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2022 (6) TMI 282 - Tri - Insolvency and BankruptcyRight to present application for Approval of Resolution Plan - barred under Section 29A(f) of IBC or not - rejection of Resolution Plan in view of the disqualification provided under Section 29-A (f) of the Insolvency and Bankruptcy Code, 2016 - seeking direction to Resolution Professional to place the present Applicant s Resolution Plan for consideration before the Committee of Creditors - locus standi to file the application challenging the eligibility of successful resolution applicant. Whether the Unsuccessful Resolution Applicant is having any locus standi to file the application challenging the eligibility of successful resolution applicant for presenting and approval of the resolution plan? - HELD THAT - It cannot be said that the applicant has no locus standi to challenge the eligibility of the Successful Resolution Applicant for submitting the resolution plan, much less can it be said to be an abuse of the process of law with some vested interest. Whether successful resolution applicant, namely, M/s Aggarsain Spinners Limited, is eligible under Section 29A(f) of the Code as per IA No.348/2021? - HELD THAT - Proviso (1) to Section 30(4) requires that committee of creditors shall not approve a resolution plan where the Resolution Applicant is ineligible under Section 29A of the Code. Before submitting a plan before the committee of creditors, it is also incumbent upon the Resolution Plan to verify whether the Resolution Applicant is eligible under Section 29A of the Code - suffice for this Tribunal to pertinently point out that an ex-facie opinion is to be offered to the committee of creditors by the Resolution Professional that the law was violated. It is also the duty of the Resolution Professional to determine as to whether the eligibility criteria of the Resolution Applicant prescribed in Section 29-A of the Code are satisfied. The Resolution Professional has to consider the objections brought to his notice prior to the submission of the Resolution Plan to the Committee of Creditors . As per Section 30(2) of the Code, the Resolution Professional has to examine each resolution plan received by him to confirm that the resolution plan provides for payment of Insolvency Resolution Process Costs, Payment of Debts of the Operational Creditors, management of the affairs of corporate debtor, the fulfilment and supervision of resolution plan, other requirement as may be specified by the Board and that it does not violate any of the provisions of the law for the time being in force 0 A bare perusal of Section 29A(f) reveals that Resolution Applicant shall not be eligible to submit a resolution plan if it is prohibited by SEBI from trading in securities or accessing the securities markets. Whether an express order of prohibition is required to be passed by SEBI directly or otherwise? - HELD THAT - When SEBI having no restrictions in delegation of its power and functions under Section 11(1) of the SEBI Act, then certainly there was no need to pass any independent order directly by SEBI debarring the resolution applicant from accessing the securities market. More so Section 29A(f) of the Code does not provide for an order to be passed by SEBI prohibiting the resolution applicant from trading in securities or accessing the securities market. Admittedly, no such order was passed by SEBI expressly and it was also not required to be passed directly by SEBI when it has got ample open-ended powers to delegate its regulatory function to any other authority including BSE. Whether the information received from SEBI by a third party under the RTI Act, 2006, filed in IA No.155/2022 is having some bearing upon the eligibility part of the successful resolution applicant? - HELD THAT - While taking into consideration the point of eligibility of Resolution Applicant at the time of submitting the resolution plan, it is evident that no such order was every passed by SEBI at any point of time on the basis of such circulars. The said order could have been passed under the quasi-judicial powers of the SEBI, but so far as regulatory functions of SEBI is concerned, the said power stands delegated to BSE as so clarified by SEBI in its reply to the application under the RTI Act that SEBI by circular dated 01.08.2017, inter alia, states that the concerned stock exchange and depositories shall coordinate with each other and ensure compliance with the circular requirement. Therefore, it can be said that under the quasi-judicial function of SEBI, no such order was passed but under the regulatory functions, this power was delegated to the stock exchange to pass the appropriate order debarring the defaulter/non-compliant of the said circular issued by SEBI. Whether the Resolution Professional has discharged his duty diligently about verifying the eligibility of resolution applicant before submission of resolution plan to committee