2025 (8) TMI 336 - AT - IBC

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 ... Rejection of application seeking approval of the Resolution Plan - disqualification of the Appellant as a Successful Resolution Applicant (SRA) in the CIRP of Corporate Debtor - time limitation u/s 29A(e) and (j), IBC - HELD THAT:- The facts as narrated by the Respondent probably are not correct as the Companies aforesaid were struck off on applications by the director(s) of the said company under Section 248(2) of the Companies Act, 2013 seeking its striking off with payment of requisite fee. Such applications are part of the rejoinder of the appellant herein and are annexed at its Pages No.13, 29 and 35 of the paper book. Thus it cannot be said the companies of the appellant were non-compliant of Section 29(A)(e) of the Code. Even otherwise Mr. Anil Gupta’s DIN status is “ACTIVE” since 2006 and he is not a disqualified director of the ROC. No evidence is placed on record by the Respondent qua the status of Mr. Anil Gupta, if he is a disqualified director, as per ROC. Admittedly for invoking Section 29A(c) of IBC, it has to be proved (i) at time of submission of resolution plan, the SRA had an account classified as an NPA; and (ii) one year has lapsed from the date of such classification till the date of commencement of CIRP of CD - On a bare perusal of Section 29A of the Code, more specifically, Clause (j), it is found that this clause debars only such connected person who are not eligible under Clauses (a) to (i) of Section 29A. However, this is not the case here. The argument of the respondent on Clauses (c) to (e) has failed, as discussed above. Hence the exercise of finding if clause (j) is attracted in the facts of this case, even otherwise, is now irrelevant. Respondent No.1 has misled the Ld. Adjudicating Authority on multiple occasions. It has also come to light Respondent No.1 is presently in judicial custody in connection with allegations of financial fraud as brought to the fore by the Appellant. These facts cast serious doubt on his credibility and the bona fides of the objections raised by him. There is no cogent or credible evidence to establish the disqualification of the Appellant under Section 29A of the Code. Furthermore, the Ld. Adjudicating Authority has failed to consider the Resolution Plan was duly approved by the CoC with 100% voting share. The impugned order is thus set aside and hence the Ld. NCLT may now proceed to hear CA No.2145/2023, qua approval of plan on merit - Appeal allowed. 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.