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2022 (8) TMI 108 - AT - Insolvency and BankruptcyRejection of Approval Plan - Cancellation of non-bailable warrants - failure to deposit the performance guarantee for the Resolution Plan - Section 74(3) of the IBC - HELD THAT - The Resolution Plan when it was approved, thus, did not contain any provision for providing a performance security. It is only after the order of the Adjudicating Authority dated 03.03.2021 that non-submission of the performance guarantee is made an issue by the Resolution Professional. After the order dated 03.03.2021, the Resolution Applicant had not appeared before the Adjudicating Authority due to which bailable and non-bailable warrants were issued. The Adjudicating Authority in its impugned order has observed that despite order of the Adjudicating Authority dated 03.03.2021, Resolution Applicant has not shown any willingness to proceed with the Resolution Plan. The CIRP is a time bound process where timeline has been prescribed for each step. The CIRP cannot be allowed to continue for indefinite period. When Appellant has submitted the Resolution Plan which was approved on 08.11.2018, he cannot just say that he was not aware of the proceedings before the Adjudicating Authority for approval of the Resolution Plan. The Adjudicating Authority has rightly drawn a conclusion that inaction on the part of the Resolution Applicant clearly indicates that he was not willing to proceed with the Resolution Plan approved by the CoC - the Adjudicating Authority has given valid reason in the order for proceeding with the liquidation of the Corporate Debtor. The present was not a case where there was any violation of Section 74(3) by the Appellant. Since the Resolution Plan was never approved by the Adjudicating Authority, the Corporate Debtor or its officers or creditors or any other persons cannot be said to have knowingly and wilfully contravened any of the terms of the Resolution Plan - application allowed.
Issues Involved:
1. Rejection of the Resolution Plan by the Adjudicating Authority. 2. Issuance and subsequent rejection of applications for cancellation of non-bailable warrants. 3. Direction for filing a complaint under Section 74(3) of the IBC against the Resolution Applicant. Detailed Analysis: 1. Rejection of the Resolution Plan by the Adjudicating Authority: The Corporate Insolvency Resolution Process (CIRP) was initiated against M/s. Shivkala Developers Pvt. Ltd. The Appellant submitted a Resolution Plan, which was approved by the Committee of Creditors (CoC) in its 10th meeting on 07.11.2018. The Resolution Professional (RP) filed CA-734 of 2018 for approval of the Resolution Plan. However, the Appellant was made a party to the application only on 03.03.2021. The Adjudicating Authority issued notices to the Appellant, who failed to deposit the performance guarantee for the Resolution Plan. Consequently, bailable and non-bailable warrants were issued against the Appellant. The Adjudicating Authority observed that the Appellant had not shown any willingness to proceed with the Resolution Plan, leading to the rejection of CA-734 of 2018 and the order of liquidation. The Tribunal noted that the requirement for performance security was introduced in the CIRP Regulations only after the approval of the Resolution Plan, and the Appellant's non-compliance indicated a lack of interest in the plan's implementation. 2. Issuance and Subsequent Rejection of Applications for Cancellation of Non-Bailable Warrants: The Appellant filed I.A Nos. 5026 of 2021, 5027 of 2021, and 5028 of 2021 for the cancellation of non-bailable warrants. The Adjudicating Authority dismissed these applications without discussing the grounds provided by the Appellant. The Tribunal found this dismissal unsustainable and allowed the applications, thereby canceling the bailable and non-bailable warrants issued against the Appellant. 3. Direction for Filing a Complaint under Section 74(3) of the IBC: The Adjudicating Authority directed the liquidator to file a complaint under Section 74(3) of the IBC against the Resolution Applicant. Section 74(3) pertains to the punishment for contravention of the resolution plan. The Tribunal held that since the Resolution Plan was never approved by the Adjudicating Authority, there was no contravention of Section 74(3). Therefore, the direction to file a complaint under this section was deemed unsustainable and was set aside. Conclusion: The Tribunal partly allowed the appeal: 1. Applications I.A Nos. 5026 of 2021, 5027 of 2021, and 5028 of 2021 were allowed, and the bailable and non-bailable warrants against the Appellant were canceled. 2. The direction to file a complaint under Section 74(3) against the Resolution Applicant was set aside. 3. The rest of the Adjudicating Authority's order dated 24.11.2021 was upheld, and the liquidator was directed to proceed in accordance with the law, allowing the Appellant to participate in the liquidation process.
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