TaxTMI 
TaxTMI 
2026 (2) TMI 134
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....ar Hathi Ramani, Advocates for R3. JUDGMENT Ashok Bhushan, J. This Appeal by a Suspended Director of the Corporate Debtor has been filed challenging the order dated 17.11.2025 passed by the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench- VI admitting a Section 7 application being CP (IB) No.154/MB/2025 filed by the Canara Bank and rejecting IA No.4439 of 2025, IA No.5205 of 2025 and IA No.5206 of 2025 filed by the Appellant. Aggrieved by the aforesaid orders, these Appeals have been filed. 2. Brief facts of the case giving rise to these Appeals are:- 2.1. The Corporate Debtor- Karanja Terminal & Logistics Private Limited was sanctioned loan of Rs. 150 Crores by Canara Bank on 03.12.2023. Three other Banks also sanctioned loan to the Corporate Debtor. A Common Loan Agreement was entered into on 28.02.2014 with the Corporate Debtor and lenders. Canara Bank being the lead bank. On request received from time to time disbursements were made by lenders including the Canara Bank. Total disbursement by all the lenders was about Rs. 386.48 Crores. Other lenders who sanctioned the loan were the Syndicate Bank, Punjab & Sind Bank and Vijaya Bank. As per the....
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....nd Bank of Baroda regarding One Time Settlement loan account of Corporate Debtor and informing that although Corporate Debtor has been declared a successful bidder for Rs. 472.10 Crores but sanction/approval from the Bank of Baroda remains pending. All consortium lenders were requested to expedite and conclude the OTS sanctioning process. In reply to the letter dated 25.08.2025, the Canara Bank wrote to Mercantile Ports & Logistics Limited with a copy to the Corporate Debtor that no approvals have been received from the Bank of Baroda and in absence of unanimous consent, OTS proposal has not become effective or binding. It was stated in the letter that as approval from all lenders have not been received, lenders have decided to annul the OTS proposal process and withdraw all previous communications. On 03.09.2025, Punjab & Sind Bank also sent a communication to the Corporate Debtor cancelling the OTS process withdrawing all previous communications. It is relevant to notice that on 16.08.2025, the lenders have received a proposal of Rs. 520 Crores from Prudent ARC Limited. The Corporate Debtor filed a Writ Petition No.13847 of 2025 before the Delhi High Court assailing the letter da....
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....25 under Section 65 of the IBC for dismissing Section 7 as having been maliciously and fraudulently initiated. On 24.09.2025, IA No.4439 of 2025 was heard and reserved. On 27.10.2025, the lenders assigned their debt to Prudent ARC. Prudent ARC on 27.10.2025 sent a communication to the Corporate Debtor about assignment of debt. On 04.11.2025, Corporate Debtor wrote to the Prudent ARC about its offer of redemption and repayment of entire outstanding debt owed to the consortium of bank or their assignee by 31.03.2026. On 06.11.2025, Prudent ARC rejected the offer proposed by the Corporate Debtor. Corporate Debtor filed an IA No.5205 of 2025 on 06.11.2025 praying for staying the pronouncement of the main petition CP (IB) No.154 of 2025 and another IA 5205 of 2025 was filed seeking direction for redemption of the assigned debt. Both the IA Nos.5205 and 5206 of 2025 were heard on 11.11.2025 and reserved. 2.4. By impugned order passed by the Adjudicating Authority on 17.11.2025, Section 7 petition CP (IB) No.154 of 2025 has been admitted and IRP has been appointed. By separate order passed on the same day, IA No.4439 of 2025 has been rejected and by another separate order, both the IA ....
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....unt was to be arranged by the Corporate Debtor from its parent company Mercantile Ports & Logistics Limited, a UK based company which amount within seven days could not have been arranged due to regulatory requirements. The Corporate Debtor has also separately written to the Prudent ARC on 04.11.2025 to liquidate the entire debt by 31.03.2026 which was also not given any consideration. Concluded OTS after Swiss Challenge in which lenders obtained the highest bid of Rs. 465.50 Crores could not have been annulled when the Corporate Debtor had given a higher offer of Rs. 472.10 Crores. Annulment of OTS proposal was illegally done by the Canara Bank. The second Swiss Challenge Method in which Prudent ARC was declared successful was a premeditated and engineered exercise driven by recovery greed and was hastily triggered. Thus, the Corporate Debtor has filed an application under Section 65 bringing into notice of the court malicious intent of the lenders which was writ large from illegal annulment of OTS process and assigning the debt of Prudent ARC and initiating process for assignment on very next date after annulling the OTS. In Section 65 application not only the intention on the da....
