Sanjay Prakash Bansal vs UCO Bank & Anr.

19.05.2022: Heard Learned Counsel for the Appellant and Learned Counsel for the Respondents.

This Appeal has been filed against the order dated 05.04.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, by which Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("Code" for short) by the Financial Creditor has been admitted.

Learned Counsel for the Appellant challenging the order submits that an OTS dated 28.05.2020 was entered between three Companies in which Company- M/s. Bhumya Tea Co. Pvt. Ltd. (Corporate Debtor) was at Item No.2. It is submitted that the debt of the Corporate Debtor was taken by the other Company which is clear from the Terms and Conditions of the OTS, hence, there was no debt and Application could not have been admitted. He submits that the said plea with regard to OTS dated 28.05.2020 was taken in the Reply of the Corporate Debtor. He has referred to paragraphs 19 and 20 of the impugned order where this has been noticed.

Learned Counsel appearing for the Respondent- Financial Creditor does not deny that OTS took place on 28.05.2020. It is however, submitted that the payments which was scheduled to be made on 30.06.2020 i.e. first installment was itself defaulted and no payments were made apart from payment of Rs. 20 Cr. which was on the communication of Sanction Order. It is submitted that in view of the default clause, the Financial Creditor was fully entitled to take proceedings and the effect of default is that OTS was stood breached and the Financial Creditor was fully entitled to proceed. It is submitted that the Application under Section 7 was filed on 25.09.2020 after default was committed for installment on 30.06.2020.

We have considered the submissions of the Learned Counsel for the parties and perused the record.

The copy of the OTS dated 28.05.2020 has been brought on the record as Annexure-B along with Reply which is at Page 522 of the paper book. The Revised Repayment Schedule as approved indicated that on communication of sanction Rs.20 Cr. was to be paid and on 30.06.2020, Rs. 16.17 Cr. was to be paid by the Companies- M/s. Darjeeling Organic Tea Estates Private Limited and M/s. Bush Tea Company Private Limited. Clause 6 of the Terms and Conditions of the OTS thus provides for 'Default Clause' which is to the following effect:-

There being clear stipulation that on any of the default Bank reserve its right to cancel the compromise settlement and will be entitle to exercise against the borrowers/ guarantors all rights and remedies available prior to the compromise settlement as per applicable law. The ‘Default Clause’ clothe the Financial Creditor the right to file Application under Section 7 which was done after 30.06.2020 when default was committed.

Learned Counsel for the Appellant submitted that there was no cancellation of the compromise OTS dated 28.05.2020, hence, it cannot be said that there was any debt due on the Corporate Debtor.

We do not accept the above submission in view of the clear stipulation of Clause 6 'Default Clause', the Bank has every right to proceed and exercise all its rights when default is committed.

It is not the case that no default was committed on 30.06.2020 nor there is any material on record to indicate that payment as was required to be paid on 30.06.2020 was paid.

Learned Counsel for the Respondents submission has substance that in view of the default, the Bank was fully entitled to proceed under Section 7. We, thus, do not find any error in the order of the Adjudicating Authority admitting Section 7 Application. There is no merit in the Appeal. The Appeal is dismissed.