2024 (5) TMI 1110 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - validity of proceeding of CIRP against the Corporate Debtor - Corporate Debtor having struck off from the Register maintained by Registrar of Companies - revival of struck off company - Impact of settlement agreements on the liability of the Corporate Debtor. Validity of CIRP against a struck-off company - HELD THAT - The company is now active in the Master Data of the Corporate Debtor in the records of the MCA, which has also been brought on record as Annexure-8 to the Additional Affidavit filed by the Resolution Professional. There are no substance in the submission of learned counsel on behalf of the Ex-Director of the Corporate Debtor that company having been struck off on 29.10.2019 the entire proceedings of the IBC need to be set aside. Company owed financial liability to the Financial Creditor and on default committed by the Corporate Debtor, Section 7 application was filed. The liabilities of the company cannot be simply washed out by action of company of non-compliance of the provisions of Companies Act, non-filing of the relevant financial documents and other filings. If the submission is accepted of the Appellant that proceeding could not have been proceeded, the easiest thing for a company would be to get struck off to wash of its all liabilities, which submission cannot be accepted. Non-acceptance of claims filed post-approval of the Resolution Plan - claims were filed after the Committee of Creditors (CoC) had already approved the Resolution Plan - HELD THAT - The Tribunal upheld the Resolution Professional's decision not to accept these late claims and noted that an application seeking admission of the claim was dismissed on 16.08.2023, which was not further challenged. Impact of settlement agreements on the liability of the Corporate Debtor - HELD THAT - The submission of the Appellant that under the settlement agreement dated 18.06.2018 and 21.06.2018 it was Super Cassettes Industries Private Limited who has to make payment of Corporate Debtor is no more available to the Appellant since one of the parties i.e. the Financial Creditor has already nullified all the understanding in writing within four days from the said settlement. Thus, liability of the Corporate Debtor to discharge its financial debt continues. More so, admission of Section 7 application on the basis of debt and default has become final and in the proceeding regarding plan approval it is not open for the Ex-Director of the Corporate Debtor to contend that there is no debt owed by the Corporate Debtor. The submission of the Appellant that debt is to be paid by Super Cassettes Industries Private Limited is fallacious and cannot be accepted. Thus, no grounds raised by the Appellant to interfere in the order dated 12.10.2023 approving the Resolution Plan. Appeal dismissed.

Summary

Issues Involved:
1. Validity of CIRP proceedings against a struck-off company.
2. Admissibility of claims filed after the approval of the Resolution Plan by the CoC.
3. Impact of Settlement Agreements on the liability of the Corporate Debtor.

Summary:

1. Validity of CIRP proceedings against a struck-off company:
The Corporate Debtor was struck off by the Registrar of Companies on 29.10.2019. The Appellant argued that the CIRP proceedings initiated u/s 7 of the IBC against the Corporate Debtor were void as the company was non-existent. However, the NCLAT noted that the Section 7 application was filed on 19.07.2019, when the company was still in existence. The Adjudicating Authority had already overruled the objection regarding the company being struck off in its order dated 11.02.2022, which was not challenged. The Tribunal also observed that the Resolution Professional had taken steps to restore the company's status to 'active' in the MCA records, thus validating the continuation of CIRP proceedings.

2. Admissibility of claims filed after the approval of the Resolution Plan by the CoC:
The Appellants, Pooja Film Company and Pooja Entertainment and Films Limited, filed their claims in Form C on 10.04.2023, after the Resolution Plan was approved by the CoC on 04.11.2022. The Resolution Professional did not accept these claims. The NCLAT upheld the decision, noting that claims were filed post-approval of the Resolution Plan. Furthermore, an application (I.A. No.4047 of 2023) filed by Pooja Entertainment & Films Ltd. for admitting its claim was rejected by the Adjudicating Authority on 16.08.2023, and this order was not challenged, making it final.

3. Impact of Settlement Agreements on the liability of the Corporate Debtor:
The Appellant argued that under Settlement Agreements dated 18.06.2018 and 21.06.2018, the liability of the Corporate Debtor was to be discharged by Super Cassettes Industries Private Limited. However, the NCLAT found that the Financial Creditor had nullified these agreements in writing on 23.06.2018, stating that the terms were not adhered to by Super Cassettes Industries Private Limited. Thus, the liability of the Corporate Debtor to discharge its financial debt continued. The Tribunal emphasized that the admission of the Section 7 application based on debt and default had become final, and it was not open for the Ex-Director to contest the existence of the debt during the plan approval stage.

Conclusion:
The NCLAT dismissed all three appeals, upholding the order dated 12.10.2023, which approved the Resolution Plan of the Corporate Debtor. The Tribunal reiterated that the commercial wisdom of the Committee of Creditors in approving the Resolution Plan is paramount and cannot be interfered with on the grounds raised by the Appellants.