Successful Swiss Challenge Bid and Ongoing ₹590 Crore OTS Cannot Defeat Insolvency Proceedings: NCLT [Read Order]

The National Company Law Tribunal (NCLT) Mumbai Bench held that a successful Swiss Challenge process and continuing One Time Settlement (OTS) negotiations cannot defeat a Section 7 petition once default is established.

During the proceedings the Corporate Debtor strongly relied on an ongoing consortium settlement process. It argued that lenders led by Bank of Baroda had already accepted a revised OTS proposal of ₹590 crore and declared the company as the successful bidder under a Swiss Challenge mechanism after no competing offers were received from ARCs or financial institutions.

The Corporate Debtor further contended that Bank of India held only 9.4% exposure in the consortium and its decision to independently pursue insolvency proceedings would jeopardize the collective settlement efforts of all lenders.

However, the Tribunal noted that despite repeated extensions and negotiations extending over several months the Corporate Debtor failed to deposit the mandatory upfront payment of ₹59 crore under the OTS terms. The Bench observed that the settlement proposal remained conditional and unimplemented, with even the source of funds for the OTS not being finalized.

The Tribunal held that admission of a Section 7 petition depends solely on proof of debt and default. The Bench reiterated that the adjudicating authority cannot compel parties to settle or defer insolvency proceedings merely because restructuring talks are underway.

The bench comprising Nilesh Sharma and Sameer Kakar admitted the insolvency plea initiated by Bank of India against Distribution Logistics Infrastructure Private Limited for a default exceeding ₹77.30 crore.

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