Settlement under Section 7 requires mutual agreement on all terms within reasonable time limits

The NCLAT Principal Bench dismissed an appeal where the appellant sought further extensions for settlement under a Section 7 application. Despite an interim order continuing from February 2024, the appellant failed to agree to all settlement terms proposed by the financial creditor within one year. The tribunal noted that both parties had not agreed to or signed any settlement agreement, preventing filing of a Section 12A application for CIRP withdrawal. The court held that settlement requires mutual agreement on all terms and conditions, and no direction could be issued to modify the proposed settlement terms. The appeal was disposed of in November 2024, with the financial creditor permitted to file a 12A application within extended time limits, but the appellant was denied further indulgence for settlement negotiations.

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The National Company Law Appellate Tribunal considered an appeal challenging an order of the National Company Law Tribunal admitting a Section 7 Application filed by ICICI Bank Ltd. The Appellant initially submitted a proposal for settlement, leading to an interim order granting time for consideration. Subsequently, the Appellant expressed intent to settle the dues, prompting the Tribunal to advise pursuing the route of Section 12A of the Insolvency and Bankruptcy Code through the Interim Resolution Professional (IRP) for settlement. The Appeal was disposed of with liberty granted for a limited period for further actions based on the settlement process.Following the final disposal, the Appellant filed multiple applications seeking extensions of time for settlement-related matters. The Tribunal granted extensions but emphasized that failure to file an application under Section 12A would result in the commencement of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Despite these extensions, subsequent developments revealed disagreements between the parties regarding settlement terms, particularly concerning the transfer of settlement amounts. The ICICI Bank opposed further extensions, citing the Appellant's failure to fully agree to the settlement terms.After hearing arguments from both parties, the Tribunal concluded that the Appellant was not entitled to further extensions for settlement and rejected the application. Consequently, the CIRP against the Corporate Debtor was set to commence in accordance with the law.In summary, the Tribunal's decision centered on the Appellant's failure to reach a complete settlement agreement with ICICI Bank, leading to the denial of further extensions and the initiation of the CIRP process against the Corporate Debtor.

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