NCLT rightly rejected plea for approval of resolution plan as applicant failed to furnish a performance guarantee

Case Details: Cimco Projects Ltd. v. Anup Kumar (Resolution Professional) Shivkala Developers (P.) Ltd. - [2022] 143 taxmann.com 17 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson, M. Satyanarayana Murthy, Judicial Member & Barun Mitra, Technical Member
  • Ashish Makhija & Deep Bisht, Advs. for the Appellant.
  • Abhijeet Sinha, Aditya Shukla & Ms Shankari Mishra, Advs. for the Respondent.

Facts of the Case

In the instant case, an appeal was filed by the resolution applicant (appellant) against the order passed by the Adjudicating Authority (NCLT) for rejecting an application for the approval of a resolution plan and ordered liquidation due to non-presence of Resolution applicant even after the issue of bailable and non-bailable warrants under section 31 of Insolvency and Bankruptcy Code, 2016.

The Appellant in pursuance of the application inviting Expression of Interest, submitted his Expression of Interest and thereafter filed the Resolution Plan, which was later approved in a committee of creditors meeting.

The Resolution Applicant had failed to deposit the performance guarantee for the Resolution Plan. The Adjudicating Authority had issued the bailable warrants against the Resolution Applicant due to his non-appearance after issuing the bailable warrant. Later on, NCLT issued non-bailable warrants for the arrest of the Resolution applicant and passed the liquidation order.

Aggrieved by the said order, the Resolution Applicant filed an appeal before the NCLAT.

The Learned Counsel for the Appellant submitted that the Appellant was initially not a party to the Application and he was made party only on 3-3-2021 by the order of the Adjudicating Authority. He could not appear before the Adjudicating Authority, thereafter, due to certain miscommunications and the Appellant is still ready to abide by the Resolution Plan and ready to comply all terms and conditions for the Resolution Plan.

The Learned Counsel for the Resolution Professional submitted that the Resolution Professional had sent a communication to the Appellant of all proceedings in the CIRP even after the order dated 3-3-2021 passed by the Adjudicating Authority impleading the Appellant and directing the Appellant to submit a performance guarantee. No steps were taken by the Appellant. The Resolution Applicant having not shown interest in abiding by the plan and deliberately not appearing before the Adjudicating Authority, the Adjudicating Authority had no option except to reject the Application for approval of the Resolution Plan.

NCLAT Held

The NCLAT held that the CIRP is a time-bound process where a timeline has been prescribed for each step. The Adjudicating Authority when failed to secure the presence of the Resolution Applicant even after the issuance of bailable and non-bailable warrants, it has rightly taken a decision for rejecting the application praying for approval of the Resolution Plan. Due to the non-serious, casual and non-diligent conduct of the Resolution Applicant, the Adjudicating Authority has rightly refused to approve the Resolution Plan.

However, since the application filed by the appellant for cancellation of a non-bailable warrant had been dismissed by NCLT without adverting to any of the reasons given by appellant, the application for cancellation of warrants was to be allowed.

List of Cases Reviewed

• • Order of NCLT-Special Bench in CA 734 of 2018 dated 24-11-2021 (para 12) partly reversed.