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TMI Blog2018 (11) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... . Shantanu Chaturvedi, Advocates for Committee of Creditors, Mr. Nitish Massey and Mr. Abhishek, Advocates for Orissa Metaliks Pvt. Ltd JUDGMENT BANSI LAL BHAT, J.- The Appellant - 'SREI Infrastructure Finance Limited', one of the 'Financial Creditors' of Respondent No. 1 - 'M/s Aadhunik Alloys and Power Ltd.' (hereinafter referred to as 'Corporate Debtor') is aggrieved of order dated 26th April, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, whereby and where under the Adjudicating Authority declined to pass an order of restraint upon the Respondents from continuing with the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor, negotiating with any other bidder and/or approving any Resolution Plan till the pendency of application being CA(IB) No. 377/KB/2018 arising out of CP(IB)No.387/KB/2017. The impugned order has been assailed on the grounds set out in the memorandum of appeal. 2. For better understanding of the controversy, it would be appropriate to trace the genesis thereof by wading through the factual matrix, which is reproduced hereunder:- Somewhere in 2017, 'S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Professional obtained legal opinion and having regard for the order dated 16.11.2017 passed by the Adjudicating Authority (National Company Law Tribunal) Hyderabad Bench in 'SREI Infrastructure Finance Ltd. Vs. Canara Bank & Ors.' held the Appellant ineligible. Resolution Professional placed the matter before the CoC, which took a decision to negotiate with the H2 bidder only. Negotiations with the H2 bidder were underway when the Appellant questioned the decision of Resolution Professional and CoC in rejecting the Appellant as a Resolution Applicant by filing CA(IB) No. 377/KB/2018. The Adjudicating Authority passed an order dated 07.05.2017 directing the CoC to consider the question of eligibility of the Appellant under Section 29A independently. In pursuance thereto CoC looked into the aspect of eligibility of the Appellant and was of the view that the Appellant was at that moment ineligible. Meanwhile the Appellant filed an appeal before this Appellate Tribunal wherein, in terms of interim order dated 09.05.2018 this Appellate Tribunal directed the CoC to decide as to which resolution plan will be accepted and keep the said resolution plan in a sealed cover so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T) (Insolvency) Nos.316 & 317 of 2017 was whether the Appellant was a 'related party' of DCHL by virtue of holding 24.6% shareholding in DCHL and the question has been answered in negative by this Appellate Tribunal. It was immaterial that Respondent No. 9 was not a party in Company Appeal (AT) (Insolvency) Nos.316 & 317 of 2017 and the finding recorded by this Appellate Tribunal that the Appellant was not a 'related party' of DCHL would be binding. He would further submit that the Respondent No. 9 is estopped from contending that the decision of 20th July, 2018 is not relevant as it has accepted in its affidavit that such decision is relevant and would determine the instant appeal. It is further submitted that the membership is determined on the basis of entry in the register of members and the mere fact that the Appellant had asserted itself as a shareholder of the DCHL will make no difference as there is no estoppel against statute. 5. The Resolution Professional, in its additional affidavit dated 01.08.2018, has taken the stand that in view of order of this Appellate Tribunal dated 20.07.2018 in DCHL matter the Appellant is now eligible under Section 29A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent appeal and status of Appellant SREI was not the question involved in DCHL matter. It is contended that the Appellant does not qualify as an eligible Resolution Applicant as it holds approximately 24% equity shares in Deccan which makes SREI a 'connected person' of Deccan and at the time of submission of resolution plan account of Deccan had been classified as NPA since more than one year before. It is lastly contended that Respondent No. 9 is the Successful Resolution Applicant with its resolution plan having been approved by CoC with 100% vote and its bid is Rs. 326 Crores as compared to Appellants bid of Rs. 300 Crore and the negotiation has already been closed. 8. Heard learned counsel for the parties and perused the record. Section 29A of the I&B Code, introduced by Act 8 of 2018 with retrospective effect from 23.11.2017 deals with persons not eligible to be Resolution Applicant. It reads as under: "29A. A person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person - (a) is an undischarged insolvent; (b) is a wilful defaulter in accordance with the guidelines of the Reserve Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (B) an asset reconstruction company registered with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; or (C) an Alternate Investment Fund registered with the Securities and Exchange Board of India." 9. This Appellate Tribunal had an occasion to consider the ambit and scope of Section 29A of the I&B Code in 'Numetal Ltd. v. Satish Kumar Gupta & Ors.' Company Appeal (AT) (Insolvency) No. 169 of 2018 decided on 7th September, 2018. It observed as follows: "41. The substantive provision of Section 29A of the 'I&B Code' suggests that not only a person is ineligible to submit a 'Resolution Plan', but also a person with any other person acting jointly or in concert with such person, if attracts any one or other ineligibility clause mentioned in clauses (a) to (i) is also ineligible. In terms of clause (j) of Section 29A, if the 'connected person' is not eligible under clauses (a) to (i), then also the person who submits the 'Resolution Plan' is not eligible. 42. Section 29A must be interpreted in light of the mischief it sought to curtail. