2024 (1) TMI 530 - AT - Insolvency and Bankruptcy

Eligibility to submit Resolution Plan - former promotor/director of the company - whether a mere fact that the person submitting a Resolution Plan has been promoter or director makes ineligible to submit a Resolution Plan? - HELD THAT - The Hon ble Supreme Court had occasion to consider Section 29A in reference to promoters of the Corporate Debtor in HARI BABU THOTA VERSUS MR. BISHWAJIT DUBEY, AMICUS CURIAE 2023 (12) TMI 1255 - SUPREME COURT . In the above case, a plan proposed by the promoter was approved by the Committee of Creditors and the application was filed by the Resolution Professional for approval of the plan which was dismissed on the ground that the promoters could not have presented the plan. The Appeal was filed by the Resolution Professional challenging the order of the Adjudicating Authority. One of the questions which was considered in the case was as to whether Resolution Applicant who was promoter was disqualified under Section 29A. The Hon ble Supreme Court in the above case has held that there is no per se disqualification under Section 29A. In the above case, MSME certificate was issued after commencement of the CIRP, hence, Section 240A was not relied by the Adjudicating Authority. The present is not a case where any of the clauses of Section 29A are being pressed for ineligibility of Respondent No.2. Ineligibility is being held only on the ground that Respondent No.2 was promoter of the Corporate Debtor till 2018 when he resigned. The view taken by the Adjudicating Authority is not as per the true and correct interpretation of Section 29A. Section 29A does not make per se promoters and directors ineligible to submit a plan unless they are ineligible under clauses (a) to (g) - Since in the present case, it is not the case that any of the clauses (a) to (g) are attracted on Respondent No.2, the mere fact that Respondent No.2 was promoter and director shall not make him ineligible to submit a Resolution Plan. The Adjudicating Authority committed error in holding that the Respondent No.2 is ineligible to submit a Resolution Plan. The rejection of IA No.2828 of 2021 is thus, unsustainable - Appeal disposed off.

Summary

Issues Involved:

1. Eligibility of the Successful Resolution Applicant under Section 29A of the Insolvency and Bankruptcy Code (IBC).
2. Interpretation and application of Section 29A of the IBC.
3. Approval of the Resolution Plan by the Committee of Creditors (CoC).

Summary:

1. Eligibility of the Successful Resolution Applicant under Section 29A of the IBC:

The primary issue in this appeal is the eligibility of the Successful Resolution Applicant, Mr. Mahesh Mathai, under Section 29A of the IBC. The Adjudicating Authority (National Company Law Tribunal) Mumbai Bench-I rejected IA No. 2828 of 2021, filed by the Resolution Professional for approval of the Resolution Plan submitted by Mr. Mahesh Mathai, on the ground that he is not eligible to submit a Resolution Plan under Section 29A of the Code. Mr. Mahesh Mathai was a former director of the Corporate Debtor, M/s. Blue Frog Media Private Limited, who resigned on 01.03.2018.

2. Interpretation and application of Section 29A of the IBC:

The Adjudicating Authority held that Section 29A restricts those persons from submitting a Resolution Plan who could have an adverse effect on the entire Corporate Insolvency Resolution Process (CIRP). It was observed that Mr. Mahesh, being a former promoter/director of the Company, is not eligible to submit a Resolution Plan. However, the Appellate Tribunal noted that Section 29A does not make all promoters and directors ineligible ipso facto. Ineligibility is attached only if they fall under any of the specific clauses (a) to (g) of Section 29A. The Tribunal emphasized that the eligibility should be assessed based on the date of submission of the Resolution Plan and found that none of the conditions under Section 29A were attracted in this case.

3. Approval of the Resolution Plan by the Committee of Creditors (CoC):

The Resolution Plan submitted by Mr. Mahesh Mathai was approved by the CoC with a 91.86% vote share. The Tribunal highlighted that the CoC had not held the Successful Resolution Applicant to be ineligible. The Tribunal also referred to the Hon'ble Supreme Court judgment in "Hari Babu Thota vs. Shree Aashraya Infra-Con Ltd.- 2023 SCC OnLine SC 1642,"� which clarified that there is no per se disqualification under Section 29A for promoters unless they fall under any specific disqualification clauses.

Conclusion:

The Tribunal concluded that the Adjudicating Authority committed an error in holding that the Respondent No.2 (Mr. Mahesh Mathai) is ineligible to submit a Resolution Plan. The Tribunal set aside the order of the Adjudicating Authority dated 18.08.2023, revived IA No.2828 of 2021, and directed the Adjudicating Authority to hear and decide the application afresh in accordance with the law. The appeal was disposed of accordingly.