2024 (1) TMI 92 - HC - Insolvency and Bankruptcy

Former director loses appeal against bank after resolution plan approval under Clean Slate Principle

The HC dismissed a Letters Patent Appeal filed by a former director seeking RBI action against HSBC Bank during CIRP proceedings. Following NCLT approval ... Maintainability of Letters Patent Appeal - CIRP - Seeking RBI to take action against HSBC Bank - Independent right of appellant to approach the court in capacity as a Member of the erstwhile Board of Directors - approval of resolution plan was also granted - HELD THAT:- Once approval of the Resolution Plan was granted by the NCLT on 27.4.2023 and the Resolution Applicants have taken control of the respondent no.4 Company, and the existing equity share capital of the 4th respondent stood written off in view of the Clean Slate Principle envisaged under the IBC, the said order is binding on the appellant as well (see para 40 of the order dt.27.4.2023 of the NCLT) - Consequently, the appellant-writ petitioner ceased to be not only a share holder but also a Member of the Board of Directors of the 4th respondent. The appellant has no locus either as a Share Holder or as a Director or as a Former Director of the 4th respondent to continue this Letters Patent Appeal, particularly when no leave of the NCLT had been obtained to pursue this Letters patent Appeal by him. Also, when the Management of the 4th respondent already stood transferred by reason of approval of the Resolution Plan by the NCLT, it’s new Management should pursue the grievance which is now being pursued by the appellant. There are no merit in the appeal - appeal dismissed. Issues involved:The judgment involves issues related to the locus standi of the appellant in seeking a mandamus directing the RBI to take action, the implications of the approval of the Resolution Plan by the NCLT, and the appellant's right to approach the court in light of the IBC provisions.Background facts:The appellant filed a Writ petition seeking reliefs against certain entities and had impleaded the RBI as a respondent. The RBI had promised action on a complaint, but the Writ petition was withdrawn later. The appellant then filed another petition seeking direction for the RBI to comply with the previous statement.Subsequent events and legal proceedings:The 2nd respondent initiated insolvency proceedings against the 4th respondent, leading to appeals and challenges up to the Supreme Court. The Resolution Plan was approved by the NCLT, resulting in the appellant ceasing to be a shareholder and director of the 4th respondent.Order of the Single Judge:The Single Judge held that the appellant lacked locus standi to seek a mandamus against the RBI and that the 4th respondent should have filed the subsequent petition. The RBI could not act due to pending matters before the NCLT and DRT.Letters Patent Appeal:The appellant challenged the Single Judge's order citing provisions of the IBC and a Supreme Court judgment. The Court found the appellant's contentions untenable, stating that he should approach the NCLT, not the High Court. The Resolution Plan approval by the NCLT rendered the appellant's appeal moot.Court's Consideration:The Court held that the Resolution Plan approval and change in management of the 4th respondent made the appellant's appeal baseless. The new management expressed disinterest in pursuing the litigation on behalf of the 4th respondent. The Court agreed with the Single Judge's reasons for denying relief to the appellant.In conclusion, the Court dismissed the appeal, emphasizing that the appellant lacked standing to continue the appeal in light of the NCLT's approval of the Resolution Plan and the change in management of the 4th respondent. The new management's disinterest in the litigation further supported the dismissal of the appeal.