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; **** **** 117. Admittedly, 'AM Netherlands' is related party of 'AM India Ltd.'. 'AM Netherlands' was the promoter of 'Uttam Galva' on the date when the 'Uttam Galva' classified as NPA in accordance with the guidelines of Reserve Bank of India and a period of one year has elapsed from the date of such classification, at the time of commencement of 'Corporate Insolvency Resolution Process' of the 'Corporate Debtor'. 118. Once the stigma of "classification of the account as NPA" has been labelled on the promoter of the 'Uttam Galva', even after sale of shares by 'AM Netherlands' it ceased to be a member or promoter of the 'Uttam Galva', but stigma as was attached with it will continue for the purpose of ineligibility under clause (c) of Section 29A, till payment of all overdue amount with interest and charges relating to NPA account of the 'Uttam Galva' is paid." 10. Adverting to the factual matrix of the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cover. It further emerges from record that in pursuance of directions of this Appellate Tribunal the CoC voted upon the BPSL resolution plan and the same was approved by 100% voting. Resolution Professional placed the BPSL resolution plan as approved by CoC before the Adjudicating Authority. Same was done in pursuance of interim directions passed by this Appellate Tribunal. The Adjudicating Authority was permitted to consider the same for approval subject to the outcome of the appeal. The Resolution Professional appears to have approached the Adjudicating Authority for approval of the BPSL Resolution Plan. The matter is said to be pending consideration before the Adjudicating Authority. 11. Whether the judgment rendered by this Appellate Tribunal on 20.07.2018 in the matter of 'SREI Infrastructure Finance Ltd. v. Canara Bank & Ors.', Company Appeal (AT) (Insolvency) No. 316 & 317 of 2018 overturning the finding of Adjudicating Authority (National Company Law Tribunal), Hyderabad Bench with regard to Appellants ineligibility on the ground of being a related party of DCHL would operate as res judicata is the primary question for consideration. 12. As has been noticed else ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tially emerged as H1 relegating BPSL to second slot was stripped of H1 status at the instance of BPSL, which alleged ineligibility of Appellant on the ground of the Appellant holding more than 24% of shares in DCHL which had been declared NPA thereby bringing the Appellant within the ambit of a 'related party' of DCHL. It appears that the allegation of ineligibility of the Appellant relating to its capacity as a 'related party' of DCHL emanated from BPSL on the strength of order dated 16th November, 2017 passed by Adjudicating Authority, Hyderabad Bench in the matter of 'SREI Infrastructure Finance Ltd. Vs. Canara Bank and Ors.', which turned tables on the Appellant forcing its ouster from the Resolution Process of the Corporate Debtor. Admittedly, the aforesaid order passed by Adjudicating Authority, Hyderabad Bench has been set aside in appeal by this Appellate Tribunal. It is therefore a question of vital importance to determine whether the allegation of ineligibility of the Appellant under Section 29A of I&B Code founded on the edifice of finding in regard to its being a related party of DCHL stands effaced on account of setting aside of the order of Adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Finance Ltd. v. Canara Bank and Ors.' in which it was held that the Appellant could not be treated to be a 'related party' in relation to DCHL. However, the fact remains that the issue of Appellant being in control of DCHL by virtue of holding more than 20 per cent shares and thereby attracting ineligibility as a 'related party' was involved in DCHL matter. Determination of the question as to whether the Appellant held 24.6% shareholding in DCHL at the relevant time thereby attracting ineligibility in terms of provisions of Section 29A of I&B Code is relevant notwithstanding the fact that R-9 was not a party to the DCHL matter. The finding recorded in DCHL matter in regard to status of Appellant as a 'related party' qua DCHL stands dislodged in appeal. The edifice upon which rested the plea of R-9 in regard to alleged ineligibility of Appellant stands demolished. It is not in controversy that the judgment rendered by this Appellate Tribunal in appeal stands unassailed and has attained finality. In view of the same the finding in appeal that the Appellant was not a related party of DCHL would be binding though it may liberally not fall within the conto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon by the Committee of Creditors. The Appellant came to be held as ineligible on the strength of order passed by Adjudicating Authority (National Company Law Tribunal) Hyderabad Bench on 16.11.2017 paving way for approval of Resolution Plan submitted by R-9 who figured as H-2 Bidder. Since the allegation in regard to ineligibility of the Appellant was founded upon the order passed by Adjudicating Authority, Hyderabad Bench in DCHL matter which has since been reversed by this Appellate Tribunal, it would not be open to R-9 to insist on fresh consideration in regard to the issue of ineligibility of Appellant, which was based solely on order passed in DCHL matter. Corporate Insolvency Resolution Process being a time bound exercise, would not allow such indulgence. 17. The legal impediment in the form of ineligibility alleged against the Appellant having been removed by process of law, the BPSL Resolution Plan pending approval before the Adjudicating Authority under Section 31(1) of the I&B Code no more survives for consideration. The Resolution Professional shall now be required to place the Resolution Plan submitted by the Appellant and approved by the CoC before the Adjudicating A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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