Withdrawal of insolvency proceedings against Sahara Hospitality permitted as parties enter settlement

The Mumbai Bench National Company Law Tribunal in the case Delta Electro Mechanical Pvt. Ltd. v Sahara Hospitality Ltd, the bench comprising of Justice P.N. Deshmukh (Judicial Member) and Shri Shyam Babu Gautam (Technical Member) observed while adjudicating a petition filed has permitted withdrawal of insolvency proceedings and termination of Corporate Insolvency Resolution Process against Sahara Hospitality Ltd., as between the parties full and final settlement was entered. On 28.07.2022, the order was passed.

Facts Of the Case:

The Corporate Debtor, Sahara Hospitality Ltd had awarded the Operational Creditor, Delta Electro Mechanical Pvt. Ltd a work order for supplying, testing, installation and commission of HVAC and electrical system at Hotel Sahara Star, Mumbai, for an amount of Rs. 32 crore (approx.).

It was observed that when the Corporate Debtor defaulted in payments, the Operational Creditor in 2018 had filed a Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, the petition seeking initiation of CIRP against the Corporate Debtor against default of Rs. 51,77,97,495/- (Principal Amount of Rs. 32,72,03,256 and Interest @ 18% Rs. 19,05,94,239/-). In 2021, the petition was disposed of by the NCLT when Parties entered into settlement terms on 23.04.2019 and as per which the Corporate Debtor was to pay in 14 installments, Rs. 20 Crore to the Operational Creditor. Liberty was granted to the Operational Creditor by the NCLT to revive the Petition in case of breach of settlement terms.

Further, the Corporate Debtor failed to adhere to the settlement terms and the Operational Creditor filed MA 2649 of 2019 seeking revival of the earlier Company Petition. Consequently, a Second Terms of Settlement were drawn between the Parties on 21.11.2019. Nonetheless, the Corporate Debtor yet again failed to oblige and comply with the payment commitments.

CIRP INITIATION

It was observed by the NCLT Bench that there was a debt and default and the Corporate Debtor had acknowledged it’s liability in view of its Settlement Agreement and no denial had been made. Thus, it was clear that the liability to repay was on the Corporate Debtor. It was admitted by the bench that the petition under Section 9 of the IBC and initiated CIRP against the Corporate Debtor. The Interim Resolution Professional appointed was Ms. Mamta Binani.

WITHDRAWAL APPLICATION:

An application was filled by IRP under Section 12A of the IBC seeking withdrawal of the petition filed by the Operational Creditor, in view of the final and full settlement entered between parties for an amount Rs. 8,00,00,000/- to be paid by the Corporate Debtor.

It was confirmed by the Operational Creditor before the bench that the entire amount as indicated in the settlement agreement has been received by it. The bench observed that taking the consent terms into account and nothing survives in the Company Petition and the same is out of the rigour of the CIRP.

Accordingly, the bench allowed the application for withdrawal and CIRP was terminated against the Corporate Debtor.