Resolution applicants barred under Section 29A(c) due to related corporate debtors' unpaid NPAs

The SC held that both resolution applicants were ineligible under Section 29A(c) of the Insolvency and Bankruptcy Code, 2016, as their related corporate debtors had not cleared their NPAs. Section 29A(c) bars persons having "control" over corporate debtors with NPAs from submitting resolution plans, with control encompassing both de jure and de facto positive control. The proviso to Section 29A(c) provides relief only if related corporate debtors clear their NPAs. Exercising powers under Article 142, the SC granted both applicants two weeks to pay off their related corporate debtors' NPAs. If payments are made, they may resubmit resolution plans, and the Committee of Creditors has eight weeks to select the best plan by requisite majority. Failure to accept any plan would result in the corporate debtor's liquidation.

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Issues Involved:
1. Ineligibility of resolution applicants under Section 29A of the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Interpretation and application of Section 29A(c) of the IBC.
3. Consideration of antecedent transactions to determine eligibility under Section 29A.
4. Timelines and procedural aspects of the corporate insolvency resolution process (CIRP).
5. Role and responsibilities of the Resolution Professional and Committee of Creditors.

Detailed Analysis:

1. Ineligibility of Resolution Applicants under Section 29A of the IBC:
The core issue revolves around the ineligibility of resolution applicants, specifically AMIPL and Numetal, to submit resolution plans after the introduction of Section 29A into the IBC. Section 29A disqualifies certain persons from being resolution applicants to prevent those who contributed to the financial distress of the corporate debtor from regaining control.

2. Interpretation and Application of Section 29A(c) of the IBC:
Section 29A(c) disqualifies a person from submitting a resolution plan if they have an account classified as a non-performing asset (NPA) for more than one year before the commencement of the CIRP, unless they clear the overdue amounts before submitting the resolution plan.

- AMIPL's Ineligibility: AMIPL was found ineligible due to its connection with Uttam Galva and KSS Petron. AMNLBV, an L.N. Mittal Group company, was a promoter of Uttam Galva, which had been classified as an NPA. Despite selling its shares in Uttam Galva before submitting the resolution plan, the sale was deemed a device to avoid the ineligibility under Section 29A(c). Similarly, Fraseli, another L.N. Mittal Group company, had control over KSS Petron, which was also an NPA.

- Numetal's Ineligibility: Numetal was found ineligible due to its association with Rewant Ruia, son of Ravi Ruia, a promoter of the corporate debtor ESIL. Despite changes in shareholding and the exit of AEL (Aurora Enterprises Limited), the presence of Rewant Ruia and the financial involvement of AEL indicated that Numetal was attempting to circumvent Section 29A(c).

3. Consideration of Antecedent Transactions to Determine Eligibility:
The court held that antecedent transactions reasonably proximate to the submission of the resolution plan must be scrutinized to prevent circumvention of Section 29A. Both AMIPL and Numetal's transactions were found to be devices to avoid ineligibility under Section 29A(c).

4. Timelines and Procedural Aspects of the CIRP:
The judgment emphasized the importance of adhering to the timelines prescribed under the IBC for completing the CIRP. The maximum period for the CIRP is 270 days, and any delay beyond this period should be avoided to prevent liquidation of the corporate debtor. The court also highlighted the necessity of excluding the time taken in legal proceedings from the 270-day period to avoid corporate death and displacement of employees and workers.

5. Role and Responsibilities of the Resolution Professional and Committee of Creditors:
The Resolution Professional (RP) is responsible for ensuring that resolution plans comply with the provisions of the IBC, including Section 29A. The RP's role is to examine and confirm the completeness of resolution plans before presenting them to the Committee of Creditors (CoC). The CoC, in turn, evaluates the feasibility and viability of the plans and approves them by a requisite majority.

Conclusion:
Both AMIPL and Numetal were found ineligible to submit resolution plans under Section 29A(c) due to their connections with NPAs. The court provided an additional opportunity for both applicants to clear the NPAs within two weeks and resubmit their plans. The CoC was given eight weeks to select the best plan, failing which the corporate debtor would go into liquidation. The judgment underscores the importance of adhering to statutory timelines and the roles of the RP and CoC in the CIRP.

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