Tribunal Invalidates Closure Plan, Directs Corporate Debtor to Maintain Operations

The Tribunal found that the 'Resolution Plan' approved for the closure of the 'Corporate Debtor' was against the objectives of the Insolvency and Bankruptcy Code. The plan's approval was deemed a violation of the Code, and the Tribunal set aside the part of the plan related to closure but upheld the rest. The Tribunal directed the 'Corporate Debtor' to ensure the company remains operational without retrenching employees. The case was remitted for necessary corrections in the plan, with a warning that if not amended, it would be set aside, and the Tribunal would proceed afresh.

---

---

Issues Involved:
1. Malicious initiation of proceedings under Section 10 of the Insolvency and Bankruptcy Code, 2016.
2. Approval of a 'Resolution Plan' that provides for the closure of the Corporate Debtor.
3. Non-consideration of claims by the 'Resolution Professional.'
4. Ineligibility of the 'Corporate Applicant' under Section 29A.
5. Non-reflection of employees' dues and retrenchment in the 'Resolution Plan.'

Issue-Wise Detailed Analysis:

1. Malicious Initiation of Proceedings:
The judgment identifies the initiation of proceedings by the 'Corporate Debtor' under Section 10 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code") as malicious, intended for purposes other than insolvency resolution or liquidation. The Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, approved a 'Resolution Plan' that did not align with the objectives of the I&B Code, noting that the plan provided for the closure of the corporate debtor rather than its revival.

2. Approval of a 'Resolution Plan' for Closure:
The Appellants challenged the order approving a 'Resolution Plan' submitted by the 'Corporate Applicant' that provided for the closure and retrenchment of all workmen. The Tribunal found that the plan was approved without considering whether it conformed to Section 30(2)(e) of the I&B Code, which mandates that the plan should not contravene any law in force. The plan proposed by the Ministry of Railways recommended the closure of the company, with a provision of Rs. 417.10 Crores for settling liabilities, including statutory and contingent liabilities, bank loans, and employee dues.

3. Non-Consideration of Claims:
Two appeals were filed by 'Industrial Services' (an 'Operational Creditor') alleging non-consideration of its claims by the 'Resolution Professional.' Initially, the claim was accepted but later not entertained due to a suit filed by the 'Corporate Debtor' during the moratorium period. The Tribunal noted that suits filed during the moratorium could not be considered to deny admissible dues.

4. Ineligibility Under Section 29A:
The Appellant argued that the 'Corporate Applicant' was ineligible under Section 29A of the I&B Code. However, the Corporate Applicant and the Indian Railway Board contended that the 'Corporate Debtor' was not an undischarged insolvent or willful defaulter and that its account had not been declared as a Non-Performing Asset. Therefore, the exclusions set out in Section 29A(b) & (c) were not applicable.

5. Non-Reflection of Employees' Dues and Retrenchment:
Appeals were also filed by the 'Burn Standard Ex-Employee Welfare Association,' challenging the non-reflection of employees' dues, including pay revisions determined by the Calcutta High Court, in the 'Resolution Plan.' The Tribunal observed that the 'Corporate Debtor' could not deny the dues of ex-officers and ex-employees or close the company.

Tribunal's Findings and Orders:
The Tribunal found that the 'Resolution Plan' was against the objectives of the I&B Code, which aims to ensure the revival and continuation of the corporate debtor. The plan's approval for the closure of the 'Corporate Debtor' was deemed a violation of Section 30(2)(e) of the I&B Code. Consequently, the Tribunal set aside the part of the 'Resolution Plan' related to the closure of the 'Corporate Debtor' but upheld the rest of the plan.

The Tribunal directed the 'Corporate Debtor' to ensure that the company remains a going concern and that employees are not retrenched. The case was remitted to the Adjudicating Authority, Kolkata Bench, to make necessary corrections in the 'Resolution Plan.' If the 'Corporate Applicant' refuses to amend the plan, it will be treated as set aside, and the Adjudicating Authority will proceed afresh.

All appeals were allowed with the aforementioned observations and directions, with no costs awarded.

---