Sudip Dutta @ Sudip Bijoy Dutta vs Prashant Jain

[Arising out of order dated 10.04.2024 passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Court - II), in IA(IBC)/449(KB)2024 in C.P. (IB)/54(KB)2021]

IN THE MATTER OF: SUDIP DUTTA @ SUDIP BIJOY DUTTA Adult Inhabitant, having Address at: Flat No.1403, 14th Floor, A Wing, Oberoi Garden I, Oberoi Gardens CHS Ltd., Thakur Village, Kandivali East, Mumbai 400 101 Email: contact@taplegal.co.in ...Appellant

Versus

PRASHANT JAIN Resolution Professional Regd. Add: A501, Shanti Heights, Plot No. 2,3,9B/10, Sector 11, Koparkharine, Thane, Navi Mumbai- 400709, Maharashtra ...Respondent

Present: For Appellant : Mr. Anando Mukherjee, Mr. Raja Ratan Bhura, Mr. Shwetank Singh, Advocates.

For Respondent : Mr. Kushal Bansal Advocate.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by a Personal Guarantor of the Corporate Debtor has been

filed, challenging the Order dated 10.04.2024 passed by the Learned

Adjudicating Authority (National Company Law Tribunal, Kolkata Bench,

Court-II), by which I.A. No. 449(KB)/2024 filed by the Resolution Professional

(RP) has been allowed terminating the Insolvency Resolution Process of Personal Guarantor and discharging the RP and further granting liberty to

the Creditors of the Personal Guarantor to initiate Bankruptcy Process

against the Personal Guarantor. Aggrieved by the Order, this Appeal has been

filed by the Appellant, the Personal Guarantor.

2. Brief facts necessary to be noticed for deciding the Appeal are:

i. An Application under Section 95(1) was filed by the State Bank of India

(SBI) against the Appellant being C.P. (IB) No. 54(KB)/2021. The

Adjudicating Authority vide Order dated 03.08.2021, appointed the

Respondent, Prashant Jain as RP.

ii. The RP after interacting with the Personal Guarantor submitted a

Report under Section 99 recommending initiation of Insolvency

Proceeding against the Personal Guarantor.

iii. Adjudicating Authority passed an Order on 16.06.2022, admitting

Section 95 Application.

iv. The Appellant aggrieved by the Order dated 03.08.2021, appointing the

RP has filed Comp. App. (AT) (Ins.) No. 807/2021 in this Tribunal. In

the Appeal, Notices were issued, but no Interim Order was passed.

v. Against the Order dated 16.06.2022, admitting Section 95 Application,

Appellant also filed Comp. App. (AT) (Ins.) No. 740/2022. After

admission of Section 95 Application RP issued Public Notice on

21.06.2022. Claims were received under Section 104 of the Insolvency

and Bankruptcy Code, 2016 (for shot `The IBC' or `The Code') by the

RP. RP prepared updated list of Creditors and intimated the Appellant

to submit a Repayment Plan.

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 2 of 14 vi. RP sent email dated 07.07.2022, 18.07.2022 and 02.08.2022, asking

for providing the relevant document.

vii. A Reply dated 03.08.2022 was sent to the email dated 02.08.2022 by

the Appellant, where Appellant asked for details on which the claims

have been arrived at. In response to the email dated 03.08.2022, RP

on 04.08.2022, provided the list of Creditors to the Appellant.

viii. RP sent several reminders informing that response is awaited, email

dated 24.08.2022 was received from Appellant again requesting

necessary documents on the basis of which the claims have been

admitted for a verification of the Appellant.

ix. The request sent by the RP, reminder was sent on 08.09.2022, no

communication was received from the Appellant, no Repayment Plan

having submitted by the Personal Guarantor. Appellant filed I.A.

No.449(KB)/2024 before the Adjudicating Authority praying for

following reliefs:

"a. Terminating the Insolvency Resolution Process of Personal Guarantor and discharging the Applicant from his role as the Resolution Professional. b. Granting liberty to the Creditors of the Personal Guarantor to initiate Bankruptcy Process against the Personal Guarantor.

c. Directing the Creditors of Personal Guarantor to contribute to the Insolvency Resolution Process cost. d. Pass such other and further orders as may be deemed fit in the matter."

x. It is also relevant to notice that both the Company Appeals filed by the

Appellant being Comp. App. (AT) (Ins.) No. 807/2021 as well as Comp.

