National Company Law Appellate Tribunal

National Company Law Appellate Tribunal: In a company appeal challenging the National Company Law Tribunal (‘NCLT’), Ahmedabad Bench’s order upholding the claim of successful resolution applicant alleging personal guarantee in favour of creditor for attracting Section 29-A(h) of the Insolvency and Bankruptcy Code, 2016 (‘IBC Code’), the Bench of judicial member Rakesh Kumar Jain, J. and technical member Naresh Salecha dismissed the same finding no scope for review or res-judicata.

Facts of the case reveal that POSCO India Pune Processing Center Pvt. Ltd. (‘appellant’) filed an application under Section 9 of IBC Code read with Rule 6 of IBC (Application to Adjudicating Authority) Rules, 2016 against Poggenamp Nagarsheth Powertronics Pvt. Ltd. (‘respondent’) for resolution of debt of Rs 16,08,45,996. The application was admitted by NCLT on 22-1-2020 and an Interim Resolution Professional (‘IRP’) was appointed. Order dated 3-6-2020 replaced IRP with Resolution Professional (‘RP’).

The RP published a form to invite Expression of Interest (‘EoI’) for submitting resolution plans. A provisional list of Proposed Resolution Applicants (PRAs) was prepared on 13-7-2020 providing 5 days’ time for raising objections. RP published final list of PRAs on 28-7-2020 for submission of resolution plan including the name of erstwhile promoters of Corporate Debtor.

As per allegations, the appellant raised objection about ineligibility of the erstwhile promoters on the ground of giving personal guarantee for Corporate Debtor, but the RP informed inapplicability of Section 29-A(h) of IBC Code providing for the disqualification of a person as resolution applicants who executed guarantee in favour of creditor, since the Corporate Debtor was registered as Ministry of Micro, Small & Medium Enterprise (‘MSME’). An application was filed by the appellant on 14-8-2020 seeking directions that RP cannot accept the resolution plan by the erstwhile promoters since the Corporate Debtor lacks MSME status at the time of filing of Section 9 application, barred from getting the benefit of Section 240-A of IBC Code.

NCLT vide order dated 6-1-2021 observed the following:

  • On the date of filing application under Section 9 of IBC Code, the Corporate Debtor was covered under MSME, but the Corporate Debtor cannot be treated as MSME at this stage based on notification dated 1-6-2020 amending the criteria for classification of MSMEs taking its retrospective effect.

  • The question of not accepting the resolution plan filed by the erstwhile promoters does not arise as the erstwhile promoters shall be ineligible under Section 29-A of IBC Code for filing the resolution plan.

  • The application in which the aforesaid order was passed, was rejected being bad in the eyes of the law and not maintainable.

On 13-1-2021, RP declared the approval of resolution plan of erstwhile promoters in the Committee of Creditors (‘CoC’) meeting. The CoC also decided and issued a direction to the RP seeking clarification from NCLT regarding ineligibility of erstwhile promotors for submission of resolution plan for which, the RP filed Pursis before the NCLT on 16-1-2021 for clarity on order dated 6-1-2021.

Two applications were filed by the appellant before NCLT during pendency of Pursis for rejection of application by RP for approval of resolution plan on the ground of Successful Resolution Applicant (‘SRA’) being ineligible as per Section 29-A(h) of IBC Code, and the application filed by RP seeking approval of resolution plan submitted by erstwhile promoters. The first application was rejected while the second one was allowed.

The present appeal challenges the rejection of application seeking rejection of Resolution Professional’s approval of resolution plan. According to the Tribunal, if this appeal is allowed holding the SRA ineligible, then the resolution plan submitted by the SRA would automatically become redundant.

The Tribunal appreciated the language of letter dated 3-6-2015 that Section 29-A(h) of IBC Code talks of an event which has already taken place/ executed, while the letter says thatin case of failure on the part of respondent to pay to appellant the said outstanding duesthe undersigned shall provide/execute personal guarantees in our respective individual capacities in favour of respondent within 30 days from the date of such failure. The language in the Tribunal’s opinion indicates non-execution of any guarantee by respondent but offering execution of guarantee in case of happening of a particular event. The Tribunal also pointed out the unavailability of any other document clinching the issue of personal guarantee already being executed at the time of submission of resolution plan, guarantee being invoked by creditor, amount remaining unpaid and therefore ineligibility as per Section 29-A(h) of IBC Code.

The Tribunal observed that the appellant’s case for dislodging SRA’s claim surrounds letter dated 3-6-2015 for alleged personal guarantee for attracting the rigour of Section 29-A(h).

The Tribunal did not find any substance in the arguments for reversing the order in the application allowed by the impugned order. The Tribunal was satisfied that neither the issue of review nor res-judicata is made out in the present case. The Tribunal did not find any error in the impugned order and dismissed the present appeal.

[POSCO India Pune Processing Center Pvt. Ltd. v. Dhaval Jitendra Kumar Mistry, 2023 SCC OnLine NCLAT 107, judgment dated 15-3-2023]

*Judgment authored by: Justice Rakesh Kumar Jain.

Advocates who appeared in this case :

For Appellant: Senior Advocate Sanjeev Sen, Advocate Ravi Kimi, Advocate Abhay Itagi, Advocate Azeem;

For Respondents: Senior Advocate Krishnendu Datta, Senior Advocate Ramji Srinivasan, Advocate Shruti Pandey, Advocate Palash Singhai, Advocate Atul Sharma, Advocate Kunal Vyas, Advocate Anushree Kapadia, Advocate Ruchi Krishna Chauhan, Advocate Rajat Singh, Advocate Abhishek Anand, Advocate Nipun Gautam, Advocate Vaibhav Mendirata.

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