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2025 (1) TMI 487 - HC - IBCBlacklisting order - Seeking quashing of the order issued by the respondents whereby the petitioner has been blacklisted for a period of three years and debarred from participating in the tender process for any work advertised by the Government of Tripura - Whether the order of blacklisting dated 5th October, 2023 is proper in the eye of law and on facts? - HELD THAT - The impugned order of blacklisting for a period of three years and debarment of the petitioner from participating in the future tender processes for any work advertised by the Government of Tripura cannot be held to be proper in the eye of law for the reasons recorded hereinafter. The object of revival of a sick company on approval of the resolution plan by the NCLT is intended to provide a clean slate for the company to ensure that the new management makes a clean break from the past. The resolution plan of the successful resolution applicant has been approved under Section 31 of the I B Code by the learned NCLT vide its order dated 11th August, 2023 which is Annexure-2 to the writ petition. It records that on the date of approval of the resolution plan by the adjudicating authority all such claims which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. Reference made to the decision of the Apex Court in Ghanashyam Mishra Sons Pvt. Ltd 2021 (4) TMI 613 - SUPREME COURT wherein it has been held that once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Govt. any State Govt. or any local authority, guarantors and other stakeholders. In the case of Ghanashyam Mishra Sons Pvt. Ltd the apex court held that one of dominant objects of the I B Code is to see that an attempt has to be made for revival of the corporate debtor and make it a running concern. The scheme of the I B Code is therefore to make an attempt by divesting the erstwhile management of its powers and vesting it in a professional agency to continue the business of the corporate debtor as a going concern until a resolution plan is drawn up - The apex court held that one of the principal object of the I B Code is to provide for revival of the corporate debtor and make it a growing concern. Once action in the nature of forfeiture of performance bank guarantee to the tune of Rs. 95,58,000/- has been imposed upon the company for the delay in the execution of the work of the contract, the order of blacklisting would not be proper in the eye of law. The penalty of blacklisting for a period of three years and debarment from future contracts with the Government of Tripura would thus be disproportionate as the petitioner would be practically unable to enter into new contracts and undertake business in order to become a growing and running concern. The respondents have taken a stand that challenge to the order of blacklisting in an independent proceeding would lead multiplicity of proceedings and conflicting views which are best avoided. However, as it appears that the learned Arbitral Tribunal has not entertained the plea against the order of blacklisting as no such claim was made before it. In such a case, refusal to entertain a challenge to the order of blacklisting by this Court under Article 226 of the Constitution of India would amount to denying a remedy available in law. Conclusion - Such order of blacklisting and debarment of the petitioner company after approval of the resolution plan with a new management would defeat the dominant aim and object of the Insolvency and Bankruptcy Code, 2016 and in all likelihood defeat the very purpose of revival of the company. The order of blacklisting is quashed. Petition allowed.
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1. ISSUES PRESENTED and CONSIDERED The primary legal question addressed in this judgment is whether the order of blacklisting dated 5th October 2023, which blacklisted the petitioner for a period of three years and debarred them from participating in any tender process for works advertised by the Government of Tripura, is proper in the eye of law and on facts. 2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents: The legal framework involves the Insolvency and Bankruptcy Code, 2016 (IBC), particularly Sections 31 and 32A, which deal with the approval of resolution plans and protection from liabilities of prior offences. The court also referenced several precedents, including the Supreme Court's decisions in Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Co. Ltd. and Vetindia Pharmaceuticals Ltd. vs. State of Uttar Pradesh, among others. Court's Interpretation and Reasoning: The court emphasized that the IBC aims to provide a clean slate for companies undergoing resolution, allowing them to revive and continue as going concerns. The court noted that the blacklisting order was based on the actions of the company's previous management and that the new management, post-resolution plan approval, should not be penalized for past misdeeds. Key Evidence and Findings: The court found that the petitioner was admitted into the Corporate Insolvency Resolution Process (CIRP) and that a resolution plan was approved by the NCLT, which transferred management to a new entity. The respondents' dissatisfaction with the petitioner's performance was noted, but the court highlighted that the resolution plan aimed to provide a fresh start. Application of Law to Facts: The court applied the principles from the IBC, noting that once a resolution plan is approved, all claims not part of the plan are extinguished. The court found that the blacklisting order contradicted the IBC's objective of reviving the corporate debtor and providing a clean slate for new management. Treatment of Competing Arguments: The petitioner argued that the blacklisting was unjustified post-resolution plan approval, while the respondents contended that the blacklisting was warranted due to the petitioner's past performance issues. The court sided with the petitioner, emphasizing the IBC's intent to protect new management from past liabilities. Conclusions: The court concluded that the blacklisting order was improper as it contradicted the IBC's objectives and would hinder the revival of the company under new management. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: "The object of revival of a sick company on approval of the resolution plan by the NCLT is intended to provide a clean slate for the company to ensure that the new management makes a clean break from the past." Core Principles Established: The judgment reinforced the principle that once a resolution plan is approved under the IBC, the corporate debtor should be allowed to start afresh, free from past liabilities that are not part of the resolution plan. The judgment also emphasized the importance of proportionality in imposing penalties like blacklisting. Final Determinations on Each Issue: The court quashed the blacklisting order dated 5th October 2023, allowing the petitioner to participate in future contracts with the Government of Tripura. The court highlighted that the blacklisting was disproportionate and contrary to the IBC's objectives.
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