App. (AT) (Ins.) No.740/2022 filed against Order appointing Resolution

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 3 of 14 Professional as well as the Order dated 16.06.2022, admitting Section

95 Application were dismissed by detailed Judgment by this Tribunal

on 29.07.2022. Against the Order dated 29.07.2022 passed by this

Tribunal dismissing both the above Company Appeals, Civil Appeal No.

7100 & 7101/2022 was filed by the Appellant which Appeals were also

dismissed by the Hon'ble Supreme Court on 12.12.2022:

"1 We find no reason to interfere with the impugned order dated 29 July 2022 passed by the National Company Law Appellate Tribunal in Company Appeal (AT) (Insolvency) No 740 of 2022 and Company Appeal (AT) (Insolvency) No 807 of 2020.

2 The Civil Appeals are accordingly dismissed. 3 Pending applications, if any, stand disposed of."

xi. In the above background of the fact that Adjudicating Authority has

passed the Impugned Order dated 10.04.2024. Adjudicating Authority

after noticing the provisions of Section 114, 115 & 121 of the IBC came

to the conclusion that when no repayment Plan is proposed, the

provisions of Section 114 & 115 is to apply and Creditors are entitled

to file an Application for Bankruptcy under Chapter IV. In Para 7,

following observations and directions have been made by the

Adjudicating Authority:

"7. Since, we have failed to decipher any specific provision contemplating a situation where no repayment plan is proposed, we consider it fit to apply provisions under Section 114 and Section 115 that envisages a situation when an Adjudicating Authority rejects a repayment plan under Section 114(1) and Section 115(2), the creditors are entitled to file an application for bankruptcy under Chapter IV. We thus pass the following Orders: -

i. We thus allow the prayer(s).

ii. With the above directions, IA(IBC)/449(KB)2024 is allowed and disposed of. Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 4 of 14 iii. The Registry is directed to send e-mail copies of the order forthwith to the Board and all the parties and their Ld. Counsel for information and for taking necessary steps."

xii. Challenging the Order, this Appeal has been filed by the Appellant.

4. Learned Counsel for the Appellant challenging the Order contends that

Order passed by the Adjudicating Authority is in violation of Principle of

Natural Justice since I.A. No.499/2024 was neither served on the Appellant

nor Appellant was given any hearing. Noticing the submission of the

Appellant, Notices were issued in this Appeal on 02.08.2024 in response to

which Notice, Reply has been filed by the RP. Learned Counsel for the

Appellant contends that Appellant has replied to the emails sent by the RP

asking for certain details so as to finalise the Repayment Plan which Reply

was sent by the Appellant by email dated 03.08.2022 and the stand taken by

the RP that there was non-cooperation by the Appellant is wholly incorrect.

It is submitted that Appellant has also filed a Writ Petition on 03.09.2022,

challenging the provisions of Section 95 or Section 100 of the IBC, which Writ

Petition came to be dismissed on 09.11.2023, upholding the constitutional

validity of Section 95 to Section 100. It is submitted that Appellant was

entitled to be given an opportunity by the Adjudicating Authority before

passing any Order on I.A. 449/2024. Learned Counsel for the Appellant has

relied on Regulation 19 of the Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for Personal Guarantors to Corporate Debtor),

Regulations 2019 and contend that the Regulation obliged the RP to provide

copies of all documents filed before the Adjudicating Authority, which

Regulation also obliged the RP to serve copy of the I.A. 449/2024.

