NCLAT Delhi Stays Insolvency Proceedings Against DB Realty Ltd., Grants Opportunity To Deposit Ots Amount

Background Facts

DB Realty Ltd. (“Corporate Debtor/Guarantor”) is 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 favour 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.

The NCLT had reserved order in the matter on 02.05.2023. Subsequently, the Corporate Debtor submitted a One Time Settlement (“OTS”) proposal to the Bank on 30.05.2023, which is under consideration.

On 08.06.2023, the Reserve Bank of India (“RBI”) issued a circular requiring Bank/Financial Institutions to have a policy to entertain OTS proposal and settlement.

On 04.07.2023, the NCLT admitted the Corporate Debtor into CIRP.

The Principal Borrower and Corporate Debtor/Guarantor filed appeals before the NCLAT against the order dated 04.07.2023. It was contended that CIRP could not have been initiated while the OTS proposal was pending consideration with the Bank.

NCLAT Verdict

The Bench opined that in view of the RBI Circular dated 08.06.2023, 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.

During the course of hearing, the Corporate Debtor submitted that it would deposit the OTS proposal amount in the Tribunal within 90 days. 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.

“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 favour of Pay and Accounts Officer, Ministry of Corporate Affairs within three months.”

The matter is next listed on 06.09.2023.

Case Title: Imtiyaz Javed Siddiqui v Bank of India & Anr.

Case No.: Company Appeal (AT)(Insolvency) No. 819 of 2023

Counsel for Appellant: Mr. Mukul Rohatgi, Mr. Arun Katpalia, Sr. Advocates, Mr, Vimal Singh, Mr. Mahesh Agarwal, Mr. Rishi Agarwal, Ms. Geetika Sharma, Mr. Akash Agarwal and Mr. Manab Virjee, Advocates.

Counsel For the Respondent: Mr. Azeem Khan, Mr. Akshada and Mr. Karan , Advocates for R-1/BOI Mr. Sumesh Dhawan and Mr. Sghaurya Shyam, Advocates for R-2/IRP.

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