NCLAT Delhi: Relevant Date To Determine Ineligibility To Submit Resolution Plan Is Date Of Submission Of Plan By Resolution Applicant
The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member), and Mr. Indevar Pandey (Technical Member) held that the relevant date to determine the ineligibility to submit a Resolution Plan is on the date on which the Resolution Plan was first submitted by the Resolution...
The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member), and Mr. Indevar Pandey (Technical Member) held that the relevant date to determine the ineligibility to submit a Resolution Plan is on the date on which the Resolution Plan was first submitted by the Resolution Applicant.
Background Facts:
On 19.07.2021 and 04.10.2021, IDBI Bank Ltd. (Respondent 2) declared Mr. Namdev Hindurao Patil (Appellant), the Suspended Director and one of the Resolution Applicants of Warana Dairy and Agro Industries Ltd. (Corporate Debtor), as a wilful defaulter. The said declaration was challenged by the Appellant before the Bombay High Court via a Writ Petition.
The Appellant was permitted by the Resolution Professional to submit the Resolution Plan depending on the outcome of the challenge by the Appellant before the Bombay High Court. On 12.05.2022, the Appellant filed Form G and submitted his Resolution Plan. The said challenge was dismissed by the High Court as withdrawn via an Order dated 24.08.2022. The Appellant filed a regular Civil Suit and Civil Judge granted the stay on 19.09.2022.
On 06.10.2022 and 07.10.2022, the Committee of Creditors ('CoC') in its 21st Meeting held the Appellant to be ineligible to submit the Resolution Plan on account of him being declared a willful defaulter and subsequently, did not consider the Resolution Plan on merits and further resolved to liquidate the Corporate Debtor.
Subsequently, the Civil Judge via Order dated 19.12.2022, dismissed the suit as non-maintainable. The Appellant lodged a Civil Appeal with the District Court, Kolhapur, contesting the Civil Judge's decision, which was also rejected via an order dated 01.04.2023. The Appellant has since filed a Second Appeal, which is pending adjudication before the Bombay High Court.
The Appellant has filed an appeal against NCLT Mumbai's Order dated 19.04.2023 ordering the Corporate Debtor into liquidation.
NCLAT Verdict:
The NCLAT Delhi dismissed the appeal and held that the relevant date to determine the ineligibility to submit a Resolution Plan is on the date on which the Resolution Plan was first submitted by the Resolution Applicant.
The Appellate Tribunal noted that Section 29A of the Insolvency and Bankruptcy Code, 2016 ('IBC') aims to safeguard the legitimate creditors of the Corporate Debtor by preventing unscrupulous individuals from benefiting themselves at the expense of creditors and undermining the objectives of the IBC.
It highlighted that the initial clause of Section 29A of IBC specifies that "A person shall not be eligible to submit a Resolution Plan if such person" is afflicted with any of the disqualifications listed in clauses (a) to (i) of Section 29A. This indicates that Section 29A disqualifies individuals who have caused or contributed to the downfall of the Corporate Debtor, rendering them unfit to assume control of its management.
NCLAT addressed the question of the date of ineligibility under Section 29A of the IBC for submitting a Resolution Plan.
It noted that the CoC has the authority to determine whether to approve or reject the Resolution Plan. It is also obligated to assess the eligibility or ineligibility of the Resolution Applicant under Section 29A of the IBC.
The Appellant Tribunal held that the determination of ineligibility for submitting the Resolution Plan is dependent upon the date when the Resolution Applicant submits his Plan.
Presently, the crucial date for determining eligibility is the date of submitting the Resolution Plan, and the Appellant was ineligible to submit the plan on 12.05.2022 due to being declared as a willful defaulter on 17.07.2021 and 04.10.2021 which is well before submitting the Resolution Plan. Moreover, there was no judicial stay in favor of the Appellant regarding his status as a willful defaulter on 12.05.2022.
In conclusion, NCLAT observed that NCLT Mumbai via its Order dated 19.04.2023 rightly adjudicated and deemed the Appellant ineligible to submit the Resolution Plan.
Case Title: Namdev Hindurao Patil vs. Virendra Kumar Jain, Liquidator, Warana Dairy and Agro Industries Ltd. and Ors.
Case No.: Comp. App. (AT) (Ins) No. 858 of 2023 & I.A. No. 2925 of 2024
Counsel for Appellant: Mr. Krishnendu Datta, Sr. Advocate along with Ms. Neha Agarwal & Mr. Nipun Gautam
Counsel for Respondent: Mr. Udita Singh, for R-1, Mr. Abhishek Sharma, Mr. Kritya Sinha & Mr. Shawaiz Nisar, for R-2, Mr. Mithilesh Kumar Pandey, for R-3.