2025 (3) TMI 275 - AT - Companies Law

Eligibility of Appellant to submit a resolution plan under Section 29A of the Insolvency and Bankruptcy Code 2016 - locus to seek reconsideration of its resolution plan after the refund of the Earnest Money Deposit (EMD) - HELD THAT - The default under Section 164(2) had occurred on 01.12.2017 the date on which the GADPPL failed to file financial statements and annual returns for a continuous period of three years. Thus Mr. Avanish Kumar Singh was ineligible to be a director as per provisions of Section 164(2) of the Companies Act 2013 and the Appellant company also accordingly was not eligible to be a resolution applicant in terms of provisions of clause (e) of Section 29A of IBC 2016. Further it is noticed that the Appellant after writing repeated reminders to RP had taken back the EMD amount and it is only as an afterthought after nearly six months that the Interlocutory Application was filed for consideration of the resolution plan. This clearly appears to be an attempt to delay the process of CIRP/liquidation. The CoC in its commercial wisdom has not accepted the resolution plan and had directed the liquidation of the Corporate Debtor. The commercial wisdom of the CoC regarding acceptance/rejection of the resolution plan is non-justiciable . Conclusion - The Ld. NCLT had rightly refused to intervene in the decision of the CoC and its commercial wisdom in rejecting the resolution plan of the Appellant. There is no ground to interfere with the order of the Ld. NCLT and accordingly the appeal fails and is dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the Appellant was eligible to submit a resolution plan under Section 29A of the Insolvency and Bankruptcy Code, 2016 (IBC).
Whether the Appellant had any standing or locus to seek reconsideration of its resolution plan after the refund of the Earnest Money Deposit (EMD).
Whether the decision of the Committee of Creditors (CoC) to reject the resolution plan and proceed with liquidation was justifiable.
Whether the National Company Law Tribunal (NCLT) was correct in dismissing the application for reconsideration of the resolution plan.

ISSUE-WISE DETAILED ANALYSIS

Eligibility under Section 29A of IBC

Relevant Legal Framework and Precedents: Section 29A of the IBC outlines the criteria for disqualification of resolution applicants. Specifically, it disqualifies individuals who are ineligible to act as directors under the Companies Act, 2013.
Court's Interpretation and Reasoning: The Tribunal found that Mr. Avanish Kumar Singh, a director of the Appellant company, was disqualified under Section 164(2) of the Companies Act, 2013, due to his association with Gomtidhara Agro & Dairy Products Pvt. Ltd., which failed to file financial statements for three consecutive years.
Key Evidence and Findings: The Tribunal noted that Mr. Singh's disqualification rendered the Appellant ineligible under Section 29A(e) and (j) of the IBC.
Application of Law to Facts: The Tribunal applied the disqualification criteria to the Appellant, deeming it ineligible to submit a resolution plan due to Mr. Singh's directorship status.
Treatment of Competing Arguments: The Appellant argued for the viability of its plan and the principle that liquidation should be a last resort. However, the Tribunal prioritized statutory compliance over these arguments.
Conclusions: The Tribunal concluded that the Appellant was ineligible to submit a resolution plan under Section 29A.

Locus and Standing to Seek Reconsideration

Relevant Legal Framework and Precedents: The Tribunal considered the implications of accepting the EMD refund and the subsequent delay in filing the application for reconsideration.
Court's Interpretation and Reasoning: The Tribunal held that by accepting the EMD refund, the Appellant forfeited its right to seek reconsideration of its resolution plan.
Key Evidence and Findings: The Tribunal noted the Appellant's repeated requests for the EMD refund and the six-month delay in filing the application.
Application of Law to Facts: The Tribunal applied principles of waiver and estoppel, concluding that the Appellant lacked standing to seek relief after accepting the refund.
Treatment of Competing Arguments: The Appellant's willingness to submit a compliant plan was insufficient to overcome the procedural and substantive barriers identified by the Tribunal.
Conclusions: The Tribunal found that the Appellant had no locus to file the application for reconsideration.

Justifiability of CoC's Decision

Relevant Legal Framework and Precedents: The Tribunal referenced precedents affirming the non-justiciability of the CoC's commercial decisions, citing the Supreme Court's stance in K. Sashidhar v Indian Overseas Bank & Ors.
Court's Interpretation and Reasoning: The Tribunal upheld the CoC's decision, emphasizing the CoC's commercial wisdom and its decision to liquidate the Corporate Debtor.
Key Evidence and Findings: The CoC's unanimous vote for liquidation and the Appellant's non-compliance with Section 29A were pivotal.
Application of Law to Facts: The Tribunal applied the principle that the CoC's commercial decisions are beyond judicial review, barring statutory violations.
Treatment of Competing Arguments: The Tribunal dismissed the Appellant's arguments regarding the viability of its plan, focusing on statutory compliance and the CoC's discretion.
Conclusions: The Tribunal found the CoC's decision to liquidate the Corporate Debtor was justified and non-justiciable.

Correctness of NCLT's Dismissal

Relevant Legal Framework and Precedents: The Tribunal considered the NCLT's adherence to procedural rules and statutory mandates.
Court's Interpretation and Reasoning: The Tribunal affirmed the NCLT's dismissal, aligning with the CoC's commercial decision and the Appellant's ineligibility.
Key Evidence and Findings: The Tribunal noted the procedural delays and the Appellant's acceptance of the EMD refund as key factors.
Application of Law to Facts: The Tribunal applied procedural and substantive legal principles to uphold the NCLT's decision.
Treatment of Competing Arguments: The Tribunal found no merit in the Appellant's arguments for reconsideration, given the procedural and eligibility issues.
Conclusions: The Tribunal upheld the NCLT's decision to dismiss the application for reconsideration.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal emphasized, "The commercial wisdom of the CoC regarding acceptance/rejection of the resolution plan is 'non-justiciable' as held by the Hon'ble Supreme Court in K. Sashidhar v Indian Overseas bank & Ors."
Core Principles Established: The Tribunal reinforced the principle that the CoC's commercial decisions are beyond judicial review, barring statutory violations.
Final Determinations on Each Issue: The Tribunal dismissed the appeal, affirming the NCLT's decision and the CoC's resolution to liquidate the Corporate Debtor.

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