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 5 of 14

5. Learned Counsel for the RP refuting the submission of the Counsel for

the Appellant contends that in spite of repeated request by the RP to the

Appellant to provide details after forwarding the list of Creditors, no

documents were supplied. It is submitted that RP has requested the

Appellant to submit a Repayment Plan and requested to provide relevant

necessary documents to verify the claims submitted by the Creditors so as to

finalise the Repayment Plan. No documents were provided by the Appellant

nor any Repayment Plan could be prepared. When no Repayment Plan has

been submitted, the process is akin to rejection of the Repayment Plan, hence

further steps have to be taken by the Adjudicating Authority. Rejection of

Repayment Plan and non-submission of Repayment Plan has to be kept on

same footing so as to take further steps. The Personal Guarantor who failed

to cooperate so as to prepare a Repayment Plan cannot be heard in

questioning the steps taken by the Adjudicating Authority under Section 115.

It is submitted that when there is no approved of Repayment Plan, the

Creditors are entitled to file an Application for Bankruptcy under Chapter IV,

the Order of the Adjudicating Authority for giving liberty is in accordance with

Section 115(2), which is statutory entitlement of the Creditors. Even if no

liberty would have been granted by Adjudicating Authority in the Impugned

Order, right of Creditor to file an Application for Bankruptcy under Chapter

V is fully provided for in Section 115(2). It is submitted that all Reports which

were required to be submitted by RP under Section 99 were already sent to

the Personal Guarantor and after considering the Report, the admission Order

was passed on 16.06.2022. It is submitted that no Repayment Plan was

submitted by Appellant nor any such Repayment Plan could be placed before

the Creditors for restructuring of the debts or affair of the Creditors. When Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 6 of 14 there was no Repayment Plan prepared, there was no question of submission

of any Repayment Plan or documents along with the Repayment Plan.

Learned Counsel for the RP submitted that Appellant was not required to be

heard by the Adjudicating Authority in an Order under Section 115 of the

IBC.

6. We have considered the submission of Counsel for the Parties and

perused the record.

7. From the submission of the Appellant, it is clear that only ground which

is being pressed by the Appellant is that Impugned Order has been passed in

violation of Principle of Natural Justice since the Appellant was not given an

opportunity in I.A. 449/2024, which was filed by the RP for termination of

Insolvency Resolution Process of the Personal Guarantor and discharge of the

RP and liberty to the Financial Creditor to file a Bankruptcy Application.

8. We had noticed above that the Appellant had challenged the Order

appointing the RP by the Adjudicating Authority on 03.08.2021 by filing

Comp. App. (AT) (Ins.) No.807/2021, in which no Interim Order was passed

by this Tribunal after Appointment of RP, RP prepared the Report under

Section 99 and the Adjudicating Authority admitted Section 95 Application by

Order dated 16.06.2022, which Order was again challenged by the Appellant

by Comp. App. (AT) (Ins.) No.740/2024. Both the Appeals filed by the

Appellant was dismissed by a detailed Judgment of this Tribunal on

29.07.2022, which Order was also challenged by the Appellant before the

Hon'ble Supreme Court and his Civil Appeal No. 7100 & 7101/2022 was also

dismissed by the Hon'ble Supreme Court on 12.12.2022. After admission of

the Section 95 Application, RP has sent a communication immediately. RP Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 7 of 14 on 18.07.2022, asking the Appellant to provide details of the Creditor along

with the email dated 18.07.2022. The RP has sent the details of six Creditors

along with the total claim as per `Form-B'. RP again sent a reminder on

August 2, 2022 to the Appellant to cooperate. Response to the email was sent

by the Appellant on 03.08.2022, which is as follows:

"Dear Sir, With respect to the documents sought by you vide email dated 07.07.2022, it is brought to your kind attention that I am making the necessary arrangements to provide the necessary document, however, in order to do so certain clarifications are sought from your end

1. Kindly explain as to what is meant by the term excluded assets and excluded debts.

2. With respect to the guarantees, I would like to state that no guarantees had been issued by me for any of my debt or otherwise of anybody else's debt.

3. With regard to the financial statements for the business owned, it is submitted that the Company Ess Dee Aluminium Ltd is already under liquidation and the financial statements and relevant documents have already been provided.

Further, with regard to the Creditors Claim it is stated that I have not executed or am aware of any debt to any of the banks on my personal capacity, It is submitted that I would require the documents or the agreements on the basis of which you have indicated the Claims.

