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2022 (1) TMI 1371 - Tri - Insolvency and BankruptcyRejection of the resolution plan submitted by the Applicant - rejection on the ground that the applicant is ineligible to file resolution plan under section 29A of the Code - Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of NCLT Rules, 2016 - HELD THAT - This Bench is of the opinion that the applicant squarely falls within the definition of Section 29A (b) and is barred to present resolution plan under Section 29A of the Code. It is further noticed that the Union Bank of India vide its order dated 25.05.2021 categorically held that in terms of RBI master circular that the applicants are wilful defaulters and further that a show cause notice dated 13.11.2019 was served to the borrower/ promoter/ directors/ guarantors. The applicant was provided personal hearing/ opportunity on 08.09.2020 and 24.12.2020. The finding of the Committee further categorised the applicant as wilful defaulter by diversion/ siphoning off the bank s fund. The said order was reviewed by the Union Bank of India on 01.07.2021 and the review committee has confirmed the categorisation of applicants as wilful defaulter. The said action of categorisation of wilful defaulter was challenged by way of Writ Petition before the Hon ble Bombay High Court in SHYAMLAL JAIDEV PANCHMATIYA ANR. VERSUS UNION BANK PF INDIA ORS. 2021 (9) TMI 1491 - BOMBAY HIGH COURT . This Bench has no hesitation to conclude that the CoC has rightly rejected the resolution plan submitted by the Applicant herein and that he is ineligible to submit a plan under Section 29A of the Code - Application dismissed.
Issues Involved:
1. Eligibility of the Resolution Applicant under Section 29A of the Insolvency and Bankruptcy Code (IBC). 2. Validity of the rejection of the resolution plan by the Committee of Creditors (CoC). 3. Allegations of fraudulent classification by Union Bank of India. 4. Compliance with procedural requirements for declaring an account as a wilful defaulter. Issue-wise Detailed Analysis: 1. Eligibility of the Resolution Applicant under Section 29A of the Insolvency and Bankruptcy Code (IBC): The primary issue for consideration was whether the CoC was justified in rejecting the resolution plan on the grounds that the applicant was ineligible under Section 29A of the IBC. Section 29A specifies that a person is not eligible to submit a resolution plan if they are a wilful defaulter according to the guidelines of the Reserve Bank of India (RBI). The Tribunal noted that Union Bank of India had issued a show cause notice on 13.09.2019 to the Corporate Debtor and its associated individuals to declare them as wilful defaulters. The CoC rejected the resolution plan in its 7th and 8th meetings, citing the classification of the account as fraud and wilful defaulter. The Tribunal concluded that the applicant fell within the definition of Section 29A(b) and was thus barred from presenting a resolution plan. 2. Validity of the rejection of the resolution plan by the Committee of Creditors (CoC): The Tribunal examined the factual matrix and found that the CoC had rejected the resolution plan based on the classification of the applicant’s account as a wilful defaulter. The CoC’s decision was upheld as it was consistent with the provisions of Section 29A of the IBC. The Tribunal emphasized that the CoC had the authority to reject the plan if the applicant was found ineligible under the specified criteria. 3. Allegations of fraudulent classification by Union Bank of India: The applicant argued that the classification of the account as fraud by Union Bank of India was arbitrary and without proper basis. They contended that the bank had not followed the procedural requirements outlined in the RBI master circular for declaring an account as a wilful defaulter. However, the Tribunal found that Union Bank of India had issued a show cause notice and provided personal hearings to the applicant on multiple occasions. The review committee of the bank had also confirmed the categorization of the applicant as a wilful defaulter. Therefore, the Tribunal concluded that the classification was not arbitrary and was in line with the regulatory guidelines. 4. Compliance with procedural requirements for declaring an account as a wilful defaulter: The applicant claimed that Union Bank of India had not adhered to the procedural requirements for declaring an account as a wilful defaulter. They argued that the bank had not provided sufficient evidence or followed the guidelines properly. However, the Tribunal found that the bank had issued a show cause notice and provided personal hearings to the applicant. The review committee had also confirmed the categorization of the applicant as a wilful defaulter. The Tribunal concluded that the procedural requirements were met, and the classification was justified. Conclusion: The Tribunal concluded that the CoC was justified in rejecting the resolution plan submitted by the applicant, as the applicant was ineligible under Section 29A of the IBC. The classification of the applicant’s account as a wilful defaulter by Union Bank of India was found to be in compliance with the regulatory guidelines. Consequently, the application was dismissed.
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