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TMI Blog2022 (8) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi Branch-VI in I.A. No. 4116(ND) of 2021 in CP(IB) No. 2260(ND) of 2019 dated 14th December, 2021, the Petitioner therein filed the present Appeal under Section 61 of Insolvency and Bankruptcy Code, 2016 (in short IBC) challenging the order referred above, whereby the application filed by the Applicant was dismissed on the ground that he is disqualified to submit a Compromise or arrangement as he is one of the Directors of company of Corporate Debtor and the Applicant, being a related person. 2. The Appellant is an independent Director of both the Companies i.e., Corporate Debtor and the Compromise or Arrangement Applicant. The Corporate Debtor Company was incorporated on 19.08.1983 and it was classified as Non-Government Company, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, as defined under Section 149(2) of the Companies Act, 2013 is not disqualified and therefore the order is ex-facie erroneous and requested to pass appropriate orders. 5. Both the Counsel for the Appellant and Respondent filed their respective Written Submissions in detail reiterating the contentions raised in the Appeal. The main contention in Written Submission of both Counsel is that the Adjudicating Authority misinterpreted Section 29(j)(ii) of IBC in conjunction with Independent Director and Promotor as defined in Section 149(6) and Section 2(69) of the Companies Act so also amended Regulation 2B of (Liquidation Process) Regulation, its date of amendment and the judgment of Hon'ble Supreme Court in Arcelor Mittal India Private Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualified to apply for Compromise and Arrangement, therefore the principle laid down in Arun Kumar Jagatramka is not applicable. 9. The disqualification attached to Interim Resolution Professional under Section 29A is as follows: 29A. Person not eligible to be resolution applicant. --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-- ....... (j) has a connected person not eligible under clauses (a) to (i) Provided that nothing in clause (iii) of Explanation I shall apply to a resolution applicant where such applicant is a financial entity and is not a related party of the corporate debtor: Provided further that the expression related p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, its holding, subsidiary or associate company during the two immediately preceding financial years or during the current financial year: (e) who, neither himself nor any of his relatives i. holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed; ii. is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of- (A) a firm of auditors or company secretaries in practice or cost auditors of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of a corporate debtor would ordinarily vest in a Board of Directors, and would include, in accord with the definitions of "manager", "managing director" and "Officer" in Sections 2(53). 2(54) and 2(59) respectively of the Companies Act, 2013, the persons mentioned therein. "The expression "control' is therefore defined in two parts. The first part refers to de jure control, which includes the right to appoint a majority of the directors of a company. The second part refers to de facto control. So long as a person or persons acting in concert, directly or indirectly, can positively influence, in any manner, management or policy decisions, they could be said to be "in control". A management decision is a decision to be taken as to ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion process under Chapter-2 (by virtue of Section 29A of IBC) permeates the liquidation process under Chapter-3 of Section 35(i)(f). 15. That being the position, there can be no doubt that the proviso to Regulation 2B of Liquidation Process Regulation, a person who is ineligible under Section 29A of IBC would not be permitted to propose a Compromise or Arrangement under Section 230 of the Companies Act, 2013. At the end of the judgment, the Hon'ble Supreme Court concluded that the disqualification placed by the Parliament in Section 29A and 35(i)(f) of IBC must also attach itself to Scheme of Compromise and Arrangement under Section 230 of the Companies Act, and when the Company is undergoing liquidation under the auspicious of IBC. As suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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