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2020 (3) TMI 855 - HC - Insolvency and BankruptcyValidity of declaration of wilful defaulter - HELD THAT:- The initial order of the Identification Committee declaring the petitioners as well as the PMPL as wilful defaulters, was upheld both by the coordinate bench of this court on April 6, 2017 and affirmed by a division bench of this court, sitting in appeal over the order of the learned Single Judge, passed on June 12, 2017 - The fresh representation thereafter, before the Review Committee, might have contained several allegations, including some already adjudicated by the Identification Committee on merits, which attained finality, the scope of enquiry of the Review Committee, which was opened up only by the order of the Supreme Court dated May 8, 2019, was restricted, by the said order itself, to the subsequent event of corporate resolution and its effect on the ‘wilful defaulter’ tag on the petitioners - the issue raised by the petitioners has to be turned down, since the Review Committee was justified in restricting its enquiry only to such subsequent event and its effect and not reopening the merits of the declaration of wilful defaulters by the Identification Committee, since the same had already attained finality. As far as the subsequent event is concerned, the petitioners are justified in arguing that since the wilful default tag was attached to the petitioners merely in the capacity of the promoters and directors of the defaulting company, which itself had been absolved of such default, automatically removing its wilful defaulter tag, such tag could not be sustained thereafter. The petitioners were castigated as wilful defaulters only due to the alleged actions taken by them in commission of the default by PMPL. Hence, the term ‘wilful default’, even in respect of the petitioners, does not pertain to their general conduct as company officials but is restricted to the default committed by the company, of which they were promoters/directors - the Review Committee adopted a palpably erroneous legal process in taking the view that the petitioners and the company were individually labelled as wilful defaulters. The impact of the sustenance of such tag would be severely detrimental to the petitioners, more so in view of the provisions of Section 29A of the Insolvency and Bankruptcy Code, 2016. Once the default itself is resolved through a Corporate Resolution Process and the company is itself absolved from such tag by its merger with a different company, the default cannot be said to continue in respect of the directors, since it has already been absolved. It was not separate causes of action, which led to the declaration of the petitioners and the PMPL as wilful defaulters, but the same alleged defaults - Once the default itself goes by virtue of a corporate resolution, the ‘wilful defaulter’ tag of the petitioners, in the capacity of promoters and directors of such company only and not in their individual capacities, had to go. Thus, the Review Committee acted palpably without jurisdiction in refusing to withdraw the wilful defaulter tag attached to the petitioners, on an unjust and unfair basis. Petition allowed.
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