The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan, Chairperson and Barun Mitra, Technical Member was hearing an appeal filed to challenge the rejection of a resolution plan submitted by the appellant. The NCLAT Bench held that the appellant, despite being previously labelled a willful defaulter, was deemed eligible to submit a Resolution Plan at the time of filing.
In a recent judgment, the National Company Law Appellate Tribunal (NCLAT) dismissed an appeal filed by the promoter, challenging the rejection of a resolution plan. The corporate debtor had been undergoing insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. The Committee of Creditors (CoC) had rejected the appellant's resolution plan on the basis of the corporate debtor being classified as a fraud and willful defaulter by the Union Bank of India.
The appellant contended that, at the time of submitting the resolution plan, there was no declaration by the Union Bank of India categorizing them as a willful defaulter. They further highlighted that a writ petition had been filed, challenging the willful defaulter status, and the High Court had granted an interim stay on the order. The appellant argued that they were not disqualified under Section 29A of the Insolvency and Bankruptcy Code to submit the resolution plan.
The Union Bank of India countered by pointing out that a show cause notice had been issued to the appellant prior to the submission of the resolution plan, indicating their willful defaulter status. They asserted that the liquidation process had already commenced, rendering the rejection of the resolution plan inconsequential.
After considering the arguments and reviewing relevant documents, the NCLAT found that the appellant was not a willful defaulter at the time of submitting the resolution plan. They acknowledged that the identification committee had declared the appellant as a willful defaulter on May 25, 2021, which was after the resolution plan submission. Furthermore, the NCLAT recognized that the High Court had granted an interim stay on the declaration of willful defaulter status.
However, the NCLAT observed that another order for liquidation had already been passed and had not been challenged. As a result, the corporate debtor was already in the liquidation process, rendering the consideration of the resolution plan unnecessary. Nevertheless, the NCLAT permitted the appellant to submit a scheme for compromise or arrangement with creditors under Section 230 of the Companies Act, 2013. Additionally, they ordered a 90-day hold on the liquidation process to facilitate the finalization of the compromise or arrangement.
In conclusion, the NCLAT dismissed the appeal against the rejection of the resolution plan, as the liquidation process was already underway. However, they granted the appellant the opportunity to submit an alternative scheme for compromise or arrangement and suspended the liquidation process for 90 days to enable this process to take place.
The appellant, despite being previously labelled a willful defaulter, was deemed eligible to submit a Resolution Plan at the time of filing.
This appeal was filed to challenge the rejection of a resolution plan submitted by the appellant. The case involved a corporate debtor, LB Industries Pvt. Ltd., who was facing insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. The appellant, as the promoter of the corporate debtor, submitted a resolution plan, which was subsequently rejected by the Committee of Creditors (CoC). The rejection was based on the classification of the corporate debtor as a fraud and willful defaulter by the Union Bank of India.
The appellant argued that at the time of submitting the resolution plan, there was no declaration by the Union Bank of India declaring them as a willful defaulter. They also pointed out that a writ petition challenging the declaration of willful defaulter status was filed, and the High Court had granted an interim stay on the order. The appellant contended that they were not disqualified under Section 29A of the Insolvency and Bankruptcy Code to submit the resolution plan.
The Union Bank of India countered by stating that the show cause notice issued to the appellant prior to the submission of the resolution plan indicated their status as a willful defaulter. They argued that the liquidation process had already commenced, and the rejection of the resolution plan was inconsequential.
The National Company Law Appellate Tribunal (NCLAT) considered the arguments and reviewed the relevant documents. They noted that the identification committee declared the appellant as a willful defaulter on May 25, 2021, which was after the submission of the resolution plan. The NCLAT also acknowledged that the High Court had granted an interim stay on the declaration of willful defaulter status.
While the NCLAT found that the appellant was not a willful defaulter at the time of submitting the resolution plan, they noted that another order for liquidation had been passed and had not been challenged. The corporate debtor was already in the liquidation process, and there was no need to consider the resolution plan. However, the NCLAT allowed the appellant to submit a scheme for compromise or arrangement with creditors under Section 230 of the Companies Act, 2013. They also ordered a hold on the liquidation process for 90 days to enable the finalization of the compromise or arrangement.
The NCLAT dismissed the appeal challenging the rejection of the resolution plan, as the liquidation process was already underway. However, they permitted the appellant to submit a scheme for compromise or arrangement and put the liquidation process on hold for 90 days to facilitate this process.
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