Suspended director of corporate debtor who was a declared wilful defaulter ineligible to submit RP: NCLAT

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Case Details: Athar Zia v. Anup Sood – [2023] 147 taxmann.com 493 (NCLAT-New Delhi)

Judiciary and Counsel Details

Justice Ashok Bhushan, Chairperson & Dr Alok Srivastava, Technical Member
Rishi Kapoor & Akhil Shankwar, Advs. for the Appellant.
Namit Suri, Ms Surabhi Sinha & Ms Sonal Malik, Advs. for the Respondent.

Facts of the Case

In the instant case, in CIRP initiated against the corporate debtor, the appellant (i.e. suspended director of the corporate debtor) filed an application challenging observation of the Resolution Professional (RP). The RP had stated that the appellant was ineligible to submit a resolution plan as he had been declared as a wilful defaulter of Bank of India (BOI), which was the only financial creditor of the corporate debtor.

The Adjudicating Authority (NCLT) granted liberty to the appellant to make a representation before the Committee of Creditors (CoC) to decide the status of the appellant afresh in relation to being a defaulter.

The appellant, instead of filing representation before the CoC sent a letter with an expression of interest (EOI) for submitting a resolution plan. The bank gave further opportunity to the appellant to make payment of outstanding dues, however the appellant did not make the payment. Therefore, the Identification Committee identified the appellant as a wilful defaulter.

The Resolution Professional filed an application before the NCLT u/s 33 of IBC for initiation of liquidation against the corporate debtor and the said application was allowed by the impugned order of the NCLT. Thereafter, an appeal was made to the National Company Law Appellate Tribunal (NCLAT).

The appellant submitted that he was eligible to submit an expression of interest and a resolution plan. However, the NCLT allowed the application for liquidation without considering the appellant’s claim.

NCLAT Held

The NCLAT observed that the bank had declared the appellant a wilful defaulter, and therefore, he was clearly disqualified to submit a resolution plan under section 29A(b) of the IBC.

The NCLAT held that the contentions raised by the appellant for challenging the impugned order were without any substance. Therefore, no error was found in the impugned order passed by the Adjudicating Authority, allowing the application for liquidation. According, the appeal was to be dismissed.

List of Cases Reviewed

Order passed by (NCLT – New Delhi) in C.A. No. 1233/2019, dated 21-2-2022 (para 13) affirmed.

List of Cases Referred to

Athar Zia v. Bank of India [Writ Petition (Civil) No. 3404 of 2019, dated 8-7-2019] (para 6)
Athar Zia v. Bank of India [Writ Petition (Civil) No. 9915 of 2021, dated 9-9-2021] (para 12).

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