NCLAT Stays CIRP Against DB Realty: Grants Opportunity to Deposit OTS Amount
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, coram comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Imtiyaz Javed Siddiqui vs. Bank of India & Anr., has stayed the Corporate Insolvency Resolution Process (CIRP) proceedings initiated against DB Realty Ltd.
The Bench granted DB Realty Ltd. an opportunity to deposit the amount offered in their One Time Settlement (OTS) proposal with the Tribunal.
The factual matrix of the case is that DB Realty Ltd. (Corporate Debtor/Guarantor), a company engaged in real estate development, which builds customized office space, retail shops, mass residential housing, and cluster redevelopment of old housing, operating in and around Mumbai.
In 2013, Bank of India (Financial Creditor) had granted financial facilities to M/s. Pune Buildtech Pvt. Ltd. (Principal Borrower). The Corporate Debtor executed a Deed of Guarantee in favor of the Financial Creditor, wherein it had undertaken repayment of the Loan availed by the Principal Borrower. The loan account of the Principal Borrower was declared Non-Performing Asset (NPA). When repayment was not done, the Financial Creditor invoked the guarantee and called upon the Corporate Debtor to pay the amount in default.
The Financial Creditor filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, over a default of Rs. 760 Crores.
Thereafter, the NCLT had reserved order in the matter on 2 May, 2023. Subsequently, the Corporate Debtor submitted a One Time Settlement (OTS) proposal to the Bank on 30 May, 2023, which was under consideration.
On 8 June, 2023, the Reserve Bank of India (RBI) issued a circular requiring Bank/Financial Institutions to have a policy to entertain OTS proposal and settlement.
On 4 July, 2023, the NCLT admitted the Corporate Debtor into CIRP.
Aggrieved by the same, the Principal Borrower and Corporate Debtor/Guarantor filed appeals before the NCLAT against the order dated 4 July, 2023. It was contended that CIRP could not have been initiated while the OTS proposal was pending consideration with the Bank.
After noting the facts and submissions, the NCLAT was of the view that the RBI Circular dated 8 June, 2023, the Bank could not immediately proceed either to accept or reject the OTS proposal, as it was necessary to frame policy first, as required by the RBI.
The bench noted the submission forwarded by the Corporate Debtor that it was willing to deposit the OTS proposal amount in the Tribunal within 90 days.
In this regard, the NCLAT observed, “Considering the sequence of the facts, we are of the opinion that to meet the ends of justice, one opportunity be given for payment of the amount, as offered in OTS, to the Bank in the Court. Learned Counsel for the Bank submits that he has no instruction with regard to receiving of the said amount. We direct that the above amount be deposited with the Registrar of NCLAT drawn in favor of Pay and Accounts Officer, Ministry of Corporate Affairs within three months.”
Therefore, the bench granted an opportunity to the Corporate Debtor to deposit the OTS amount with the Registrar, NCLAT.
Accordingly, the CIRP of the Corporate Debtor has been stayed. The matter is next listed on 6 September, 2023.