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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 ..... 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 contours of 'Res Judicata'. 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 so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate 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, 'State Bank of India' filed an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I B Code') being CP (IB) No. 387/KB/2017 against the Corporate Debtor for triggering Corporate Insolvency Resolution Process, which was admitted by the Adjudicating Authority on 03.08.2017. The Interim Resolution Professional made p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otiate 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 that it is not given any effect without prior permission of this Appellate Tribunal. Besides, the Adjudicating Authority was also restrained from passing any order of liquidation. Pursuant to such direction, the CoC voted upon the BPSL Resolution Plan as amended and same was approved by CoC with 100% voting. This development was brought to the notice of this Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded 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 Code to submit a resolution plan for the Corporate Debtor. 6. The Committee of Creditors has taken the stand that pursuant to the order of this Appellate Tribunal in DCHL matter the Appellant is not a 'related party' of the Deccan Chronicle. It is submitted on behalf of Committee of Creditors that in the event of this appeal being allowed CoC m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eccan 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 ₹ 326 Crores as compared to Appellants bid of ₹ 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 Bank of India issued under the Banking Regulation Act, 1949; (c) has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange 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. The 'Statement of Objects and Reasons' appended to the Insolvency and Bankruptcy Code (Amendment) Bill, 2017 (Bill No. 280 of 2017) in Lok Sabha (ultimately passed as Act 8 of 2018), seeking the above said amendment is as under: 2. The provisions for insolven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 instant case, be it seen that upon evaluation of the financial matrix, feasibility and viability by the Committee of Creditors, the Appellant -'SREI Infrastructure Finance Ltd.' emerged as the highest evaluated Resolution Applicant. However, tables were turned on it when BPSL approached the Adjudicating Authority (National Company Law Tribunal) Kolkata Bench through the medium of CA No. 289 of 2018. During its hearing BPSL submitted representations alleging that the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 elsewhere in this judgment, a person will be ineligible to submit a resolution plan if such person or any other person acting jointly or in concert with such person attracts any of the disqualifications enumerated under clause (a) to (h) of Section 29A. The disqualification, in terms of clause (i) would also be attracted if such person suffers from any disability corresponding to clauses (a) to (h) under any law in a jurisdiction outside India. Clause (j) embraces within its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Adjudicating Authority, Hyderabad Bench. 13. Learned counsel for Respondent No. 9 (BPSL) submits that admission on the part of the Appellant in regard to its status as shareholder of DCHL in its various statutory filings and pleadings coupled with its conversion notice dated 14th December, 2013 operates as an estoppel against the Appellant. He further submits that these equity shares were allotted to the Appellant. Reference is made to the share certificate issued by DCHL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contours of 'Res Judicata'. 16. Next question for consideration is whether the aforesaid finding is a finding on a pure question of law and if so, whether the same is erroneous so as to warrant interference in these appeal proceedings. A bare look at the judgment lays bare that this Appellate Tribunal was of the view that the finding of Resolution Professional and the Adjudicating Authority that the Appellant was a 'related party' in relation to DCHL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Authority for its approval in terms of provisions of Section 30(6) of the Code. The Adjudicating Authority shall accord consideration thereto in accordance with law except for the issue in regard to eligibility of Appellant as a Resolution Applicant which stands settled. 18. The appeal is allowed in the aforesaid terms. Since the extended period of 270 days for conclusion of the Corporate Insolvency Resolution Process has expired on 18th May, 2018, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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