Om Tranns Infra Corporation Initiates Insolvency Proceedings Over Unpaid Operational Debt Despite Settlement Agreement
In a significant ruling, the National Company Law Tribunal (NCLT) Chennai Bench has admitted the petition filed by Om Tranns Infra Corporation Pvt. Ltd. for initiating the Corporate Insolvency Resolution Process (CIRP) against Everrenew Energy Pvt. Ltd. The petition, filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, was admitted despite the existence of a settlement agreement between the parties.
The bench, comprising Mr. Sanjiv Jain, Member (Judicial), and Mr. Venkataraman Subramaniam, Member (Technical), adjudicated on a petition concerning unpaid invoices amounting to Rs. 3,24,05,707, for transportation and carrier services rendered by the petitioner to the corporate debtor. The tribunal noted that the settlement agreement did not alter the original character of the operational debt and that the breach of such an agreement does not extinguish the statutory rights of creditors under the Insolvency and Bankruptcy Code (IBC).
The case revolves around services provided by Om Tranns Infra Corporation from June to October 2024, for which Everrenew Energy defaulted on payments. A demand notice was issued on November 18, 2024, following which a part payment was made by the corporate debtor. However, the respondent’s contention that a settlement agreement reached in January 2025 superseded previous obligations was rejected by the tribunal. The NCLT clarified that the settlement agreement did not constitute novation of the original contract and that the operational debt remained valid.
The tribunal also dismissed the respondent’s defense regarding inflated invoicing and alleged employee collusion, noting that no pre-existing dispute was raised before the demand notice was issued. The NCLT highlighted that the corporate debtor’s acknowledgment of the debt and part payments substantiated the petitioner’s claims.
Under the tribunal's order, the CIRP is to be overseen by Mr. S. Kangayan as the Interim Resolution Professional. The tribunal has also enforced a moratorium, barring the institution or continuation of suits against Everrenew Energy, transferring assets, and recovering property during the insolvency proceedings. The decision underscores the importance of honoring operational debts and the limitations of settlement agreements in altering statutory rights under the IBC.
Bottom line:-
Settlement agreements under IBC do not alter or extinguish the original character of operational debt, and breach of such agreements does not change the statutory rights of creditors to initiate CIRP proceedings.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 9, 14, The Indian Contract Act, 1872 Section 62
