2024 (11) TMI 297 - AT - IBC

Violation of principles of natural justice - Appellant was not given an opportunity of hearing - termination of Insolvency Resolution Process of Personal Guarantor and discharging the RP - HELD THAT - Section 106 contemplate Report of RP on Repayment Plan. Section 105 required the Debtor to prepare in consultation with the RP Repayment Plan. As per Section 106, the Report which requires to be submitted within 21 days from the last date of submission of claims under Section 102. The facts brought on the record indicates that there has been no communication from the Appellant after 24.08.2022. No Repayment Plan having prepared by the Debtor or submitted, no Proceeding for convening of the Meeting of Creditors or conduct of Meeting could take place. The Adjudicating Authority took the view that when the Repayment Plan has not been received, the effect and consequence of rejection of Plan has to ensue by virtue of Section 115. The Application I.A. 449/2024, which was filed by RP, and the Prayers made thereunder were in accordance with Statutory Scheme under Section 115. Repayment Plan having not been submitted by Debtor, natural consequence was Creditors to file an Application for Bankruptcy under Chapter IV - The present is the case where Appellant right from very beginning has been challenging every action of the Adjudicating Authority and acts of Resolution Professional unsuccessfully. Appellant has never submitted any Repayment Plan to be finalised by the RP. From the facts and sequence of the event which has been brought on the record, it is clear that at no point of time, subsequent to receiving request from the RP for submitting a Repayment Plan, Appellant raised any grievance or filed any proceeding before the Adjudicating Authority, raising his grievances and grounds for not being able to submit a Repayment Plan. The Appellant kept silence for years together and when consequential Order under Section 115 has been passed by the Adjudicating Authority, he is raising grievance of not being heard by the Adjudicating Authority. Regulation 19 refers to filing of Repayment Plan by RP and Repayment Plan has to be submitted within 120 days from the Resolution Process commencement date. Resolution Process commencement date is 16.06.2022 and 120 days came to an end in the Year 2022 itself. Copies of the documents filed before the Adjudicating Authority which was required to be given to the Guarantor as contemplated in Regulation 19(2) relates to the documents which are filed along with the Report submitted by RP under 106 112. In the present case, when Repayment Plan has not been submitted by Debtor, nor was finalised by the RP and no Report has been submitted by RP to the Adjudicating Authority, the question of submitting or giving any documents along with the Report regarding Repayment Plan does not arise, hence, Regulation 19 is not applicable in the facts of the present case nor Appellant can rely on Regulation 19. In the Appeal also Appellant has not been able to show any substantial ground to interfere with the Order impugned, except on harping on the argument that he was not given opportunity - there are no ground to interfere with the Impugned Order passed by the Adjudicating Authority - appeal dismissed.

Summary

Issues Involved:

1. Whether the order terminating the Insolvency Resolution Process of the Personal Guarantor was in violation of the principles of natural justice.
2. Whether the Adjudicating Authority erred in allowing creditors to initiate the bankruptcy process against the Personal Guarantor.
3. Whether the Resolution Professional complied with the procedural requirements under the Insolvency and Bankruptcy Code and associated regulations.

Issue-wise Detailed Analysis:

1. Violation of Principles of Natural Justice:

The appellant contended that the order by the Adjudicating Authority was passed without serving I.A. No. 449/2024 on the appellant or providing a hearing, thus violating the principles of natural justice. The appellant argued that the Regulation 19 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtor), Regulations 2019, obligated the RP to provide copies of all documents filed before the Adjudicating Authority, including I.A. 449/2024. However, the tribunal observed that the appellant had ample opportunity to submit a repayment plan but failed to do so. The appellant also did not raise any grievances or file proceedings before the Adjudicating Authority regarding the inability to submit a repayment plan. The tribunal concluded that the appellant's claim of not being heard was unfounded, as the appellant had been silent for a significant period and only raised the issue after the consequential order under Section 115 was passed.

2. Allowing Creditors to Initiate Bankruptcy Process:

The tribunal examined the statutory scheme under the Insolvency and Bankruptcy Code, particularly Sections 114 and 115. It noted that when no repayment plan is proposed by the debtor, the provisions of Section 115(2) entitle creditors to file an application for bankruptcy under Chapter IV. The tribunal found that the Adjudicating Authority correctly applied these provisions, as no repayment plan was submitted by the appellant, thereby leading to the natural consequence of allowing creditors to initiate the bankruptcy process. The tribunal emphasized that the entitlement of creditors to file a bankruptcy application is a statutory consequence under Section 115(2), and the Adjudicating Authority's order was in line with this provision.

3. Compliance with Procedural Requirements:

The appellant argued that the RP failed to provide necessary documents and details for finalizing the repayment plan, which allegedly led to non-cooperation from the appellant. However, the tribunal noted that the RP had repeatedly requested the appellant to provide relevant documents and submit a repayment plan, which the appellant failed to do. The tribunal highlighted that the RP had complied with the procedural requirements by issuing public notices, preparing a list of creditors, and communicating with the appellant regarding the claims. The tribunal found no procedural irregularities on the part of the RP and concluded that the RP's actions were in accordance with the statutory and regulatory framework.

Conclusion:

The tribunal dismissed the appeal, finding no merit in the appellant's arguments. It upheld the Adjudicating Authority's order, stating that the order was neither in violation of natural justice nor contrary to the statutory provisions of the Insolvency and Bankruptcy Code. The tribunal affirmed that the creditors were rightly granted liberty to initiate the bankruptcy process, and the RP was correctly discharged following the completion of the insolvency resolution process.