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....cation for interim relief. Letters Patent Appeal was filed by the Corporate Debtor where again Counsel for the Corporate Debtor offered to deposit the entire amount. In JLM meeting held on 16.10.2025, lenders finalised the terms and conditions for accepting the offer from Corporate Debtor and Corporate Debtor was to pay the entire amount within 45 days and 50% within 7 days which offer was never accepted by the Corporate Debtor. Corporate Debtor thus, from time and again made various OTS offer which were never culminated into any binding decision. The submission of the Corporate Debtor that Section 7 petition was malicious and fraudulently initiated is without any substance. There being debt and default committed by the Corporate Debtor, initiation of proceeding under Section 7 in September 2024 was neither malicious nor malafide. In IA No.4439 of 2025 filed by the Corporate Debtor, allegations regarding OTS process was raised alleging it to be reason to hold initiation as malicious and fraudulent. Adjudicating Authority has rightly rejected IA No.4439 of 2025. When the matter was heard and judgment reserved on 16.09.2025, Corporate Debtor had made all submissions. After judgment h....
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....which proposal was again reiterated by letter dated 23.05.2025 in the reply to Section 7 application in paragraph 8.7, disbursal of amount of Rs. 386.48 Crore was admitted by the Corporate Debtor. Recall notice issued by the Canara Bank and OTS proposal submitted from time to time clearly proves that debt and default is not even denied by the Corporate Debtor at any point of time. Adjudicating Authority after considering all aspects of the matter and materials on the record returned its finding in paragraph 44 that debt and default is beyond Rs. 1 Crore. In Paragraph 44 of the order, following has been observed:- "44. In view of the foregoing findings, analysis and discussions, we conclude that the Corporate Debtor has committed a default in repaying the financial debt to the Financial Creditor for a sum well beyond rupees one crores. Thus, the present petition satisfies the minimum threshold of default of INR 1 crore prescribed u/s 4 of the Code for initiating the CIRP of the Corporate Debtor. It is trite to say that the Adjudicating Authority need not ascertain the exact amount of default committed by the Corporate Debtor for the purpose of admitting the application u/s ....
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....ndertakings • No-objection to business operations post-settlement d) Removal of all security interests, charges, and encumbrances upon payment completion" 9.5. With respect to said proposal, letter dated 13.06.2025 was issued by the Canara Bank informing that Competent Authority has accepted OTS offer of Rs. 430 Crores to the consortium subject to similar permission from all other member banks. It is useful to notice entire letter dated 13.06.2025 which is as follows:- "सदंर्भ / Ref: CB/15550/KTLPL/OTS-SAN/84/2025-26 दिनांक / Date: 13.06.2025 सेवा में / To, M/s Karanja Terminal & Logistics Pvt. Ltd. Office No.705 & 706, 7th Floor, Shelton Cubix, Plot No. 87, Sector-15, Belapur CBD, Navi Mumbai, Maharashtra 400614 "Without Prejudice" प्रिय महोदय / महोदया / Dear Sir/Madam, विषय'/Sub: One Time Settlement (OTS) For Loan Account Of M/s. Kar....
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....irst Refusal to match the bid of H1 bidder. OTHER TERMS & CONDITIONS: 1. Bank reserves the right for withdrawal of the OTS sanctioned at any point of time even during the period permitted for payment of OTS without assigning any reasons for withdrawal of OTS. 2. In the event of Bank finding Firm's misrepresentation of facts, bank reserves the right to withdraw the OTS permitted and proceed legally for recovery of entire dues. 3. The OTS settlement will not have any bearing whatsoever on the ongoing criminal case/proceedings initiated by CBI / Police authorities, if any. The OTS shall be without prejudice to the rights of CBI/Police to prosecute till conclusion of the pending criminal proceedings. 4. Upon payment of entire OTS amount as per terms of sanction, the account will be appear in the records of CIC'S for minimum period of seven years with remarks SETTLED as per CIC (Regulation) Act-2005. 5. In the event of non-compliance with any of the terms of the sanction by the Firm, including payment of the OTS amount as per the stipulated schedule, the OTS sanction stands automatically withdrawn without assigning any reason....
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....5. 3. List the matter for pronouncement of order on 06.10.2025. 4. In the meanwhile, let E-auction (Swiss Challenge Method), scheduled to be held on 23.09.2025, go on. However, respondents are restrained from declaring the outcome of E-auction, or acting upon it, till the pronouncement of order. 5. Needless to say that the direction given herein above will not create any special equities in favour of the parties." 9.8. The Delhi High Court on 06.10.2025 delivered its order on the interim application filed by the Corporate Debtor. Delhi High Court after considering the materials on the record made observations that concluded and binding contract has not come into existence. In paragraphs 79 to 83, following was observed: "79. Thus, the next question, and the more important one, that needs to be addressed is that whether a concluded and binding contract had come into existence by mere approval of petitioner's bid by respondent no.3/Canara Bank and respondent no.4/Punjab & Sind Bank and that whether the condition of requirement of approval of all the lenders inserted in the approval letters issued by the said banks is a post-bid condition, wh....
