Corporate insolvency resolution process can be resumed if settlement agreement fails: NCLAT Chennai
NCLAT Chennai bench made up of Justice M Venugopal and Mr Kanthi Narahari in the case of ICICI Bank v OPTO Circuits (India) limit concluded that the corporate insolvency resolution process (CIRP) can be reactivated if the settlement agreement between the parties fails.
ICICI Bank has filed an appeal before NCLAT Chennai under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the order of 17.08.2020 of NCLT Bengaluru in which it allowed withdrawal of the IBC petition but at instead of giving liberty to revive CIRP granted liberty to file a new petition under IBC against OPTO Circuits (India) limited (OPTO).
ICICI Bank filed a petition under Section 7 of the Code against OPTO which was admitted by NCLT Bengaluru on 18.03.2020 and the CIRP was initiated. OPTO filed a writ petition in the Karnataka High Court and a stay was granted to the CIRP on 24.03.2020. However, in the meantime, a settlement has been reached between ICICI Bank and OPTO. Accordingly, ICICI Bank is filing a request with NCLT Bengaluru to terminate CIRP and grant freedom to reactivate/resume CIRP in the event of settlement failure between the parties.
NCLT Bengaluru granted CIRP termination but did not grant freedom to relaunch/resume rather granted freedom to file a new petition against OPTO.
ICICI Bank Conflicts
It was argued by ICICI Bank that the freedom to relaunch/resume the CIRP should have been granted by NCLT under the terms of the Appeal Tribunal judgment of 14.07.2020 in the matter of Vivek Bansal vs. Burda Druck India Pvt. ltd.
Conflicts of OPTO
OPTOT claimed that it was unable to pay the balance because its accounts had been blocked in accordance with the order issued by the Directorate of Execution and that it could be authorized to submit a new proposal for settlement at ICICI Bank.
Decision/analysis by NCLAT
The NCLAT noted that there is only one issue to be considered in this appeal, namely whether the awarding authority’s decision ordering that, not complying with the terms and conditions of a single settlement, the appellant bank has the right to file a new claim of the company is justifiable?
The NCLAT held that the NCLT should have considered the NCLAT decision in the Vivek Bansal case as a precedent in similar facts.
“21…Even otherwise, the arbitration authority has not taken note of the request made by the debtor company in IA No. 273 of 2020 of 05.08.2020 in which it is requested that the case may be settled as settled by giving freedom to the applicant Bank (Appellant) to take over the CIRP in the event of non-compliance with the terms of the OTS.”
NCLAT amended the freedom granted by NCLT Bengaluru and granted freedom to ICICI Bank to seek CIRP relaunch/restore in the event of non-compliance with the settlement agreement.
Case Title: ICICI Bank v OPTO Circuits India Limited
Counsel for the Appellant: Mr. V Suresh, Mr. Dev Eshwar,
Counsel for the Respondent: Mr. Navaneetha Krishnan, Mr. NP Vijaya Kumar
Click here to read/download the order