The National Company Law Appellate Tribunal (NCLAT) has said that a resolution plan submitted as part of insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) does not automatically fail just because the person who submitted it dies before the plan is approved [Arun Kumar Singh Vs Genius Exports]
The NCLAT said the plan can still be examined to see if it can be carried forward, including in some cases by the deceased resolution applicant’s heirs.
A Bench of Judicial Member Justice N Seshasayee and Technical Member Indevar Pandey said the IBC does not specifically deal with such a situation. It described this as a “blind spot” in the law.
The case arose from the insolvency proceedings of Genius Exports Private Limited.
A resolution plan submitted by Digvijay Nath Tripathi had been approved by the Committee of Creditors (CoC) in May 2022. The plan was then sent to the National Company Law Tribunal (NCLT) for approval.
However, Tripathi died in September 2024 while the application was still pending.
The NCLT later rejected the plan. It held that the role and obligations of a resolution applicant could not be transferred or inherited and, therefore, the plan could no longer be implemented. It then ordered liquidation of the company.
The NCLAT said this approach was wrong.
It noted that a resolution applicant is not comparable to a resolution professional or a liquidator, who hold statutory offices. It also said the death of a resolution applicant is not listed under Section 33(1) of the IBC as a ground for ordering liquidation.
The Bench said insolvency law should, as far as possible, try to keep the company alive instead of rushing towards liquidation.
“Liquidation is amputation of the corporate assets for free sale in the market whereas CIRP requires preserving the soul of the corporate debtor by saving its body and life - the business of the corporate debtor,” the NCLAT said.
The appellate tribunal then laid down how such cases should be handled.
If the request for resolution plan or the resolution plan itself contains a clause dealing with the death of the applicant, that clause can be followed. If neither document says anything about it, the plan can be sent back to the CoC to decide whether it can still be implemented.
The heirs of the deceased applicant can also be considered but they do not get an automatic right to take over the plan.
The CoC would have to examine whether the heir has the necessary experience to run the business, is eligible under Section 29A of the IBC and is willing to implement the plan on the same terms.
In the present case, the NCLAT noted that there was already a settlement between the suspended director and the sole member of the CoC, and a separate application had been filed to withdraw the insolvency proceedings.
Therefore, it set aside the liquidation order, revived the corporate insolvency resolution process and directed the NCLT to consider the withdrawal application.
Advocates Deep Bisht and Astitwa Kumar appeared for operational creditor Arun Kumar Singh. Advocate Shubham Budhiraja appeared for former resolution professional Parag Singhal.
Advocate Sujal Bhatt appeared for respondent Nripendra Kumar Tripathi
[Read Judgment]