NCLAT Allows Resolution Plan Approval, Finds No Disqualification Under Section 29A of IBC

The NCLAT set aside the rejection of the application seeking approval of the Resolution Plan, holding that the appellant was not disqualified under Section 29A of the IBC. The tribunal found no credible evidence that the appellant's companies were non-compliant or that the appellant was a disqualified director. Allegations under clauses (c) to (e) and (j) of Section 29A were rejected. The respondent was found to have misled the Adjudicating Authority and lacked credibility. The Resolution Plan had been approved by the CoC with 100% voting share. The matter was remanded to the NCLT to hear the approval of the plan on merits. The appeal was allowed.

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ISSUES:

Whether the Successful Resolution Applicant (SRA) is disqualified under Section 29A(e) and (j) of the Insolvency and Bankruptcy Code (IBC) due to the involvement of a "connected person" disqualified as a director under the Companies Act, 2013.Whether the disqualification under Section 29A(e) arises from the striking off of companies associated with the connected person under Section 164(2)(b) of the Companies Act, 2013.Whether the SRA is disqualified under Section 29A(c) of the IBC on account of having an account classified as a Non-Performing Asset (NPA) at the time of submission of the resolution plan.Whether the connected person, allegedly controlling or managing the SRA, falls within the ambit of Section 29A(j) of the IBC.Whether the observations or allegations regarding ownership or control of related entities by proxies of the connected person can be considered without conclusive evidence.

RULINGS / HOLDINGS:

The SRA is not disqualified under Section 29A(e) and (j) of the IBC as the connected person's companies were struck off on applications under Section 248(2) of the Companies Act, 2013, and not due to non-compliance under Section 164(2)(b); moreover, the connected person's Director Identification Number (DIN) status is "ACTIVE."The disqualification under Section 29A(e) cannot be premised solely on the striking off of companies when such striking off was voluntary and compliant with statutory procedures, and no evidence was placed on record showing the connected person as disqualified as per the Registrar of Companies.The SRA is not disqualified under Section 29A(c) as there was no account classified as NPA at the time of submission of the resolution plan, and the entities alleged to be NPAs were no longer related to the SRA at the relevant time.Section 29A(j) applies only if the connected person is ineligible under clauses (a) to (i); since disqualification under other clauses failed, Section 29A(j) is not attracted.The mere mention of the connected person's expertise in the resolution plan does not establish control or management over the SRA; the role is advisory, not managerial.Prima facie allegations or observations by investigative agencies or courts without conclusive evidence cannot be used to disqualify the SRA.The objections raised by the respondent are devoid of merit, and the impugned order disallowing approval of the resolution plan is set aside.

RATIONALE:

The Court applied Section 29A of the IBC, which enumerates persons not eligible to submit a resolution plan, including disqualifications under the Companies Act, 2013, and the concept of "connected person."Section 164(2)(a) and (b) of the Companies Act disqualify directors of companies failing to file financial statements or repay deposits; however, voluntary striking off under Section 248(2) does not trigger disqualification.Precedent from the Supreme Court clarified that unless a director is specifically disqualified by competent authority, an "active" DIN status precludes disqualification under Section 164(2)(b).The Court emphasized the requirement of concrete evidence to establish control or management by the connected person and rejected assumptions based on advisory references in the resolution plan.Regarding Section 29A(c), the Court required proof that the account was classified as NPA at the time of submission and that one year had elapsed before commencement of CIRP; absence of such proof negated disqualification.The Court noted the adverse conduct and questionable credibility of the objecting party, impacting the weight of their objections.The decision reflects a strict adherence to statutory interpretation and evidentiary requirements to prevent unwarranted disqualification of resolution applicants.

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