SREI Infrastructure Finance Limited Vs State of Tripura (Tripura High Court)
Conclusion: State could not blacklist a company after approval of a resolution plan under the Insolvency and Bankruptcy Code, and that the new management could not be punished for the actions of the old management.
Held: Assessee-company challenged the blacklisting order passed by the State of Tripura which banned the company from participating in government contracts for three years. The blacklisting was based on misconduct and defaults committed when the company was under its earlier management, before the approval of the resolution plan by the National Company Law Tribunal. Assessee-company argued that the blacklisting order defeated the purpose of the Insolvency and Bankruptcy Code, which gave a company a clean slate after a resolution plan was approved. They submitted that punishing the revived company would discourage resolution applicants and go against the objective of corporate revival under the Code. The State contended that the government had the right to choose with whom it will contract and that the past conduct of the company justified its decision to blacklist. They argued that the IBC did not take away the power of the State to act in the public interest and prevent companies with a history of misconduct from participating in future projects. It was held that upon approval of the Resolution Plan and the change in management, if the order of blacklisting was allowed to survive the past misconducts of the erstwhile management would continue to haunt assessee company and would not serve the purpose of revival of the company. Moreover, the respondents had already forfeited the performance bank guarantee of assessee for Rs.95,58,000/- for breach of terms and conditions of the contract. Therefore, on consideration of the issues involved and the elaborate discussion made, such order of blacklisting and debarment of assessee company after approval of the resolution plan with a new management would defeat the dominant aim and object of the Insolvency and Bankruptcy Code, 2016 and in all likelihood defeat the very purpose of revival of the company.