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....tium. In paragraph 42 of the order, following has been observed:- "42. We also observed that during the course of hearing, the Ld. Counsel for the Respondent has not denied the existence of the aforesaid letters. Since the OTS proposal given by the Respondent is not unanimously approved by the members of the Consortium, it is not binding on the consortium. Moreover, another member of the Lenders' Consortium viz. Punjab & Sind Bank has filed an application u/s 7 of the Code against the Corporate Debtor vide CP(IB) No. 552/MB/2025. Therefore, in view of the above findings, it is crystal clear that the OTS proposal given by the Respondent to the Lenders' Consortium in the year 2025 has failed. Accordingly, we cannot entertain any grievance of the Respondent qua the OTS Proposal." 9.10. After the dismissal of interim relief by the Delhi High Court, assignment dated 27.10.2025 was made in favour of the Prudent ARC which assignment was communicated by Prudent ARC to the Corporate Debtor. 9.11. OTS proposal which was initiated by the Corporate Debtor on 23.05.2025 continued to remain only a proposal it having not been approved by all the three consortium members of ....
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....aid in equal instalments of 15 days each. • Shall also pay the interest calculated at the Lead Bank MCLR as on 01.04.2025 +1.50% p.a. i.e. 9.10+1.50= 10.60% p.a. on the entire settlement amount calculated from October 1st, 2025, which is the day following the day when the amount was supposed to be received by the banks as per the loan sales process. The present rate being charged is 11.05% p.a. (MCLR + 2.15); • In the event that the appellant defaults in making any payment or breaches the timeline for any payment, this entire arrangement will be nullified and the appellant shall not have any further rights to object to lenders process for sale of exposure in the manner decided by lenders and in the manner it is already concluded; • Shall submit to the lenders, within 6 days, the source of funding of KTLPL's offer - and the lenders shall have the right to seek any additional clarifications regarding the same from KTLPL; and • If there are defaults and this arrangement is nullified, the amount paid so far shall be adjusted towards the outstanding due from the Borrower and the appropriations shall be done in terms of the underlyi....
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.... by the Corporate Debtor on 17.09.2025 i.e. after judgment was reserved on Section 7 application alleging that Section 7 proceeding has been initiated fraudulently and malafidely instituted which proceeding need to be dismissed. Copy of the IA has been brought on the record by the Appellant as Annexure A-32. When we look into the averments and application, the basis of the allegation of malicious nature of CIRP despite a concluded settlement. Question has been raised that after declaration of successful bidder in Swiss Challenge it was abuse of process of IBC for collateral purpose and arbitrary and malafide conduct of annulment of OTS. The said allegation clearly indicate that the application is founded on events which took place after offer was submitted by Corporate Debtor on 23.05.2025. Section 65 of the IBC provides as follows:- "65. Fraudulent or malicious initiation of proceedings. - (1) If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be, the Adjudicating Authority may impose upon such perso....
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....t nos. 3 and 4 acted within the purview of their authority in terms of the BPD. Merely because the cancellation was done on 02.09.2025 and fresh bidding process was advertised on 03.09.2025, in the absence of any other material, does not lead to the conclusion that there this is a mala fide involved. 87. On the contrary, prima facie there appears to be merit in the submission of Mr. Mehta that there is no mala fide involved in the entire process related to petitioner's OTS handling, as the lenders are getting approximately Rs. 50 crores over and above petitioner's offer of Rs. 472.10 crore, since the new E-Auction would start from the base price of Rs. 520 crores, suggesting that interest of the respondent nos. 3 to 5, the public sector banks, is not being compromised in the new process. 88. Further, the respondent nos.3 to 5 are resorting to the exercise of transfer of loan exposure in terms of the RBI Master Directions of 2021 in which only permitted transferees can participate and compete. That apart, E-Auction would follow the Swiss Challenge Method to ensure that the best price is fetched, therefore, the new bid process is seemingly not intended to fa....
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....cations. In paragraph 34 of the order rejecting the application, following has been observed:- "34. In view of the discussion above and noting that: a. Their exists a debt. b. The debt is in default. c. Applicant has made repeated attempts to settle the debt, however the financial creditors have finally rejected/recalled the OTS offered by the Applicant. d. Hon'ble Delhi High Court has denied any interim relief to the Applicant vide order dated 06.10.2025. e. Assignment of debt has happened post the orders were reserved in CP/154/2025 on 16.09.2025. f. The new assignee has since rejected the offer of the Applicant for redemption of debt (In fact the Applicant in the IAs has not offered to redeem the debt on upfront basis, rather it has sought the consent of the consortium of lenders or their assignee for repayment of total outstanding dues to all lenders in installment over a period of time till 31.03.2026). g. Legal position being that once an order / judgment is reserved, no pleadings can be entertained by a court or Tribunal, We are of the considered view that IA/5205/2025 & IA/5206/2025 are not....