Wilful defaulter tag cannot survive when the underlying company default is resolved through corporate insolvency proceedings.

A Calcutta HC decision is noted on the scope of review of a wilful defaulter declaration after a later corporate resolution. The Court held that the Review Committee could not reopen the earlier merits because that declaration had already attained finality, and its enquiry was confined to the effect of the subsequent resolution. It also held that where promoters' or directors' tag was purely derivative of the company's default, the wilful defaulter status could not survive once the company's liabilities were resolved through the insolvency process. The writ petitions succeeded and the consequential relief followed.

---

---

Issues: (i) Whether the Review Committee could reopen the merits of the earlier declaration of wilful default, or whether its enquiry was confined to the effect of the subsequent corporate resolution. (ii) Whether the wilful defaulter tag against the petitioners, as promoters and directors, could survive after the company's default stood resolved through the corporate resolution process.

Issue (i): Whether the Review Committee could reopen the merits of the earlier declaration of wilful default, or whether its enquiry was confined to the effect of the subsequent corporate resolution.

Analysis: The earlier declaration of wilful default had already been upheld in proceedings before the High Court and had attained finality. The further representation before the Review Committee arose only after the subsequent order of the Supreme Court, which permitted consideration of the representation in light of later events. In that setting, the scope of review was restricted to the effect of the corporate resolution and did not extend to reopening matters already concluded on merits.

Conclusion: The Review Committee was justified in refusing to reopen the earlier merits and confining its enquiry to the subsequent event.

Issue (ii): Whether the wilful defaulter tag against the petitioners, as promoters and directors, could survive after the company's default stood resolved through the corporate resolution process.

Analysis: The petitioners were tagged only in relation to the default attributed to the company, and not on an independent footing divorced from that default. Once the company's liabilities were resolved and the company itself ceased to remain under the same default stigma, the same default could not logically continue to sustain the tag against the promoters and directors whose alleged liability was derivative of the company's conduct. The continuation of the tag would also carry serious civil consequences, including those under the insolvency regime.

Conclusion: The wilful defaulter tag could not be sustained against the petitioners after the company's default had been resolved.

Final Conclusion: The writ petitions succeeded. The impugned orders of the Review Committee were set aside, and the petitioners' wilful defaulter status was withdrawn with consequential reliefs.

Ratio Decidendi: Where the wilful defaulter status of promoters or directors is derivative of the very same company default that has subsequently been resolved in corporate insolvency proceedings, the tag cannot be continued against them merely on the basis of the resolved default.

---