With regard to the documents, due to some personal difficulty, I have been unable to collate and arrange for providing the same, therefore I kindly request you to provide me with a slight accommodation. In the meanwhile, please provide me with the document so as to determine the basis on which the claims have been admitted.

Thank you for your kind consideration."

9. RP again immediately responded to the email dated 03.08.2022, asking

to provide the details at the earliest. Several emails were sent by RP. On

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 8 of 14 24.08.2022, Appellant again wrote to the RP to provide the necessary

documents on basis of which claims have been submitted.

10. Now we notice the Statutory Scheme after admission of Section 95

Application under Section 100. Section 102 provides for Public Notice and

claim for Creditors which Public Notice was duly issued by RP. On

21.06.2022, claims were also received which was also forwarded to the

Appellant. Section 104 provides for preparation of list of Creditors. The list

of Claimants of prepared, 6 claims received were tabulated by the RP and was

forwarded to the Appellant vide email dated 18.07.2022, which is brought on

record as Annexure 2 to the Reply of the RP. Section 105 provides for

Repayment Plan. Section 105 is as follows:

"105. Repayment Plan.-(1) The debtor shall prepare, in consultation with the resolution professional, a repayment plan containing a proposal to the creditors for restructuring of his debts or affairs. (2) The repayment plan may authorise or require the resolution professional to--

(a) carry on the debtor's business or trade on his behalf or in his name; or

(b) realise the assets of the debtor; or (c) administer or dispose of any funds of the debtor. (3) The repayment plan shall include the following, namely:--

(a) justification for preparation of such repayment plan and reasons on the basis of which the creditors may agree upon the plan;

(b) provision for payment of fee to the resolution professional; (c) such other matters as may be specified."

11. Section 106 contemplate Report of RP on Repayment Plan. Section 105

required the Debtor to prepare in consultation with the RP Repayment Plan.

As per Section 106, the Report which requires to be submitted within 21 days

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 9 of 14 from the last date of submission of claims under Section 102. The facts

brought on the record indicates that there has been no communication from

the Appellant after 24.08.2022. No Repayment Plan having prepared by the

Debtor or submitted, no Proceeding for convening of the Meeting of Creditors

or conduct of Meeting could take place. Section 111 provides for approval of

Repayment Plan by Creditors, which is as follows:

"111. Approval of repayment plan by creditors.-The repayment plan or any modification to the repayment plan shall be approved by a majority of more than three-fourth in value of the creditors present in person or by proxy and voting on the resolution in a meeting of the creditors."

12. Section 112 provides for Report of Meeting of Creditor on Repayment

Plan and Section 114 contemplates Order of Adjudicating Authority on

Repayment Plan, which is as follows:

"114. Order of Adjudicating Authority on repayment plan.-(1) The Adjudicating Authority shall by an order approve or reject the repayment plan on the basis of the report of the meeting of the creditors submitted by the resolution professional under section 112:

Provided that where a meeting of creditors is not summoned, the Adjudicating Authority shall pass an order on the basis of the report prepared by the resolution professional under section 106. (2) The order of the Adjudicating Authority approving the repayment plan may also provide for directions for implementing the repayment plan. (3) Where the Adjudicating Authority is of the opinion that the repayment plan requires modification, it may direct the resolution professional to re-convene a meeting of the creditors for reconsidering the repayment plan."

13. In the present case, no Repayment Plan having been prepared there

arose no occasion to pass an Order for either accepting or rejecting the

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 10 of 14 Resolution Plan. Section 115 provides for effect of Order of Adjudicating

Authority on Repayment Plan, which provision is as follows:

"115: Effect of order of Adjudicating Authority on repayment plan.-(1) Where the Adjudicating Authority has approved the repayment plan under section 114, such repayment plan shall--

(a) take effect as if proposed by the debtor in the meeting; and

(b) be binding on creditors mentioned in the repayment plan and the debtor.

(2) Where the Adjudicating Authority rejects the repayment plan under section 114, the debtor and the creditors shall be entitled to file an application for bankruptcy under Chapter IV.

(3) A copy of the order passed by the Adjudicating Authority under sub-section (2) shall be provided to the Board, for the purpose of recording an entry in the register referred to in section 196."

