| Headnote |
Insolvency and Bankruptcy Code, 2016: s.29A – Issue relatesto ineligibility of resolution applicants to submit resolution plansafter the introduction of s.29A into the Code – Petition filed underthe Code for financial debts owed to the financial creditors-Banksby the corporate debtor ESIL for Rs.45,000 crores – RP (ResolutionProfessional) invited an expression of interest from potentialresolution applicants – Appellant (AMIPL) and one entity Numetalsubmitted expression of interest – Submission of resolution plan byAMIPL and Numetal – RP found both AMIPL and Numetal ineligibleunder s.29A – RP held that AM Netherlands mentioned as aconnected person of AMIPL was disclosed as a promoter of UttamGalva which was declared as a NPA – Similar was the situation ofNumetal – AMIPL and Numetal challenged the order of RP beforeAdjudicating Authority (NCLT) – On 2.4.2018, pursuant to the RP’sinvitation, fresh resolution plans submitted by AMIPL, Numetal andone other entity ‘Vedanta’ – On 19.4.2018, NCLT passed order inall the IAs, wherein it first held that there was no patent illegality inthe decision of RP for declaring ineligibility of applicants – It thenwent on to hold that RP ought to have produced both the resolutionplans before the Committee of Creditors (CoC) and to follow theprovision of s.29A(c) r/w s.30(4) for affording opportunity to theresolution applicants before declaring them ineligible and, therefore,remanded back the matter to RP and CoC on this ground – Pendingappeals before NCLAT, on 8.5.2018, CoC disqualified AMIPL andNumetal – On 7.9.2018, NCLAT held that at the time of first resolutionplan by Numetal, one of the shareholders being ‘AEL’ was relatedparty and therefore, Numetal was not eligible to submit resolutionplan in terms of s.29A and that on 29.3.2018, as the AEL was notthe shareholder of Numetal and all the three shareholders beingeligible, Numetal was eligible – Therefore, resolution plan submitted by Numetal to be considered by CoC to find out its viability – Asregards AMIPL, order of NCLT was affirmed subject to conditionthat AMIPL shall make payment of all overdue amount with interestthereon and charges relating to NPA of both the “Uttam Galva”and “KSS Petron” within three days – Instant appeals filed by AMIPLand Numetal – Held: The ingredients of sub-clause (c) of s.29A arethat, the ineligibility to submit a resolution plan attaches if anyperson, as is referred to in the opening lines of s.29A, either itselfhas an account, or is a promoter of, or in the management or controlof, a corporate debtor which has an account, which account hasbeen classified as a non-performing asset, for a period of at leastone year from the date of such classification till the date ofcommencement of the corporate insolvency resolution process – Ifit is shown, on facts, that, at a reasonably proximate point of timebefore the submission of the resolution plan, the affairs of thepersons referred to in s.29A are so arranged, as to avoid payingoff the debts of the non-performing asset concerned, such personsmust be held to be ineligible to submit a resolution plan – In theinstant case, since both the resolution plans even on 2.4.2018,were hit by s.29A(c), and since the proviso to s.29A(c) will not applyas the corporate debtors related to AMIPL and Numetal have notpaid off their respective NPAs, ordinarily, these appeals would bedisposed of by merely declaring both resolution applicants to beineligible under s.29A(c) – However, in order to do complete justiceunder Art.142 of the Constitution of India, one more opportunity isgiven to both resolution applicants to pay off the NPAs of theirrelated corporate debtors within a period of two weeks inaccordance with the proviso to s.29A(c) – If such payments aremade within the said period, both resolution applicants can resubmittheir resolution plans dated 2.4.2018 to CoC, who are then given aperiod of 8 weeks to accept, by the requisite majority, the bestamongst the plans submitted, including the resolution plan submittedby Vedanta – In the event that no plan is found worthy of acceptanceby the requisite majority of the CoC, the corporate debtor, i.e. ESIL,shall go into liquidation – Constitution of India – Art.142 – Companylaw.Insolvency and Bankruptcy Code, 2016: s.29A(c) – It isimportant for the competent authority to see that persons, who are otherwise ineligible and hit by sub-clause (c), do not wriggle out ofthe proviso to sub-clause (c) by other means, so as to avoid theconsequences of the proviso – For this purpose, despite the factthat the relevant time for the ineligibility under sub-clause (c) toattach is the time of submission of the resolution plan, antecedentfacts reasonably proximate to this point of time can always be seen,to determine whether the persons referred to in s.29A are, insubstance, seeking to avoid the consequences of the proviso to subclause(c) before submitting a resolution plan.Insolvency and Bankruptcy Code, 2016: s.29A – Point of timeat which the disqualification in sub-clause (c) of s.29A will attach –Held: The stage of ineligibility attaches when the resolution plan issubmitted by a resolution applicant – The date of commencement ofthe corporate insolvency resolution process is only relevant for thepurpose of calculating whether one year has lapsed from the dateof classification of a person as a non-performing asset.Insolvency and Bankruptcy Code, 2016: s.3(37) – By s.3(37)of the Code, words and expressions used but not defined in theCode but defined inter alia by the SEBI Act, 1992, and the CompaniesAct, 2013, shall have the meanings respectively assigned to them inthose Acts – SEBI (Substantial Acquisition of Shares and Takeovers)Regulations, 2011 – s.2(1)(q).Doctrines/Principles: Doctrine of lifting veil – Held: Thedoctrine is applicable even to group companies, so that one is ableto look at the economic entity of the group as a whole.Words and phrases: Expression “acting jointly” – Meaningof in the context of s.29A of Insolvency and Bankruptcy Code, 2016. |
