2023 (8) TMI 192 - AT - Insolvency and Bankruptcy

Tribunal dismisses Company Appeal, orders refund of Earnest Money Deposit with interest.

Mr. S. Hari Karthik, Liquidator, The Jeypore Sugar Company Limited Versus Mr. Jayaram Chowdhary, Mrs. Rajeswari Ramakrishnan, Mr. Madhu Desikan

The National Company Law Appellate Tribunal, Chennai, dismissed the Company Appeal, ruling in favor of the Respondent for the refund of the Earnest Money ... Refund of the EMD Amount - respondent was considered to be ‘disqualified’ under Section 29A of the Code for Submission of the Plan - HELD THAT:- It is an admitted fact that the First Respondent had deposited an amount of Rs. 2,00,00,000/- on 23/01/2020 towards EMD/ Binding Submission Bank Guarantee (BSBG), and was subsequently informed by the Appellant vide email dated 27/02/2020 that he was disqualified under Section 29A of the Code and hence was not eligible to submit a Resolution Plan. While so, the ‘Adjudicating Authority’ vide Order dated 29/05/2020 had ordered for Liquidation of the Corporate Debtor Company. As regarding the forfeiture of BSBG, it is clearly stated in the terms that only when the Resolution Applicant is found to have made ‘false or misleading representation’, it can be forfeited. In the instant case, there is absolutely no material evidence on record to substantiate the contention of the Appellant that the 1st Respondent had deliberately or maliciously sought to derail the CIRP Process or given any misleading representation. It is not the case of the Appellant that the 1st Respondent had challenged his ineligibility under Section 29A of the I & B Code, 2016 by way of an Appeal. It is pertinent to mention that under Regulation 36B of the IBBI (CIRP) Regulations, 2016, there is no requirement to obtain a non-refundable deposit for submission of the Resolution Plan. The Record shows that the Company had gone into Liquidation on 29/05/2020 and the IA/829/2020 filed by the 1st Respondent was allowed, vide the Impugned Order on 04/10/2021 and the EMD amount of Rs. 2,00,00,000/- has still not been refunded. The ‘Adjudicating Authority’ in the Impugned Order has observed that the Resolution Plan given by the 1st Respondent was not even placed before the CoC for its consideration and therefore the question of delay in procedure does not arise and that the Liquidator was not right in holding back the EMD amount. There are no illegality or infirmity in the reasoning given by the ‘Adjudicating Authority’ in the Order impugned - appeal dismissed. Issues Involved: The issues involved in the judgment include the forfeiture of Earnest Money Deposit (EMD), the entitlement of the Respondent to a refund of the EMD amount, and the expunging of certain averments made in the application.Forfeiture of Earnest Money Deposit (EMD): The Appellant, the Liquidator, alleged that the Promoters attempted to derail the Resolution Process, leading to the Company's liquidation. The Appellant argued that the Respondent wilfully misused the judicial process, justifying the forfeiture of the EMD. Citing the Supreme Court's judgment in 'National Highways Authority of India Vs. Ganga Enterprises,' the Appellant contended that forfeiture of the EMD was warranted due to the Respondent's disruptive behavior.Entitlement to Refund of EMD Amount: The Respondent, having been disqualified under Section 29A of the Insolvency and Bankruptcy Code, requested the refund of the EMD. Despite directions from the Adjudicating Authority to refund the amount, the Liquidator failed to comply, leading to the Respondent filing an application seeking the refund. The main consideration was whether the Respondent, being disqualified, was entitled to the refund of the EMD amount.Expunging of Averments in the Application: The Liquidator sought to expunge certain averments made by the Respondent in the application, alleging connivance with the erstwhile promoters to defraud. The Adjudicating Authority found the averments not grave enough to defame the Liquidator and dismissed the Liquidator's request for expunging.Conclusion: The National Company Law Appellate Tribunal, Chennai, dismissed the Company Appeal, ruling that the Respondent was entitled to the refund of the EMD amount. The Tribunal found no evidence to support the Appellant's claim of the Respondent's disruptive behavior. Additionally, the Tribunal upheld the Adjudicating Authority's decision regarding the averments made in the application. The judgment directed the refund of the EMD amount to the Respondent with accrued interest within a week from the date of the order.