Tribunal overturns ineligibility ruling, allows compromise proposal within 30 days. Liquidation on hold pending arrangement review.

The Tribunal set aside the decision declaring the Appellant ineligible under Section 29A of the Insolvency and Bankruptcy Code, finding that the Appellant was not a willful defaulter at the relevant times. Despite the liquidation order, the Tribunal allowed the Appellant to propose a compromise or arrangement under the Companies Act within 30 days, with the Liquidator to consider it within 60 days. The liquidation process was put on hold for 90 days for this purpose, with proceedings to continue if no arrangement was approved within the specified timeframe.

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Issues Involved:
1. Eligibility of the Appellant under Section 29A of the Insolvency and Bankruptcy Code to submit a Resolution Plan.
2. Validity of the declaration of the Appellant as a willful defaulter by Union Bank of India.
3. Impact of the liquidation order on the consideration of the Resolution Plan.

Summary:

Issue 1: Eligibility under Section 29A
The Appellant challenged the rejection of its Resolution Plan by the Committee of Creditors (CoC) on grounds of ineligibility under Section 29A of the Insolvency and Bankruptcy Code, 2016. The Appellant argued that at the time of submitting the Resolution Plan and its consideration by the CoC, there was no declaration by Union Bank of India labeling them as willful defaulters. The Tribunal found that the Appellant was not a willful defaulter at the relevant times, as the identification committee's declaration came later on 25th May 2021. The Tribunal set aside the Adjudicating Authority's order upholding the CoC's decision.

Issue 2: Declaration as Willful Defaulter
Union Bank of India issued a show cause notice on 13.11.2019, which was contested by the Appellant. The identification committee eventually declared the Appellant as a willful defaulter on 25.05.2021, a decision upheld by the review committee on 01.07.2021. However, the High Court of Bombay stayed these orders on 20.09.2021, rendering them non-operative. The Tribunal concluded that the Appellant could not be considered a willful defaulter as of the date of the judgment.

Issue 3: Impact of Liquidation Order
Despite setting aside the ineligibility decision, the Tribunal acknowledged that the Corporate Debtor had been ordered into liquidation by a separate order dated 20th January 2022, which was not appealed. Consequently, the liquidation process had commenced, and there was no scope for reconsidering the Resolution Plan. However, the Tribunal allowed the Appellant to propose a scheme for compromise or arrangement under Section 230 of the Companies Act, 2013, within 30 days. The Liquidator was directed to consider this proposal within 60 days, and the liquidation process was to be kept on hold for 90 days to facilitate this.

Conclusion:
The Tribunal disposed of the appeal by:
a. Setting aside the Adjudicating Authority's order declaring the Appellant ineligible under Section 29A.
b. Acknowledging that no direction could be issued for reconsidering the Resolution Plan due to the liquidation order.
c. Permitting the Appellant to submit a compromise or arrangement within 30 days.
d. Directing the Liquidator to consider the compromise or arrangement within 60 days.
e. Keeping the liquidation process on hold for 90 days.
f. Stating that if no compromise or arrangement is approved within 90 days, the liquidation proceedings shall continue.

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