National Company Law Appellate Tribunal : In an appeal filed by the appellant against the order passed by the National Company Law Tribunal (NCLT) for cancellation of non-bailable warrants, a bench comprising of Ashok Bhushan*, M Satyanarayana Murthy, JJ., and Barun Mitra (Technical Member) held that the NCLT was right in refusing to approve the Resolution Plan due to non-serious, casual and non-diligent conduct of the Resolution Applicant.
A Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor by the NCLT. The Resolution Professional /Appellant submitted a resolution plan which was later approved in the 10th Committee of Creditors' (CoC) meeting held on 07-11-2018. The CoC authorized the appellant to file Application for approval of the Resolution Plan. The successful resolution applicant was permitted to be impleaded as one of the Respondents by the NCLT vide order dated 03-03-2021.
The resolution applicant failed to deposit the performance guarantee for the Resolution Plan and , he did not appear before the NCLT. The NCLT issued a non-bailable warrant against the resolution applicant vide order dated 03-09-2021 and dismissed the plan approval application vide order dated 24-11-2021. The NCLT directed the initiation of liquidation of the corporate debtor and also, directed the liquidator to take actions against the successful resolution applicant under S. 74(3) of the Insolvency and Bankruptcy Code, 2016. The present appeal is filed by the appellant against the order dated 24-11-2021 passed by the National Company Law Tribunal.
Contention of the Parties
The Appellant contended that initially he was not a party to the plan approval application but was made a party later and due to certain miscommunication, he was not able to appear before the NCLT. The Appellant contended that initially there was no requirement for submitting any performance guarantee therefore he did not submit any performance guarantee during submission of resolution plan. The Appellant also contended that he is still ready to abide by the resolution plan and to comply with all the terms and conditions of the resolution plan.
The respondents contended that the appellant had not shown any interest in abiding by the resolution plan and deliberately did not appear before the NCLT therefore the tribunal was correct in rejecting the application for approval of resolution plan.
Appellate Tribunal's Take
The Tribunal opined that it is correct that initially the appellant was not a party to the plan approval application and also, on the date when Resolution Plan was approved, it did not contain any provision for providing performance security.
The Tribunal observed that the NCLT was right in dismissing the plan approval application as the CIRP is a time bound process where timeline has been prescribed for each step and cannot be allowed to continue for an indefinite period. Moreover, the applicant has not shown any willingness to proceed with the Resolution Plan. The Tribunal stated that
“Due to non-serious, casual and non-diligent conduct of the Resolution Applicant, the Adjudicating Authority has rightly refused to approve the Resolution Plan. We do not find any error in the order of the Adjudicating Authority in rejecting CA-734 of 2018.”
The Tribunal cancelled the bailable and non-bailable warrants issued to the appellant as the NCLT dismissed the application for the cancellation of non-bailable warrant without adverting to any of the reasons given by the Appellant.
The Tribunal also held that the direction issued by the NCLT for filing a complaint under S. 74(3) against the appellant is unsustainable as there was no violation of S. 74(3) by the Appellant. The Tribunal stated that
“Since the Resolution Plan was never approved by the Adjudicating Authority, the Corporate Debtor or its officers or creditors or any other persons cannot be said to have knowingly and wilfully contravened any of the terms of the Resolution Plan.”
The Tribunal directed the Liquidator appointed by the impugned order to proceed in accordance with the law and it shall be open for the appellant to participate in liquidation process.
[Cimco Projects Ltd. v. Anup Kumar, 2022 SCC OnLine NCLAT 330, decided on 01-08-2022]
Advocates who appeared in this case :
Mr Ashish Makhija and Mr. Deep Bisht, Counsel for the Appellants;
Ms Abhijeet Sinha and Mr. Aditya Shukla, Counsel for the Respondent 1;
Ms. Shankari Mishra, Counsel for the Respondents (other).
*Ritu Singh, Editorial Assistant has put this report together.