2023 (3) TMI 647 - AT - Insolvency and Bankruptcy

Legality of approved Resolution Plan - ineligibility of the erstwhile promoters - case of appellant is that Respondent had given their personal guarantee in favour of the creditor on behalf of the Corporate Debtor on 03.06.2015 then their case would be covered by Section 29A(h) of the Code and they would be held to be ineligible to submit a resolution plan - case of respondent is that the letter dated 03.06.2015 is not a guarantee but it is only an intention to execute a personal guarantee in case of the happening of an event. It is further submitted that such a guarantee has to be invoked by the creditor and remained unpaid in full or part. HELD THAT - In order to appreciate, the rival contention in this regard, the language of the letter dated 03.06.2015 has to be appreciated. Counsel for the Respondent has rightly argued that Section 29A(h) of the Code talks of an event which has already taken place i.e. has executed (a guarantee) whereas letter dated 03.06.2015 says that in case of failure on the part of POGGENAMP to pay to POSCO-IPPC the said outstanding dues, as mentioned herein, we (the undersigned) shall provide/execute Personal Guarantees in our respective individual capacities in favour of POSCO-IPPC within 30 days from the date of such failure . A close scrutiny of the aforesaid language used in the letter dated 03.06.2015 indicates that Respondent No. 2 had not executed any guarantee rather it had offered to execute a guarantee in case of the happening of a particular event. There is no other document placed on record besides the letter dated 03.06.2015 to clinch this issue that personal guarantee had already been executed by Respondent No. 2 at the time when they had submitted their resolution plan and that guarantee had been invoked by the creditor and the amount remained unpaid in full or part, therefore, was ineligible in view of Section 29A(h) of the Code. There are no substance in the arguments raised by Counsel for the Appellant for the purposes of reversing the order in the application which has been allowed by the impugned order. After perusal of the record, we are satisfied that neither the issue of review nor res-judicata is made out on the facts and circumstances of the present case. Lastly, the Appellant has tried to argue that the Respondent No. 2 was not entitled to the benefit of Section 240A(1) of the Code whereas the case of Respondent No. 2 is that it is not seeking the benefit of Section 240A(1) and has neither claimed such a benefit. It is rather submitted that the letter of MSME was withdrawn - As a matter of fact, from the perusal of the entire record, we have found that the whole case of the Appellant to dislodge the claim of the SRA revolves around the letter dated 03.06.2015 i.e. alleged personal guarantee, in order to attract the rigour of Section 29A(h) of the Code but since, Respondent No. 2 had not executed any guarantee, vide letter dated 03.06.2015, rather it was stated that it may execute a guarantee on failure of certain event that may happen at the instance of the Corporate Debtor, therefore, Section 29A(h) was not at all attracted to the present lis. There is no error in the order impugned herein at the instance of the Appellant and therefore, the appeal is found without any merit and the same is hereby dismissed.

Summary

Issues:
The issues involved in the judgment are the eligibility of the erstwhile promoters to submit a resolution plan under Section 29A(h) of the Insolvency and Bankruptcy Code, 2016 and the interpretation of a letter dated 03.06.2015 as a personal guarantee.

Eligibility of Erstwhile Promoters:
The Appellant, an Operational Creditor, filed an application under Section 9 of the Code against the Corporate Debtor for the resolution of a debt. The Adjudicating Authority admitted the application and appointed an IRP, later replaced by an RP. The RP invited Expression of Interest for resolution plans and published lists of Proposed Resolution Applicants. The Appellant objected to the inclusion of erstwhile promoters in the final list, citing ineligibility under Section 29A(h) of the Code. The Adjudicating Authority held that the Corporate Debtor could not claim MSME status retrospectively and rejected the Appellant's application seeking direction against accepting the resolution plan from erstwhile promoters.

Interpretation of Letter dated 03.06.2015:
The Appellant argued that the letter dated 03.06.2015 constituted a personal guarantee by the erstwhile promoters, making them ineligible under Section 29A(h) of the Code. The Respondent contended that the letter only expressed an intention to provide a guarantee in case of default by the Corporate Debtor. The Adjudicating Authority found that the letter did not constitute an executed guarantee and therefore, Section 29A(h) was not applicable. The Respondent's resolution plan was approved, leading to the Appellant's challenge through the present appeal.

Conclusion:
The Tribunal examined the language of the letter dated 03.06.2015 and determined that it did not amount to an executed guarantee but rather an intention to provide a guarantee in the future. As no other document supported the existence of a guarantee, the Tribunal found that Section 29A(h) was not attracted to the case. The Appellant's arguments regarding review of previous orders, res-judicata, and entitlement to statutory benefits were also dismissed. Ultimately, the Tribunal concluded that the appeal lacked merit, upheld the decision to allow the resolution plan of the erstwhile promoters, and dismissed the appeal without costs.