14. Sub-Section (2) of Section 115 provides that where the Adjudicating

Authority reject the Repayment Plan under Section 115, Debtor and Creditor

shall be entitled to file an Application for Bankruptcy under Chapter IV. Thus,

the entitlement of Creditor to file an Application for Bankruptcy under

Chapter IV flows from Statutory Scheme under Section 115(2).

15. As noted above, the Adjudicating Authority took the view that when the

Repayment Plan has not been received, the effect and consequence of rejection

of Plan has to ensue by virtue of Section 115. The Application I.A. 449/2024,

which was filed by RP, and the Prayers made thereunder were in accordance

with Statutory Scheme under Section 115. Repayment Plan having not been

submitted by Debtor, natural consequence was Creditors to file an Application

for Bankruptcy under Chapter IV.

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 11 of 14

16. The present is the case where Appellant right from very beginning has

been challenging every action of the Adjudicating Authority and acts of

Resolution Professional unsuccessfully. Appellant has never submitted any

Repayment Plan to be finalised by the RP.

17. From the facts and sequence of the event which has been brought on

the record, it is clear that at no point of time, subsequent to receiving request

from the RP for submitting a Repayment Plan, Appellant raised any grievance

or filed any proceeding before the Adjudicating Authority, raising his

grievances and grounds for not being able to submit a Repayment Plan. The

Appellant kept silence for years together and when consequential Order under

Section 115 has been passed by the Adjudicating Authority, he is raising

grievance of not being heard by the Adjudicating Authority.

18. Now we come to the Regulation 19 on which much reliance has been

placed by the Counsel for the Appellant to contend that even the Application

I.A. 449/2024 was required to be served on the Appellant. Regulation 19

provides as follows:

"19. Filing with the Adjudicating Authority.-(1) The resolution professional shall file the repayment plan, as approved by the creditors, along with the report mentioned in sections 106 or 112, as the case may be, with the Adjudicating Authority on or before completion of one hundred and twenty days from the resolution process commencement date.

(2) The resolution professional shall provide the copies of the documents filed with the Adjudicating Authority under sub-regulation (1) to the guarantor and the creditors, within three days from the date of such filing."

19. Appellant has referred to Regulation 19(2) to contend that when

Regulation requires that copies of documents filed by the Adjudicating

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 12 of 14 Authority are required to be provided to the Guarantors, Appellant was

required to be heard when Order under Section 115 has been passed.

20. When we look into the Regulation 19, it is clear that the Regulation

refers to filing of Repayment Plan by RP and Repayment Plan has to be

submitted within 120 days from the Resolution Process commencement date.

Resolution Process commencement date is 16.06.2022 and 120 days came to

an end in the Year 2022 itself. Copies of the documents filed before the

Adjudicating Authority which was required to be given to the Guarantor as

contemplated in Regulation 19(2) relates to the documents which are filed

along with the Report submitted by RP under 106 & 112. In the present case,

when Repayment Plan has not been submitted by Debtor, nor was finalised

by the RP and no Report has been submitted by RP to the Adjudicating

Authority, the question of submitting or giving any documents along with the

Report regarding Repayment Plan does not arise, hence, Regulation 19 is not

applicable in the facts of the present case nor Appellant can rely on Regulation

19. No Repayment Plan having been submitted or finalised, Adjudicating

Authority has not committed any error in giving liberty to the Creditors to file

an Application for Bankruptcy under Chapter IV, which is a statutory

consequence under Section 115(2). In so far as discharge of the RP is

concerned, the discharge is also consequential to completion of Insolvency

and Bankruptcy Process against the Appellant under the provisions of

Chapter III of the Code.

21. In the Appeal, also Appellant has not been able to show any substantial

ground to interfere with the Order impugned, except on harping on the

argument that he was not given opportunity in I.A. No.449/2024.

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 13 of 14

22. In the facts of the present case, we do not find any ground to interfere

with the Impugned Order passed by the Adjudicating Authority.

There is no merit in the Appeal. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

NEW DELHI

6th November, 2024

himanshu

Comp. App. (AT) (Ins.) No. 1494 of 2024 & I.A. No. 5389 of 2024 14 of 14