One Time Settlement effect on Section 7 admission when instalments unpaid allows lender to proceed; appeal dismissed

One Time Settlement (OTS) default due to unpaid instalments terminated the suspension of enforcement and permitted creditor proceedings to continue; the borrower did not comply with the OTS and thus defaulted, triggering entitlement to revive or proceed with legal/enforcement actions. Because the OTS expressly allowed parties to resume proceedings on default, the adjudicating authority correctly admitted the insolvency petition against the corporate debtor despite the OTS. The consequence is that resolution under the insolvency framework is required and the appeal against admission is dismissed.

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Issues: Whether the Adjudicating Authority erred in admitting the Section 7 application against the corporate debtor despite a One Time Settlement (OTS) entered between the parties on 29.09.2025.

Analysis: The appeal challenges admission of a Section 7 application where an OTS was executed on 29.09.2025 providing an upfront payment and a schedule for payment of the balance within 90 days. The OTS expressly provided that in the event of default or delay the parties were entitled to revive or continue legal proceedings and enforcement actions. The admitted date of default in the Section 7 application preceded the OTS. The record shows only the upfront payment was made and subsequent scheduled instalments for October and November were not paid, constituting breach of the OTS. The Tribunal examined the OTS clauses relied upon by the appellant, including the clause purporting to hold legal actions in abeyance during compliance, and noted the same clause preserves the bank's right to revive proceedings on default. Given non-compliance with the OTS terms by the corporate debtor, the factual condition necessary to restrain the creditor from proceeding was not met. The Tribunal concluded that the Adjudicating Authority properly applied the statutory scheme under Section 7 and regulations governing initiation of CIRP when the debtor remained in default.

Conclusion: The Tribunal upheld the admission of the Section 7 application and dismissed the appeal; conclusion is against the appellant and in favour of the respondent.

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