2022 (8) TMI 999 - Tri - Insolvency and Bankruptcy

Seeking direction to the respondent to refund the EMD amount and to reimburse the amount given by the applicant as bank guarantee towards performance security - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - It is noted that the resolution plan submitted by the resolution professional before this Adjudicating Authority under Section 30(6) of the Code, 2016 was not be accepted due to non-consideration of the claims of some home-buyers and the RP CoC were directed to consider the grievances of the Union Bank of India and other creditors, home-buyers, plot owners etc. The resolution applicant submitted the modified plan to the CoC, which was rejected by the CoC and further the CoC forfeited the EMD of the resolution applicant which is not as per the provisions of law - it is directed that the forfeited amount of the resolution applicant should be refunded to the resolution applicant within 14 days from the date of this order. Application disposed off.

Summary

Issues:
Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking refund of EMD amount and reimbursement of bank guarantee towards performance security.

Analysis:
The applicant, a resolution applicant, submitted EoI and EMD as per the Resolution Professional's requirements. The CoC approved the resolution plan with a majority vote. However, subsequent issues arose when the plot buyers raised claims not considered earlier. The CoC directed the applicant to revise the resolution plan, which was done but ultimately rejected by the CoC without proper communication, leading to the forfeiture of EMD and performance security.

The respondent-RP argued that the applicant failed to comply with due diligence requirements and made unilateral changes to the resolution plan, which led to objections from Union Bank of India and other parties. The CoC directed the applicant to modify the plan, but the revised plan was significantly different and rejected, resulting in the forfeiture of EMD and performance security.

The CoC justified the rejection of the revised plan based on legal advice and the need to finance the CIRP cost. The Tribunal observed that the rejection and forfeiture were not in line with the law. Consequently, the Tribunal directed the refund of the forfeited amount to the resolution applicant within 14 days from the date of the order.

In conclusion, the Tribunal found that the rejection and forfeiture of the resolution applicant's EMD and performance security were unjustified. The decision emphasizes the importance of adherence to legal provisions and proper communication in insolvency proceedings to protect the rights of resolution applicants.