NCLT initiates CIRP against Aban Offshore Insolvency, allows application by PNB [Read Order]

In a recent ruling, the National Company Law Tribunal (NCLT), Chennai Division Bench, admitted a Section 7 application filed by Punjab National Bank against Aban Offshore Ltd., initiating the Corporate Insolvency Resolution Process (CIRP) for a default of over Rs. 1062 crore.

The application stemmed from a debt dating back to 2017. Aban Offshore, the Corporate Debtor, contested the petition, arguing that it was a solvent company facing temporary difficulties and had submitted several One-Time Settlement (OTS) proposals.

The debtor urged the Tribunal to exercise its discretion under Section 7(5)(a) of the IBC to reject the petition, relying heavily on the Supreme Court's decision in Vidarbha Industries Power Ltd., which allows for discretion in cases of solvent companies.

Punjab National Bank, the Financial Creditor, argued that the existence of a financial debt and default was clearly established through acknowledgements and documents submitted. They contended that disputes over the quantum of debt were irrelevant at the admission stage and that the NCLT could not be compelled to consider an OTS proposal, citing judgments like Innoventive Industries Ltd. and E.S. Krishnamurthy v. Bharath Hi-Tecch Builders.

The NCLT bench, comprising Justice Sanjiv Jain (Judicial) and Venkataraman Subramaniam (Technical), held that its scope under Section 7(5) was confined to verifying the existence of a debt and default. It distinguished the facts of the present case from Vidarbha Industries, noting that Aban Offshore was offering a settlement with a significant haircut, which indicated insolvency rather than a mere liquidity mismatch. The Tribunal reiterated that it had no jurisdiction to direct the parties to settle the debt at the pre-admission stage.

Consequently, the NCLT found that a financial debt and default had been established and admitted the petition, initiating the CIRP against Aban Offshore Ltd. and appointing Headway Resolution & Insolvency Services Pvt. Ltd. as the Interim Resolution Professional.

In a subsequent development, the NCLT passed another order to address a procedural impasse after the sudden demise of Mr. Ram Ratan Kanoongo, the key person representing the appointed IRP entity.

To ensure the CIRP progressed, the Tribunal, on an application by the Financial Creditor, appointed Mr. Shailesh Bhalchandran Desai as the new IRP in his personal capacity, allowing him to take over the proceedings and continue the resolution process.

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