Once a One-Time Settlement is accepted and part payment is received, the Financial Creditor cannot file CIRP

NCLT Kolkata Bench Denies IDBI Bank's Insolvency Petition Against Jain Infraprojects. Tribunal Rejects CIRP Application, Urges Parties to Explore Settlement Options

In a significant judgment delivered on September 16, 2025, the Kolkata Bench of the National Company Law Tribunal (NCLT) has rejected the Corporate Insolvency Resolution Process (CIRP) application filed by IDBI Bank Limited against Jain Infraprojects Limited under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. The bench, comprising Member (Judicial) Smt. Bidisha Banerjee and Member (Technical) Shri Siddharth Mishra, concluded that IDBI Bank's reliance on an older default date was inappropriate, given the acceptance of One-Time Settlement (OTS) arrangements and part payments by the Corporate Debtor.

The case revolved around IDBI Bank's claim of a default amounting to over Rs. 1072 crores, with the original date of default traced back to September 30, 2013. Jain Infraprojects had engaged in multiple OTS arrangements with IDBI Bank, some of which had been accepted and partially fulfilled. The tribunal emphasized that once an OTS is accepted and part payment is made, the CIRP application cannot revert to an older default date. This move would constitute a misuse of the IBC intended for recovery purposes rather than resolution.

IDBI Bank's counsel argued for the insolvency proceedings based on the original debt, while Jain Infraprojects highlighted its efforts to settle with consortium lenders, having successfully settled with seven out of eleven banks. The NCLT acknowledged these efforts and criticized IDBI Bank for preventing the Corporate Debtor from fulfilling OTS obligations, rendering the contract voidable under Sections 53 and 54 of the Indian Contract Act, 1872.

The tribunal cited precedents, including the Supreme Court ruling in Swiss Ribbons Pvt. Ltd. v. Union of India, asserting that the IBC is not a recovery forum but a resolution mechanism. This judgment underscores the discretionary power of the NCLT in admitting or rejecting CIRP applications based on specific case circumstances, as per Section 7 of the IBC.

The NCLT has urged both parties to settle the matter amicably and provided Jain Infraprojects with an opportunity to recall the admission order within two months. This ruling not only highlights the importance of exploring settlement avenues but also reinforces the judicial stance against using insolvency proceedings as leverage for recovery.

Bottom Line:

Insolvency and Bankruptcy Code - Date of default - Once a One-Time Settlement (OTS) is accepted and part payment is received, the Financial Creditor cannot revert to an older default date to file CIRP under Section 7 of IBC.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 7, Indian Contract Act, 1872 Sections 53 and 54

IDBI Bank Limited v. Jain Infraprojects Limited, (NCLT)(Kolkata Bench) : Law Finder Doc Id # 2781887