Ex-Director Ineligible to Submit Resolution Plan for MSME when CD is Wilful Defaulter: NCLAT [Read Order]

The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) held that the ex-director is ineligible to submit resolution plan for Micro Small & Medium Enterprise (MSME) when the Corporate Debtor (CD) is the wilful defaulter.

The present appeal has been filed under Section 61 of the Insolvency & Bankruptcy Code, 2016 (in short ‘Code’) by the Appellant herein i.e., Namdev Hindurao Patil, who is the suspended director and one of the Resolution Applicant of the Corporate Debtor i.e., Warana Dairy and Agro Industries Ltd. against the Impugned Order dated 19.04.2023 passed by the National Company Law Tribunal, Mumbai Bench.

The appellant alleged that the Respondent No. 2 wrongly declared the appellant as wilful defaulter on 19.07.2021 and on 04.10.2021, which was challenged by the appellant before the appropriate court and the Resolution Professional permitted the appellant to submit the Resolution Plan subject to outcome of the challenge by the appellant.

The appellant alleged that CoC was bound to consider his Resolution Plan in terms of 39(3)(c) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’).

The Respondent No. 2 pleaded that the Appellant was not eligible to submit the Resolution Plan since the Appellant was declared a wilful defaulter and disqualified under Section 29(A) of the Code.

It is the case of the Respondent that an ad-interim stay is not a final conclusion regarding the wilful defaulter status of the appellant and it was meant only for not taking any further adverse action by the Respondent No. 2 against the appellant and it did not absolve wilful defaulter status of the Appellant and therefore Section 29 (A) of the Code was clearly applicable to the appellant barring appellant from submitting the Resolution Plan.

A Three Member Bench comprising Justice Rakesh Kumar Jain, Member (Judicial), Mr. Naresh Salecha, Member (Technical) and Mr. Indevar Pandey, Member (Technical) observed that “We have already noted that Section 240 A of the Code does not give any reprieve to the Appellant from applicability of Section 29A (b) of the Code. Thus no legal remedy is available to the Appellant from being held as ineligible to submit Resolution Plan which was rightly done by the CoC and adjudicated by the Adjudicating Authority vide its Impugned Order dated 19.04.2023.”

“From above relevant analysis, it is very clear that relevant date is the date of submission of the Resolution Plan and the Appellant was not eligible to submit the Resolution Plan on 12.05.2022, since he had already been declared as wilful defaulters by the Respondent No. 2 on 17.07.2021 and 04.10.2021. i.e., much prior to his submission of Respondent Plan. It is also fact that no judicial stay existed in favour of the Appellant on 12.05.2022 regarding his status as wilful defaulter. Hence, we hold that the Appellant was not eligible to submit the Resolution Plan and this was rightly adjudicated by the Adjudicating Authority” the Tribunal held.

To Read the full text of the Order CLICK HERE

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