting the application and initiating the CIRP.

5. Validity and Impact of the One Time Settlement (OTS) Proposal:
The Tribunal held that the OTS proposal was an acknowledgment of debt under Section 18 of the Limitation Act, 1963. The payments made under the OTS were not part of the OTS but were charges on the security. The Tribunal found that the promoters had not paid any sum under the OTS but had arranged Rs. 150 crores from different entities, which was kept in a no-lien account. The failure of the OTS proposal justified the initiation of CIRP by the Financial Creditor. The principle of "Approbate and Reprobate" was not applicable as the Corporate Debtor had accepted the benefits of the contracts and was estopped from denying the liability.

Disposition:
The appeal was dismissed, and the interim order granted by the Tribunal was vacated. The connected pending applications were also closed. The Tribunal concluded that the Adjudicating Authority's order admitting the application under Section 7 and declaring a moratorium was free from legal infirmities.

---