Former promoters/directors not automatically disqualified from submitting resolution plans under Section 29A unless specific clauses apply

NCLAT Principal Bench held that former promoters/directors are not per se disqualified from submitting resolution plans under Section 29A of the Insolvency and Bankruptcy Code. The tribunal ruled that mere status as a former promoter/director does not create automatic ineligibility unless specific disqualification clauses (a) to (g) under Section 29A apply. The adjudicating authority erred in rejecting the resolution plan solely based on the applicant's past role as promoter/director until 2018. The SC precedent in Hari Babu Thota case confirmed no blanket disqualification exists. Appeal was allowed, and the rejection order was set aside.

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Issues Involved:

1. Eligibility of the Successful Resolution Applicant under Section 29A of the Insolvency and Bankruptcy Code (IBC).
2. Interpretation and application of Section 29A of the IBC.
3. Approval of the Resolution Plan by the Committee of Creditors (CoC).

Summary:

1. Eligibility of the Successful Resolution Applicant under Section 29A of the IBC:

The primary issue in this appeal is the eligibility of the Successful Resolution Applicant, Mr. Mahesh Mathai, under Section 29A of the IBC. The Adjudicating Authority (National Company Law Tribunal) Mumbai Bench-I rejected IA No. 2828 of 2021, filed by the Resolution Professional for approval of the Resolution Plan submitted by Mr. Mahesh Mathai, on the ground that he is not eligible to submit a Resolution Plan under Section 29A of the Code. Mr. Mahesh Mathai was a former director of the Corporate Debtor, M/s. Blue Frog Media Private Limited, who resigned on 01.03.2018.

2. Interpretation and application of Section 29A of the IBC:

The Adjudicating Authority held that Section 29A restricts those persons from submitting a Resolution Plan who could have an adverse effect on the entire Corporate Insolvency Resolution Process (CIRP). It was observed that Mr. Mahesh, being a former promoter/director of the Company, is not eligible to submit a Resolution Plan. However, the Appellate Tribunal noted that Section 29A does not make all promoters and directors ineligible ipso facto. Ineligibility is attached only if they fall under any of the specific clauses (a) to (g) of Section 29A. The Tribunal emphasized that the eligibility should be assessed based on the date of submission of the Resolution Plan and found that none of the conditions under Section 29A were attracted in this case.

3. Approval of the Resolution Plan by the Committee of Creditors (CoC):

The Resolution Plan submitted by Mr. Mahesh Mathai was approved by the CoC with a 91.86% vote share. The Tribunal highlighted that the CoC had not held the Successful Resolution Applicant to be ineligible. The Tribunal also referred to the Hon'ble Supreme Court judgment in "Hari Babu Thota vs. Shree Aashraya Infra-Con Ltd.- 2023 SCC OnLine SC 1642," which clarified that there is no per se disqualification under Section 29A for promoters unless they fall under any specific disqualification clauses.

Conclusion:

The Tribunal concluded that the Adjudicating Authority committed an error in holding that the Respondent No.2 (Mr. Mahesh Mathai) is ineligible to submit a Resolution Plan. The Tribunal set aside the order of the Adjudicating Authority dated 18.08.2023, revived IA No.2828 of 2021, and directed the Adjudicating Authority to hear and decide the application afresh in accordance with the law. The appeal was disposed of accordingly.

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