2022 (8) TMI 232 - AT - Insolvency and Bankruptcy

Appeal Dismissed as Frivolous: Appellant Estopped, Order Final.

The Tribunal dismissed the appeal, finding it frivolous and vexatious. It concluded that the Appellant was estopped from challenging the order dated ... Scheme of compromise and arrangement - revocation of liquidation - eligibility under Section 29A(c) - liquidator's fee and Regulation 4 of the IBBI (Liquidation Process) Regulations - estoppel and finality of orders - limitation under Section 61(2)Eligibility under Section 29A(c) - scheme of compromise and arrangement - revocation of liquidation - estoppel and finality of orders - limitation under Section 61(2) - Whether the respondents were ineligible as scheme proponents under Section 29A and whether the impugned orders revoking liquidation and sanctioning the scheme required interference - HELD THAT: - The Tribunal held that the Adjudicating Authority had directed the proponents to submit an affidavit and required the liquidator to file a report; the proponents furnished an affidavit dated 17.01.2020 and the liquidator filed his report on 22.01.2020 confirming settlement of dues. The order of the Adjudicating Authority dated 10.01.2020 approving the scheme was not challenged by the liquidator and has attained finality. In light of the facts that the proponents had paid the amounts to financial creditors and the Adjudicating Authority had considered precedents including the decisions permitting consideration of schemes in liquidation and the interpretation of Section 29A(c) in Arcelormittal, the Tribunal found no merit in reopening eligibility. The Tribunal further observed that the challenge to the order dated 10.01.2020 was barred by limitation under Section 61(2), and, on merits, the appellant was estopped from disputing the scheme approval. Taking these factors together, the Tribunal concluded that the appeal was frivolous and vexatious and did not warrant interference with the revocation of liquidation and sanction of the scheme. [Paras 36, 37, 41, 42, 43]Appeal dismissed; no interference with the orders sanctioning the scheme and revoking liquidation.Final Conclusion: The appeal was dismissed as frivolous and vexatious; the Adjudicating Authority's sanction of the scheme and revocation of liquidation are upheld, the appellant being estopped and the challenge to the earlier sanction order barred by limitation. No order as to costs. Issues Involved:1. Eligibility of Respondents as scheme proponents under Section 29A of the IBC.2. Payment of liquidator's fee and its interpretation by the Adjudicating Authority.Detailed Analysis:1. Eligibility of Respondents as Scheme Proponents:The Appellant contested the eligibility of the Respondents to act as scheme proponents under Section 29A of the Insolvency and Bankruptcy Code (IBC), 2016. The Adjudicating Authority's order dated 05.05.2020 allowed the promoters to take back the Corporate Debtor under a scheme for compromise and arrangement, which the Appellant argued was in contravention to Section 29A read with Section 35(1)(f) of the IBC and Regulation 2B(1) of the IBBI (Liquidation Process) Regulations, 2016.The Respondents submitted that the scheme was unanimously approved by the shareholders and creditors of the Corporate Debtor. The Adjudicating Authority had directed the Appellant to file a report certifying that the Respondents did not suffer from any disqualification under Section 29A. The Appellant filed this report on 24.01.2020.The Adjudicating Authority, in its order dated 10.01.2020, considered the Supreme Court's judgment in M/s Meghal Homes Pvt. Ltd. and the NCLAT's judgment in Jindal Steel and Power Limited vs. Arun Kumar Jagatramka, which clarified that a promoter ineligible under Section 29A cannot submit a scheme for compromise and arrangement. However, it was noted that the Respondents had settled the debts owed to the secured financial creditors in full, which was a significant factor in determining their eligibility.The Appellant did not contest the issue of ineligibility before the Adjudicating Authority and even submitted the scheme for approval. The Adjudicating Authority concluded that the Respondents were not disqualified under Section 29A as they had settled the debts of the Corporate Debtor.2. Payment of Liquidator's Fee:The Appellant also raised issues regarding the payment of the liquidator's fee. The Adjudicating Authority's order dated 05.05.2020 determined that the liquidator's fee would be payable only upon the occurrence of specific events as detailed in the order. The Appellant argued that this interpretation was erroneous and contrary to Section 53 of the IBC and the IBBI (Liquidation Process) Regulations, 2016.The Respondents contended that the Appellant had delayed handing over the Corporate Debtor, causing additional expenses. They also argued that the Appellant, as an officer of the court, had no vested right or locus standi to challenge the scheme that he himself had submitted for approval.The Adjudicating Authority noted that the Appellant's repeated attempts to challenge the scheme were an abuse of process and aimed at personal gain. The Tribunal emphasized that the Appellant had not challenged the order dated 10.01.2020 within the limitation period and that the order had attained finality.Conclusion:The Tribunal dismissed the appeal, finding it frivolous and vexatious. It concluded that the Appellant was estopped from challenging the order dated 10.01.2020, which had attained finality. The appeal was seen as an abuse of process and a waste of the Tribunal's time. No costs were awarded, and any pending applications were closed.