of creditors for discussion and approval? - HELD THAT - There is no averment and evidence placed on record on behalf of the Resolution Professional that before submitting the resolution plan to committee of creditors for approval, he had verified the antecedents of the resolution applicant from the websites of SEBI and BSE. If SBI has accessed this information from the BSE website, then certainly Resolution Professional could have also done so, if acted diligently. In these circumstances, it can be safely concluded that Resolution Professional has failed to discharge its duties diligently about verifying the eligibility of Resolution Applicant. Whether the matter be referred back to the committee of creditors for determining the question of eligibility or this Bench may decide the eligibility of the Resolution Applicant and reject the resolution plan submitted by the Resolution Applicant being ineligible under Section 29A(f) of the Code? - HELD THAT - From the careful perusal of the finding of the Hon ble NCLAT, this Bench is competent to decide issue of ineligibility of Resolution Applicant at the time of submitting the Resolution Plan under Section 29A(f) of the Code as it has not been decided by the Committee of Creditors when the Resolution Plan was put before it by the Resolution Professional for approval. The Resolution Applicant is declared ineligible under Section 29A(f) of the Code at the time of submission of the resolution plan and resolution plan submitted by Resolution Applicant stands rejected - the matter is referred back to the Committee of Creditors, which is ordered to be reinstated and revived to make another attempt for consideration of other resolution plans in accordance with law - application allowed.
Issues Involved:
1. Locus standi of the unsuccessful resolution applicant. 2. Eligibility of the successful resolution applicant under Section 29A(f) of the Insolvency and Bankruptcy Code, 2016. 3. Impact of information received from SEBI under the RTI Act on the eligibility of the successful resolution applicant. Issue-wise Detailed Analysis: 1. Locus Standi of the Unsuccessful Resolution Applicant: The tribunal addressed the contention that the unsuccessful resolution applicant lacks locus standi to challenge the eligibility of the successful resolution applicant. It was argued that the applicant, being neither a stakeholder nor a creditor, had no vested right to interfere in the approved resolution plan. However, the tribunal found that the applicant's challenge was specific to the eligibility under Section 29A of the Code, not the merits or implementation of the plan. The tribunal concluded that the applicant has locus standi to challenge the eligibility of the successful resolution applicant. 2. Eligibility of the Successful Resolution Applicant under Section 29A(f): The core issue was whether the successful resolution applicant was eligible under Section 29A(f) of the Code, which disqualifies entities prohibited by SEBI from trading in securities or accessing the securities markets. The tribunal examined the relevant SEBI circulars and the regulatory powers under Section 11 of the SEBI Act. It was determined that SEBI had delegated its regulatory functions to the stock exchanges, and the BSE had issued a notice on 28.03.2018 debarring the resolution applicant from accessing the securities market. Despite the resolution applicant's arguments that no direct SEBI order was issued, the tribunal held that the BSE's action under SEBI's delegated authority was sufficient to establish ineligibility. Admissions in the information memorandum and subsequent clarifications by the resolution applicant were deemed insufficient to negate the prohibition. The tribunal concluded that the successful resolution applicant was ineligible under Section 29A(f) at the time of submitting the resolution plan. 3. Impact of Information Received from SEBI under the RTI Act: The tribunal considered the information received from SEBI under the RTI Act, which clarified that SEBI had not directly prohibited or debarred any company or its promoters/directors under the relevant circulars. However, the tribunal found that this information did not affect the eligibility determination, as the prohibition was effectively enforced through BSE's delegated authority. The tribunal reiterated that the eligibility of the resolution applicant must be assessed at the time of plan submission, and the BSE's prohibition was valid and binding. Conclusion: The tribunal declared the successful resolution applicant ineligible under Section 29A(f) of the Code and rejected the resolution plan. To avoid liquidation, the Corporate Insolvency Resolution Process (CIRP) period was extended by 90 days, and the matter was referred back to the Committee of Creditors for consideration of other resolution plans. IA No.348 of 2021 was allowed, and IA No.155 of 2022 was dismissed.
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