Mr. Chenchaiah Vemuru vs Canara Bank Limited & Anr.

[Per: Justice Sharad Kumar Sharma, Member (Judicial)]

Before, we deal with the controversy, which may engage consideration in the instant Company Appeal, certain facts becomes inevitable for us to be considered. A CIRP process under Section 7 of I&B Code was initiated, as against the present Appellant for the alleged default in remittance of the financial dues, for the financial assistance taken by the Appellant from the Financial creditor, the Canara Bank. The CIRP process, thus stood instituted on 22.07.2025, against SLS Power Ltd. (Corporate Debtor) and consequent to it, an RP was appointed.

But, the facts, which could be culled out from the records are that, owing to the demand notice issued by Financial Creditor under Section 13(2) of SARFAESI Act, as a consequential action, the possession notice was issued on 06.10.2018 to hand over the assets of the Corporate Debtor on the SARFAESI proceedings that, were drawn by the Respondent. However later on, the SARFAESI proceedings stood disposed by an order that was passed on 07.02.2019 (we may not be concerned about what implications would the SARFAESI proceedings will have for the purposes of the instant Company Appeal).

The proceedings of SA No. 382/2018, which stood instituted before the Debt Recovery Tribunal, was disposed of by an order of 07.02.2019, based upon the payment schedule, which was submitted by the Corporate Debtor for the remittance of the amount due to be paid. Owing to the terms of One Time Settlement, that was submitted vide letter dated 19.07.2025, that is much prior to the order of admission of Section 7 of I&B Code proceedings, i.e., 22.07.2025, the OTS proposal of 19.07.2025, it contained certain payment schedule, which was required to be followed by the Corporate Debtor, as per the terms contained under Clause (a) of the sanction of the compromise/one time settlement proposal, a part of which is extracted here under:

In pursuance to the terms and conditions that were contained under the One Time Settlement proposal of 19.07.2025, it is not disputed by any of the parties to the proceedings, that, the entire amount has already been paid by the Corporate Debtor to the Financial creditor, but the process has not yet been concluded, though the proceedings under Section 12A of I&B Code, 2016, has already been instituted by the Resolution Professional by filing the same before the learned Adjudicating Authority on 25.08.2025, and the reason why the same has not been proceeded is on the ground that the relevant balance sheets pertaining to the financial year ending on 31.03.2023, had not been submitted by the IRP and the audited accounts sheets have not been presented, due to which Section 12A was not been considered by the Learned Adjudicating authority, for giving quitters to Section 7 of I&B Code proceedings.

Owing to the peculiar circumstances of the case, where as a consequence of the approved one time settlement, which already stood approved on 11.07.2025 by Financial Creditor, which the CD had entered into by way of an OTS reference No. ARMB: VIJ: OTS: SLSP: 180: 2025-26: NCM dated 19.07.2025, yet the Appellant is being faced with the Impugned Order dated 22.07.2025, resulting into an admission of Section 7 of I&B Code proceedings. The impediment, which is casted upon for non consideration of an application under Section 12A of I&B Code, is that despite the remittance of the entire amount, its because of the non supply of the requisite documents pertaining to the financial statements of the CD, as it would be one of the necessary documents to be considered for the purposes of deciding the application under Section 12A of I&B Code filed by the IRP. The IRP participated in the proceedings and he too had admitted the fact, that on the basis of One Time Settlement of 19.07.2025, the full amount has already been paid by the Corporate Debtor. But the impediment of non-consideration of Section 12A of I&B Code, is because of non furnishing of the account statement of the Corporate Debtor, be that as it may.

Whatsover, amount that was claimed by the Financial creditor, alleging to be an outstanding due to be paid by the Corporate Debtor as upto 31.03.2025, since the same has already been remitted in full satisfaction, and while complying with the terms of one time settlement of 19.07.2025, nothing much is left to be decided in this Company Appeal on merits, because once the financial creditor was already in receipt of the entire amount, the purpose of Section 7 of I&B Code, stands satisfied as no fruitful purpose could be achieved, while putting the Corporate Debtor into a CIRP process, particularly when as on the date of its initiation i.e., 22.07.2025, the entire financial liability stood already settled.

Owing to the above, we quash the impugned order dated 22.07.2025, as rendered in CP(IB)/18/7/AMR/2025, Canara Bank vs. M/s. SLS Power Ltd. and it is left open for the NCLT to decide the application under Section 12A of I&B Code, subject to fulfilment of all the formalities required to be discharged by the Appellant even of supplying of relevant statements. Any decision which is to be rendered under Section 12A of I&B Code, would be left open for the Appellant to be challenged or by any of the parties to the proceedings who is aggrieved by it.