Appeal Dismissed, CIRP Initiated Against Corporate Debtor; Liability Admitted, Settlement Proposal Rejected

The appeal was dismissed, and the Tribunal upheld the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Tribunal found that the Corporate Debtor admitted its liability for a financial debt, which predated the COVID-19 pandemic, and rejected arguments related to limitation periods and the impact of economic conditions. The rejection of the One Time Settlement proposal and the establishment of the debt and default led to the dismissal of the appeal, affirming the legality of the adjudicating authority's decision.

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Issues Involved:
1. Admission of Liability and Existence of Financial Debt
2. Date of Default and Limitation
3. Impact of COVID-19 and Economic Recession
4. One Time Settlement (OTS) Proposal and Rejection
5. Allegations of Malicious Intent and Abuse of Process

Summary:

1. Admission of Liability and Existence of Financial Debt:
The Appellate Tribunal noted that the Corporate Debtor admitted its liability based on the One Time Settlement (OTS) dated 18.12.2021, which proved the existence of a "Financial Debt" due and payable to the Financial Creditor. The Tribunal emphasized that the default occurred before the COVID-19 pandemic and could not be sheltered under Section 10A of IBC, 2016.

2. Date of Default and Limitation:
The Tribunal observed that the Corporate Debtor's Loan Account was declared Non-Performing Asset (NPA) on 01.06.2019. Given this date, the application filed under Section 7 of IBC, 2016 on 27.10.2021 was within the limitation period. The Tribunal rejected the Appellant's contention that the date of default could not be 01.06.2019 due to subsequent loan renewals.

3. Impact of COVID-19 and Economic Recession:
The Appellant argued that the Corporate Debtor was already suffering due to general economic recession before the COVID-19 pandemic, which further impacted its operations. However, the Tribunal held that the default occurred before the pandemic, and the Corporate Debtor could not use the pandemic as a defense.

4. One Time Settlement (OTS) Proposal and Rejection:
The Tribunal recorded that the OTS proposal dated 18.12.2021 amounting to Rs.84.81 crores was rejected by the Financial Creditor, who requested an increase in the OTS amount. This rejection further proved the existence of a "Financial Debt" and "default." The Tribunal also noted that the Financial Creditor had issued a demand notice and possession notice under the SARFAESI Act, 2002, which went unheeded by the Corporate Debtor.

5. Allegations of Malicious Intent and Abuse of Process:
The Appellant contended that the application by the Financial Creditor was malicious and an abuse of process. However, the Tribunal found that the Corporate Debtor's financial debt and default were established, and the Financial Creditor's actions were justified. The Tribunal dismissed the appeal, stating that the debt was due and payable, and the adjudicating authority's decision to admit the application was free from legal flaws.

Conclusion:
The appeal was dismissed, and the Tribunal upheld the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The connected interim applications were also closed.

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