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TMI Blog2024 (1) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... esented 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2. The Adjudicating Authority by the impugned order observed that the question to be examined is as to whether Successful Resolution Applicant meets the eligibility criteria under Section 29A. The Adjudicating Authority after considering the submissions of the parties took the view that Section 29A restricts those persons from submitting a Resolution Plan who could have an adverse effect on the entire CIRP. It was held that Mr. Mahesh being a former promoter/director of the Company is not eligible to submit a Resolution Plan. 3. Learned Counsel for the Resolution Professional challenging the order impugned submits that the Adjudicating Authority committed error in holding Successful Resolution Applicant as ineligible whereas promoters/ex management are not ineligible to submit a Resolution Plan unless they are ineligible under any of the clauses as provided in Section 29A. It is submitted that the Successful Resolution Applicant is not covered by any of the clauses under which ineligibility is attached to promoter/ex-management. Section 29A does not make ineligible ipso facto all promoters and directors. Ineligibility is attached if they are ineligible under any of the clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the eligibility has to be looked into on the date when plan was submitted. However, we proceed to examine as to whether ex-promoter/directors are not eligible to submit a Resolution Plan under Section 29A if no disqualification is attached in any of the clauses under Section 29A. 8. Section 29 A of the IBC is as follows:- 29A. Persons 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 (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 (10 of 1949); (c) [at the time of submission of the resolution plan 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 Regulation Act, 1949 (10 of 1949) [or the guidelines of a financial sector regulator issued under any other law for the time being in force,] and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on I;] (f) is prohibited by the Securities and Exchange Board of India from trading in securities or accessing the securities markets; (g) has been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code: [Provided that this clause shall not apply if a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place prior to the acquisition of the corporate debtor by the resolution applicant pursuant to a resolution plan approved under this Code or pursuant to a scheme or plan approved by a financial sector regulator or a court, and such resolution applicant has not otherwise contributed to the preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction;] (h) has executed [a guarantee] in favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or Issue of Security by a Person Resident Outside India) Regulations, 2017 made under the Foreign Exchange Management Act, 1999 (42 of 1999); (d) an asset reconstruction company register with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (e) an Alternate Investment Fund registered with Securities and Exchange Board of India; (f) such categories of persons as may be notified by the Central Government. 9. The Adjudicating Authority in its order has referred to Section 29A (c). Section 29A (c) is attracted when at the time of submission of the plan, the person 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, is classified as non-performing assets. Present is a case where as per submission of the Appellant, no bank is creditor of the Corporate Debtor. Form-H mentions the name of creditors of the Corporate Debtor and all creditors are only individual. Present is not a case even there is any suggestion or material that account of Respondent No.2 or the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Hon ble Supreme Court after considering the ILC Report 2018 and Section 240A laid down following in paragraphs 23 to 25 : - 23. Thus, even on this count, the plan submitted in question will not incur the disqualification. We may also note that the aforesaid intent is reflected in the statutory provision itself that in Section 29A (c) which begins with at the time of submission of the resolution plan . 24. It is also pointed out that even if it was an NPA, the defect can be cured as set out in proviso (1) before submission of the plan, making the submission of the plan the crucial date. 25. We are thus, setting aside the impugned orders of the NCLT dated 28.02.2023 and NCLAT dated 02.06.2023 and allow the appeal leaving parties to bear their own costs. 13. The present is not a case where a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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