TaxTMI 
TaxTMI 
2022 (1) TMI 1504
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....20 Per: Kanthi Narahari Member (T) The present Appeal is filed against the order dated 02.03.2020 in CA No.188 of 2019 in TP No. 41 of 2019 in CP No. 352 of 2018 passed by the Adjudicating Authority (NCLT, Cuttack Bench) whereby the Adjudicating Authority allowed the above CA and approved the Resolution Plan of the 3rd Respondent herein as per Section 31(1) of the I&B Code, 2016. Aggrieved by the same, the Appellant preferred the present Appeal. Appellant's Submissions 1. Mr. Arijit Mazumdar, Learned Counsel appeared for the Appellant submitted the brief facts. 2. The Learned Counsel appearing for the Appellant submitted that the Appellant is a Trust registered under the Indian Trusts Act,1882 and registered as category-II Alternative Investment Fund under the SEBI Regulations, 2016. It is a privately pooled investment vehicle which collects funds from its investors and invest such funds in accordance with the define Investment Policy for the benefit of all its Investors. The investments are made through various schemes floated by the Appellant from the time to time. The IGOF India Growth Opportunity Fund is one of such schemes which is a shareholder of the 2nd Respo....
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....nsfer Agreement. 8. It is submitted that the 3rd Respondent (AMIPL) herein is the Successful Resolution Applicant for Essar Steel India Ltd. and the Resolution Plan of the 3rd Respondent has been approved on 08.03.2019 by the Learned Adjudicating Authority, Ahmedabad. It is submitted that after the Judgment of the Hon'ble Supreme Court in Essar Insolvency matter on 15.11.2019, the 3rd Respondent concluded the complete acquisition of Essar on 16.12.2019 by extinguishing the existing Share Capital of Essar. As per Essar's own statement in the recently filed Financial Statement, the 3rd Respondent in its nominee now hold 100% of its shareholding thus, making it a wholly owned subsidiary of 3rd Respondent (AMIPL). 9. It is submitted that Essar is also a shareholder of 2nd Respondent (OSPIL) the Corporate Debtor holding 30.2% shareholding and the 2nd Respondent being under CIRP is an undischarged insolvent. Therefore, the 3rd Respondent is ineligible to be a Resolution applicant of OSPIL as it is barred under Section 29A (a) read with 29A (j) of the Code read with explanation 1 (iii) thereof thereby making 3rd Respondent a connected person to Essar. 10. It is submitted that the....
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.... to submit the Resolution Plan for 2nd Respondent. 15. In view of the reasons as stated above, the Learned Counsel prayed this Bench to quash and set aside the Impugned Order dated 02.03.2020 passed by the Adjudicating Authority, Cuttack Bench. SUBMISSIONS OF RESPONDENTS 1 AND 4: 16. The Learned Senior Counsel appearing for the Respondent submitted that the CIR process of the Corporate Debtor was initiated pursuant to the Order dated 14.05.2019 passed by the Adjudicating Authority in CP/352/2018. After completion of the process as envisaged under law, in terms of Section 25(2)(h) of the Code after having discussions, held the Resolution Plan submitted by the 3rd Respondent came to be approved by 100% positive vote of COC at its 8th meeting held on 06.12.2019. The Plan provided for payment of 100% of the verified and admitted Principal amount due to each financial Creditor of the Corporate Debtor as admitted by the RP. 17. It is submitted that the Appellant had at no point raised any objection to the approved Resolution Plan before the Learned Adjudicating Authority during the proceedings under Section 31 of the Code. 18. On the point of ineligibility of the 3rd Respo....
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....ol of ESIL to 3rd Respondent (AMIPL) occurred only on 16.12.2019. Therefore, it is submitted that the allegation that the 3rd Respondent was a connected person of Corporate Debtor owing to its purported ownership control of ESIL since 08.03.2019 has no basis. As stated supra, the 3rd Respondent took over the management and control of ESIL on 16.12.2019 whereas the approved Resolution Plan was submitted by the 3rd Respondent in respect of Corporate Debtor on 30.11.2019 and approved by the COC by 100% positive vote on 06.12.2019. Therefore, it is submitted that prior to taking over the ESIL the 3rd Respondent plan was approved. 22. It is submitted that the entire purpose of Section 29A of the Code is to preclude undesirable persons from participating in the resolution process and not to punish bona fide resolution applicants who are genuinely attempting to revive certain Corporate Debtors. It is submitted that keeping in view the text and object of introducing Section 29A within the four corners of the Code, the 3rd Respondent not being an undesirable person who contributed towards the Corporate Debtor would in no manner fall within the ambit of Section 29A of the Code. It is subm....
