Resolution plan approval challenged over bidder's alleged s.29A(g) ineligibility; disqualification assessed at submission, remand ordered.

The dominant issue was whether the resolution plan, approved by the CoC, was liable to be rejected for alleged ineligibility of the successful resolution applicant under s.29A(g) IBC. Applying SC authority, the Appellate Tribunal held that ineligibility must be assessed at the time of submission of the resolution plan; contemporaneous certificates issued by the CA and the resolution professional showed that the applicant was never disqualified to submit the plan. Consequently, the finding of the Adjudicating Authority treating the plan as non-compliant with s.29A(g) was set aside, and the matter was remanded for fresh consideration of the plan within four weeks.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the resolution plan could be rejected as non-compliant with Section 29A(g) on the ground that deposit/recovery of an amount in relation to an application under Section 43 amounted to admission of a preferential transaction, even though no adjudicatory order had been passed holding such preferential transaction under the Code.

(ii) At what point of time the eligibility/disqualification under Section 29A(g) is to be assessed for a successful resolution applicant, and whether the material on record established ineligibility at that stage.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Rejection of the plan under Section 29A(g) without an order holding preferential transaction

Legal framework (as applied by the Court): The Court proceeded on the basis that for Section 29A(g) to operate, there must be a preferential transaction (or other specified transaction) "in respect of which an order has been made by the Adjudicating Authority under this Code". The Court treated the existence of such an order as a necessary condition for invoking Section 29A(g).

Interpretation and reasoning: The Court found that the impugned reasoning-treating deposit of the amount claimed in the Section 43 application as an "admission" of preferential transaction and therefore dispensing with any "formal order"-was not sustainable. The Court emphasised that, on the record, there was no order by the Adjudicating Authority holding that a preferential transaction existed so as to trigger Section 29A(g). The Court also noted the material showing that the sum in question had been repaid prior to submission of the plan, as recorded in an earlier order referred to in the proceedings.

Conclusion: The finding that the plan was hit by Section 29A(g) was set aside, as the condition of an adjudicatory order under the Code establishing the preferential transaction was not met on the facts noted by the Court.

Issue (ii): Timing of assessment of Section 29A(g) eligibility and evidentiary basis for ineligibility

Legal framework (as applied by the Court): The Court held that eligibility/disqualification of the successful resolution applicant is to be assessed at the time of submission of the resolution plan. The Court applied this timing principle while examining whether Section 29A(g) disqualified the applicant.

Interpretation and reasoning: The Court relied on the contemporaneous compliance material placed on record: (a) a certificate referred to from the chartered accountant appointed in the process, (b) the applicant's affidavit/undertaking asserting no ineligibility under Section 29A(g), and (c) the resolution professional's certification after searching the relevant portal, coupled with the disclosure that the Section 43 application had been disposed of with recovery/deposit and that the amount stood in the corporate debtor's CIRP account for the benefit of creditors. On this basis, the Court concluded that the record did not support disqualification at the plan-submission stage, and that the absence of an order determining a preferential transaction further negated Section 29A(g) ineligibility.

Conclusion: The Court held that the plan could not be rejected on Section 29A(g) ineligibility on the material before it, set aside the contrary finding, and directed that the plan be considered afresh by the Adjudicating Authority in light of these conclusions within a stipulated timeframe.

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