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2018 (5) TMI 695 - Tri - Insolvency and BankruptcyCorrection of the decision of the Resolution Professional - Eligibility for submission of resolution plan by the Resolution Applicant, M/s. Numetal Limited - Held that - As expressed the Numetal Limited (Resolution Applicant) is a single and independent corporate entity and it cannot be termed as a consortium of its shareholders not it intend to implement the Resolution Plan jointly with another person hence, in view of this the amended clause 4.11.2 (1) to the RFP would neither be applicable or binding upon the resolution applicant and thus, it is not required at all to seek an approval from the RP or the CoC. In respect of proposed change its shareholding of ESIL in terms of RFP and also are required under the other provisions of the Law. It has been also emphasised that the Numetal Limited is not a SPV brought into existence merely for the purpose of submitting the Resolution Plan in respect of Corporate Debtor ESIL as it has recently entered into an agreement to acquire majority stock in Odisha Slurry Pipeline Infrastructure Limited by an independent contract from the Resolution Plan, Thus, it cannot be presume that the applicant is such a Corporate entity which is brought into the existence only for the purpose of putting forth resolution plan for the ESIL. Since, there is difference in the legal opinions among the learned Luminaries and law firms and more than one views are possible in present case to be acted upon then, it cannot be said that there is patently illegality in the conclusion of the RP or it acted arbitrarily or mala fidely in rejecting the resolution plan by relying on the legal opinion received and believed to be true by him and which were placed before the CoC. Moreover, the RP under the provision of the Code it is expected to make scrutiny of a resolution plan in conformity with the law of the land and to take such a prudent decision which a common man in normal course may arrive and think just and proper. This court being Adjudicating Authority under the Code is not expected to substitute its view upon the discretion and wisdom of the RP and CoC to opt for only which a particular view until and unless it is the case of patent illegality or arbitrariness. Therefore, for the aforesaid reason in our prima facie view we do not find any patent illegality in the decision of the RP for declaring ineligible to applicants which is a prudent decision where there is possibility of more than one legal view then this court at this stage is not expected to substitute its view and to interfere with the conclusion of the RP.
Issues Involved:
1. Eligibility of M/s. Numetal Limited as a Resolution Applicant. 2. Eligibility of M/s. Arcelor Mittal India Private Limited (AM) as a Resolution Applicant. 3. Compliance with Section 29A of the Insolvency and Bankruptcy Code (IBC). 4. Procedural adherence by the Resolution Professional (RP) and Committee of Creditors (CoC). 5. Remedial actions and directions for reconsideration. Detailed Analysis: 1. Eligibility of M/s. Numetal Limited as a Resolution Applicant: - Facts and Arguments: M/s. Numetal Limited sought a declaration of eligibility to submit a Resolution Plan for Essar Steel India Limited (ESSAR) under the IBC. The RP declared Numetal ineligible based on the introduction of Section 29A, which prohibits certain persons from submitting resolution plans. Numetal argued it did not suffer from ineligibility under Section 29A, providing a clause-wise analysis to support its claim. - RP's Decision: The RP found Numetal ineligible under Section 29A(c) and (h) due to its connection with Ravi Ruia, who was deemed to be acting in concert with Rewant Ruia, a shareholder of Numetal. Ravi Ruia was a promoter of an entity classified as an NPA and had executed guarantees in favor of creditors. - Tribunal's Observation: The Tribunal noted that the RP acted prudently based on legal opinions and found no patent illegality in the RP's decision. However, it emphasized that the CoC should have considered the Resolution Plan and provided an opportunity to cure the ineligibility under Section 29A(c). 2. Eligibility of M/s. Arcelor Mittal India Private Limited (AM) as a Resolution Applicant: - Facts and Arguments: AM challenged the RP's decision declaring it ineligible under Section 29A(c) due to its connection with Uttam Galva and KSS Petron, both classified as NPAs. AM argued that it had divested its shareholding in Uttam Galva before submitting the Resolution Plan and should not be disqualified. - RP's Decision: The RP found AM ineligible as AM Netherlands, a connected person, was a promoter of Uttam Galva, and LN Mittal had control over KSS Petron, both classified as NPAs. The RP relied on legal opinions that divesting shareholding did not remove the disqualification unless overdue amounts were paid. - Tribunal's Observation: The Tribunal agreed with the RP's determination of ineligibility but highlighted the procedural lapse by the CoC in not providing an opportunity to cure the ineligibility under Section 29A(c). 3. Compliance with Section 29A of the Insolvency and Bankruptcy Code (IBC): - Section 29A(c): Prohibits persons with NPAs for more than a year from submitting a Resolution Plan unless overdue amounts are paid before submission. - Tribunal's Interpretation: The Tribunal emphasized the need to follow the statutory provisions of Section 29A(c) and the proviso to Section 30(4), which allows curing the ineligibility by paying overdue amounts within 30 days. 4. Procedural Adherence by the Resolution Professional (RP) and Committee of Creditors (CoC): - Tribunal's Findings: The Tribunal found that the RP and CoC did not follow the mandatory provisions of Section 30(3) and (4) of the IBC. The RP should have presented the Resolution Plans to the CoC along with comments on eligibility and allowed an opportunity to cure ineligibility under Section 29A(c). 5. Remedial Actions and Directions for Reconsideration: - Tribunal's Order: The Tribunal remanded the matter back to the RP and CoC for reconsideration. It directed the RP to present all Resolution Plans to the CoC and follow the provisions of Section 29A(c) read with Section 30(4). The CoC was instructed to provide an opportunity to cure ineligibility by paying overdue amounts within 30 days. - Exclusion of Time: The Tribunal excluded the period from the date of filing the application (20.03.2018) to the date of pronouncement of the order from the CIRP timeline, in line with the decision of the NCLAT in Quantum Ltd. v. Indus Finance Corpn. Ltd. Conclusion: The Tribunal's judgment emphasized the importance of adhering to statutory provisions and procedural fairness in the insolvency resolution process. Both M/s. Numetal Limited and AM were given an opportunity to cure their ineligibility under Section 29A(c) by paying overdue amounts, ensuring a fair and transparent process in the best interest of the Corporate Debtor.
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