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2023 (5) TMI 1159 - AT - Insolvency and BankruptcyDisqualification of resolution applicant - wilful defaulter of bank - Rejection of Resolution Plan submitted by the Applicant - Appellant submits that on the day when Resolution Plan submitted by the Appellant came for consideration before the CoC, there was no declaration by Union Bank of India as willful defaulter - disqualification under Section 29A of I B Code - whether the Appellant was disqualified at the time when the Resolution Plan submitted by the Appellant came for consideration? - HELD THAT - Appellant was not willful defaulter at the time he submitted the Resolution Plan and at the time his plan came for consideration, we cannot lose sight of the fact that by another order dated 20th January, 2022 in IN THE MATTER OF FANENDRA H. MUNOT LTD., WOOD PRESERVERS PRIVATE LIMITED VERSUS LB INDUSTRIES PRIVATE LIMITED 2022 (1) TMI 1370 - NATIONAL COMPANY LAW TRIBUNAL, MUMBAI filed by the RP seeking liquidation, Adjudicating Authority has passed an order on 20th January, 2022 which has been brought on record at page 393 of the Appeal paper Book by the Appellant himself. The order dated 20.01.2022 having not been challenged has attained finality. The Corporate Debtor is in the Liquidation and Liquidation Process has commenced subsequent to the Order dated 20th January, 2022. Liquidation Process having commenced there is no occasion for issuing any direction for consideration of the Resolution Plan of the Appellant. It is also relevant to notice that according to the Regulation 2B, compromise or arrangement proposed under Section 230 has to be completed within 90 days of order of liquidation. But we having by this order held that order of identification committee declaring the promoters/directors as willful defaulter is not in operation which we have found by order of the date, ends of justice will be served if 90 days period is allowed to the Appellant to submit a compromise or arrangement to the Liquidator. The order of the Adjudicating Authority dated 20th January, 2022 upholding the decision of CoC declaring the Appellant as ineligible to submit a Resolution Plan under Section 29A is set aside. It is held that Appellant was eligible to submit a plan on the date of its submission as well as on the date it came up for consideration - Appeal disposed off.
Issues Involved:
1. Eligibility of the Appellant under Section 29A of the Insolvency and Bankruptcy Code to submit a Resolution Plan. 2. Validity of the declaration of the Appellant as a willful defaulter by Union Bank of India. 3. Impact of the liquidation order on the consideration of the Resolution Plan. Summary: Issue 1: Eligibility under Section 29A The Appellant challenged the rejection of its Resolution Plan by the Committee of Creditors (CoC) on grounds of ineligibility under Section 29A of the Insolvency and Bankruptcy Code, 2016. The Appellant argued that at the time of submitting the Resolution Plan and its consideration by the CoC, there was no declaration by Union Bank of India labeling them as willful defaulters. The Tribunal found that the Appellant was not a willful defaulter at the relevant times, as the identification committee's declaration came later on 25th May 2021. The Tribunal set aside the Adjudicating Authority's order upholding the CoC's decision. Issue 2: Declaration as Willful Defaulter Union Bank of India issued a show cause notice on 13.11.2019, which was contested by the Appellant. The identification committee eventually declared the Appellant as a willful defaulter on 25.05.2021, a decision upheld by the review committee on 01.07.2021. However, the High Court of Bombay stayed these orders on 20.09.2021, rendering them non-operative. The Tribunal concluded that the Appellant could not be considered a willful defaulter as of the date of the judgment. Issue 3: Impact of Liquidation Order Despite setting aside the ineligibility decision, the Tribunal acknowledged that the Corporate Debtor had been ordered into liquidation by a separate order dated 20th January 2022, which was not appealed. Consequently, the liquidation process had commenced, and there was no scope for reconsidering the Resolution Plan. However, the Tribunal allowed the Appellant to propose a scheme for compromise or arrangement under Section 230 of the Companies Act, 2013, within 30 days. The Liquidator was directed to consider this proposal within 60 days, and the liquidation process was to be kept on hold for 90 days to facilitate this. Conclusion: The Tribunal disposed of the appeal by: a. Setting aside the Adjudicating Authority's order declaring the Appellant ineligible under Section 29A. b. Acknowledging that no direction could be issued for reconsidering the Resolution Plan due to the liquidation order. c. Permitting the Appellant to submit a compromise or arrangement within 30 days. d. Directing the Liquidator to consider the compromise or arrangement within 60 days. e. Keeping the liquidation process on hold for 90 days. f. Stating that if no compromise or arrangement is approved within 90 days, the liquidation proceedings shall continue.
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