The NCLAT, New Delhi Bench opined that after a charge was created in favour of the Bank, it was mandatory for the Corporate Debtor to get the consent of the Bank to execute the lease rent agreement.

It was expounded that the suspended board of directors do not have locus standi to file an appeal against the plan’s approval by the committee of creditors.   

Regarding the change of business plan due to the resolution plan, it was ruled that the same is permitted under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”). Further, in the present case, the Corporate Debtor was not doing business for many years.

Brief Facts:

The present appeals have been filed against the order of the NCLT vide which the resolution plan of Respondent No.2 was approved.

The Corporate Debtor provided corporate guarantee to one Bank for the loan availed by Tantia Construction Pvt. Ltd. (“TCL”). Thereafter, the account of borrower was declared NPA and notice was issued under Section 13(2) SARFAESI Act, 2002.

Meanwhile, one Mr. Harshvardhan Tantia holding 62% shares in the Corporate Debtor consented to being a director of the Appellant with 50% shareholding.

Thereafter, the Corporate Debtor entered into lease rent agreement which was unstamped and unregistered with the Appellant and lease hold right was created in favor of the Appellant.

The Bank issued notice under SARFAESI Act, 2002 for enforcement of security interest over the subject land. The bank guarantee against the Corporate Debtor was invoked.

The Bank filed Section 7 application under the IBC against the Corporate Debtor. The Resolution Professional then issued notice for termination of the lease that was in favor of the Appellant.

As per the audit report, the rent of the subject land was Rs. 4.85 lakhs however, the Corporate Debtor had given the same to the Appellant for Rs.55,000.

The resolution plan submitted by the Appellant was rejected and the one by Respondent No. 2 was accepted with 100% voting.

The present appeal has been preferred by 3 suspended directors against the approval of the resolution plan.

Contentions of the Appellant:

It was argued that the resolution plan changed the nature of the business and hence, was violative of Section 5(26) of the IBC.

Contentions of the Respondents:

It was contended that the Appellant connived with the Corporate Debtor to frustrate the insolvency process. Even after NPA, the Appellant entered into an unlawful lease agreement with the Corporate Debtor.

Further, it was argued that the IBC permits the transfer of property/land of a Corporate Debtor. In the present case, the factory was not in the shape of running, and therefore, it was impossible to revive the business.

Observations of the Tribunal:

It was observed that the principal borrower’s account was declared NPA, and still, the director (one of the Appellants) entered into a lease agreement with the Corporate Debtor.

Further, the lease period was five years, so registering the same was mandatory.

The Bench noted that after a charge was created in favour of the Bank, it was mandatory for the Corporate Debtor to get the consent of the Bank to execute the lease rent agreement.

It was opined that the suspended board of directors do not have locus standi to file an appeal against the plan’s approval by the committee of creditors.   

Regarding the change of business plan, it was ruled that the same is permitted under IBC. Further, in the present case, the Corporate Debtor was not doing business for many years.

The decision of the Tribunal:

Based on the aforementioned analysis, the Bench accordingly dismissed the appeals.

Case Title: Jaydip Ghosh & Ors. V. Niraj Agarwal & Ors. and other connected matters

Case No.: Company Appeal (AT)(Ins) No. 839 of 2022 and other connected matters

Coram: Justice Rakesh Kumar, Dr. Alok Srivastava (Technical Member)

Advocates for Appellants: Advs. Prakhar Tandon, Shambo Nandy

Advocates for Respondents: Advs. Niraj Agarwal, Kumarjit Banerjee, Neha Tandon, Akshay Sharma, Shivam Saini, Arun Agarwal, Greeshma Beebireddy

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