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2019 (7) TMI 284 - AT - Insolvency and BankruptcyValidity of Resolution Plan - a unique plan which provides no revival of the corporate debtor but to close it by discharging its debts to all stakeholders inclusive of its staff and workmen - Corporate Applicant - grievance of the Appellant- Industrial Services is that the suits were filed by the Corporate Debtor during the period of Moratorium against the Industrial Services and, therefore, the same cannot be taken into consideration to deny the admissible dues payable to the Industrial Services - (Operational Creditor) - whether the plan in question is in conformity with Section 30(2) (e) of the I B Code and achieves the Objects of the I B Code ? HELD THAT - Resolution Plan has been prepared for ensuring settlement of dues of the creditors on receipt of fund as proposed in payment Schedule of the Resolution Plan Supervision implementation of the resolution plan will be done by the Board of Directors of the Company as going concern - Though during the Resolution Process , and thereafter, the Resolution Applicant is required to ensure that the company remains as a going concern but contrary to the provisions of the I B Code , closure of the Corporate Debtor has been proposed and approved by the Adjudicating Authority. In SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. 2019 (1) TMI 1508 - SUPREME COURT the Hon ble Supreme Court noticed the Preamble of the Code and held that the primary focus of the legislation is to ensure revival and continuation of the Corporate Debtor by protecting the Corporate Debtor from its own management and from a corporate s death by liquidation. As the Resolution Plan is against the object of the Code and the application under Section 10 was filed with intent of closure of the Corporate Debtor for a purpose other than for the resolution of insolvency, or liquidation, we hold that the part of the Resolution Plan which relates to closure of the Corporate Debtor / Corporate Applicant being against the scope and intent of the I B Code is in violation of Section 30(2)(e) of the I B Code - the part of the approved Resolution Plan in so far as it relates to closure of the Corporate Debtor / Corporate Applicant but uphold the rest part of the Resolution Plan , as approved is set aside. The case is remitted to the Adjudicating Authority, Kolkata Bench, to make necessary correction in the Resolution Plan by asking the Corporate Debtor to delete the portion of the plan which proposes closure of the Company - appeal allowed by way of remand.
Issues Involved:
1. Malicious initiation of proceedings under Section 10 of the Insolvency and Bankruptcy Code, 2016. 2. Approval of a 'Resolution Plan' that provides for the closure of the Corporate Debtor. 3. Non-consideration of claims by the 'Resolution Professional.' 4. Ineligibility of the 'Corporate Applicant' under Section 29A. 5. Non-reflection of employees' dues and retrenchment in the 'Resolution Plan.' Issue-Wise Detailed Analysis: 1. Malicious Initiation of Proceedings: The judgment identifies the initiation of proceedings by the 'Corporate Debtor' under Section 10 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code") as malicious, intended for purposes other than insolvency resolution or liquidation. The Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, approved a 'Resolution Plan' that did not align with the objectives of the I&B Code, noting that the plan provided for the closure of the corporate debtor rather than its revival. 2. Approval of a 'Resolution Plan' for Closure: The Appellants challenged the order approving a 'Resolution Plan' submitted by the 'Corporate Applicant' that provided for the closure and retrenchment of all workmen. The Tribunal found that the plan was approved without considering whether it conformed to Section 30(2)(e) of the I&B Code, which mandates that the plan should not contravene any law in force. The plan proposed by the Ministry of Railways recommended the closure of the company, with a provision of ?417.10 Crores for settling liabilities, including statutory and contingent liabilities, bank loans, and employee dues. 3. Non-Consideration of Claims: Two appeals were filed by 'Industrial Services' (an 'Operational Creditor') alleging non-consideration of its claims by the 'Resolution Professional.' Initially, the claim was accepted but later not entertained due to a suit filed by the 'Corporate Debtor' during the moratorium period. The Tribunal noted that suits filed during the moratorium could not be considered to deny admissible dues. 4. Ineligibility Under Section 29A: The Appellant argued that the 'Corporate Applicant' was ineligible under Section 29A of the I&B Code. However, the Corporate Applicant and the Indian Railway Board contended that the 'Corporate Debtor' was not an undischarged insolvent or willful defaulter and that its account had not been declared as a Non-Performing Asset. Therefore, the exclusions set out in Section 29A(b) & (c) were not applicable. 5. Non-Reflection of Employees' Dues and Retrenchment: Appeals were also filed by the 'Burn Standard Ex-Employee Welfare Association,' challenging the non-reflection of employees' dues, including pay revisions determined by the Calcutta High Court, in the 'Resolution Plan.' The Tribunal observed that the 'Corporate Debtor' could not deny the dues of ex-officers and ex-employees or close the company. Tribunal's Findings and Orders: The Tribunal found that the 'Resolution Plan' was against the objectives of the I&B Code, which aims to ensure the revival and continuation of the corporate debtor. The plan's approval for the closure of the 'Corporate Debtor' was deemed a violation of Section 30(2)(e) of the I&B Code. Consequently, the Tribunal set aside the part of the 'Resolution Plan' related to the closure of the 'Corporate Debtor' but upheld the rest of the plan. The Tribunal directed the 'Corporate Debtor' to ensure that the company remains a going concern and that employees are not retrenched. The case was remitted to the Adjudicating Authority, Kolkata Bench, to make necessary corrections in the 'Resolution Plan.' If the 'Corporate Applicant' refuses to amend the plan, it will be treated as set aside, and the Adjudicating Authority will proceed afresh. All appeals were allowed with the aforementioned observations and directions, with no costs awarded.
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