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....n is towards the full and final satisfaction of such Financial Debt held by ESIL. 28. It is submitted that the provisions of the Code do not mandate that a Resolution Plan is required to provide for return for the equity shareholders of the Corporate Debtor. 29. In view of the reasons as stated above the Learned Counsel prayed this Tribunal to dismiss the Appeal. 3 RD RESPONDENT'S SUBMISSIONS: 30. The Learned Counsel appearing for the 3rd Respondent submitted that the appellant has no loco standi in its capacity as an erstwhile shareholder of Corporate Debtor to intervene in and challenge the Plan. It is a settled law that shareholders have no role to play in either the initiation of the CIRP or in the Resolution Process. Shareholders have no right to take part in the proceedings of the COC. Furthermore, they are ineligible to participate as Resolution Applicants by virtue of the bar under Section 29A of the I&B Code. Further the shareholders are not entitled to receive any payments under Section 30 of the I&B Code. Therefore, the Appellant cannot be considered to be an aggrieved person within the meaning of section 61 and has no loco standi to challenge the Plan. 31....
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....12.2019 when the 3rd Respondent came to acquire 100% shares of ESIL i.e. after the date on which ineligibility attaches. The said fact was admitted by the Appellant also. Therefore, as on the date of submitting the Resolution Plan, the 3rd Respondent was eligible. 36. In view of the reasons as stated above, the Learned Counsel prayed this Bench to dismiss the Appeal. 37. Heard the Learned Counsel appeared for the respective parties, perused the Pleadings and documents filed in their support. After analyzing the pleadings, the issue that arises for consideration is whether the 3rd Respondent is ineligible under Section 29A(a) read with Section 29A(j) of the Code, 2016 read with explanation I (iii) thereof to submit a Resolution Plan or not? 38. Before answering the issue we would like to refer to a few facts. The present Appeal filed challenging the approval of the Resolution Plan of the 3rd Respondent herein in respect of the Corporate Debtor i.e. 2nd Respondent by the Adjudicating Authority vide Order dated 2nd March 2019. The Resolution Professional of the Corporate filed IA/188/2019 before the Adjudicating Authority under Section 30(6) read with Section 31(1) of the I &....
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....gible to submit a Resolution Plan if such person, are any other person acting jointly or in concert with such person. a) Is an undischarged insolvent b) A willful defaulter in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulations Act, 1949 c) at the time of submission of the Resolution Plan has an account or an account of the Corporate Debtor under the management or control of such person or of whom such person is a promoter, classified as nonperforming asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulations Act, 1949 (10 of 1949) or the guidelines of a Financial Sector Regulator issued under any other law for the time being in force and at least a period of one year has lapsed from the date of such classification till the date of commencement of the Corporate Insolvency Resolution Process of the Corporate Debtor Provided that the person shall be eligible to submit a resolution plan if such person makes payment of all overdue amounts with interest thereon and charges relating to non-performing asset accounts before submission of resolution plan. ....
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....n in the Code, did not restrict or bar any person from submitting a resolution plan or participating in the acquisition process of the assets of the company at the time of liquidation. Concerns have been raised that persons who, with their misconduct contributed to defaults of companies or are otherwise undesirable, may misuse this situation due to lack of prohibition or restrictions to participate in the resolution or liquidation process, and gain or regain control of the corporate debtor. This may undermine the processes laid down in the Code as the unscrupulous persons would be seen to be rewarded at the expense of the creditors. In addition, in order to check that the undesirable persons who may have submitted their resolution plans in the absence of such a provision, responsibility is also being entrusted on the committee of creditors, to give a reasonable period to repay overdue amounts and become eligible." 46. From the reading of the above statement and objects by incorporating Section 29A by way of amendment is to preclude undesirable persons from participating in the resolution process. Further the Hon'ble Supreme Court held that the Courts must take recourse to the pu....
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.... the aforesaid fact, the 3rd Respondent was not in the control and management of ESIL until the disposal of the Appeals by the Hon'ble Supreme Court. Therefore, the Appellant cannot be treated or classified as a connected person. Till the time the Appellant finally took the company into its control and management, the company was managed and was under the control of the Resolution Professional of ESIL. 51. As on the date of submission of Resolution Plan to this Corporate Debtor by the 3rd Respondent, the 3rd Respondent was not the shareholder of the Corporate Debtor i.e. OSPIL. Therefore, the stand that it is the connected party is rejected. 52. Further, Section 29A(c) would not be applicable to Resolution Applicants who acquire a Corporate Debtor pursuant to a prior Resolution Plan approved under the Code. Therefore, we hold that the 3rd Respondent is not ineligible for the submission of Resolution Plan as a Successful Resolution Applicant. 53. The other contention of the Appellant is that the ESIL who is a 32% shareholder paid a sum of Rs. 501.01 Crore and the Appellant was not made any payment. It is to state that the ESIL who is a shareholder of the Corporate Debtor an....