TaxTMI 
TaxTMI 
2026 (6) TMI 318
X X X X Extracts X X X X
X X X X Extracts X X X X
....Adv., Ms. Mishra Divya Santosh, Adv., Mr. Sumesh Dhawan, Adv., Mr. Ankit Singal, Adv., Ms. Shruti Munjal, AOR, Ms. Kriti Bhatia, Adv., Ms. Kavya Tekriwal, Adv., Mr. Brijesh Kumar Tamber, AOR, Mr. Vinay Singh Bist, Adv., Mr. Prateek Kushwaha, Adv., Ms. Arani Mukherjee, Adv., Mr. Yashu Rustagi, Adv., Mr. Sahas Bhasin, Adv. ORDER 1. Since the issues involved in both the captioned appeals are the same, the parties are also the same and the appeals arise from a single corporate insolvency resolution proceeding, those were taken up for hearing analogously and are being disposed of by this common judgment and order. 2. These appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016 (for short, "the IBC") seek to challenge the following judgments passed by the National Company Law Appellate Tribunal (NCLAT) :- i. Judgment and Order dated July 25, 2025 ('First Impugned Order') passed in Company Appeal (AT) (Ins.) No. 859 of 2025 ('Appeal') limited to the extent whereby the NCLAT held the Appellant to be ineligible under Section 29A of IBC and directed for continuation of the Corporate Insolvency Resolution Process by issuance of a fresh Form-G. ii. Judg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s.) No. 859 of 2025, the sole issue was with respect to Myotic's locus. On this issue, the NCLAT by way of the first impugned order decided against Myotic. With the aforesaid conclusion, the appeal stood concluded and nothing further therein remained to be adjudicated. 11. Despite coming to the aforesaid conclusion and dismissing the appeal, the NCLAT in the first impugned order went ahead and held the appellant also to be ineligible under Section 29A of IBC. 12. Since the only two remaining Prospective Resolution Applicants being Myotic and appellant were held to be ineligible, thus, the NCLAT directed for continuation of CIRP from the stage of issuance of a fresh Form-G. 13. Being aggrieved, the appellant preferred an appeal against the first impugned order to the extent it held the appellant to be ineligible under Section 29A and directed for continuation of CIRP by issuance of fresh Form-G. This Court by order dated 04.08.2025 permitted the appellant to approach the NCLAT to point out the errors in the first impugned order, more particularly in paras 105-106 respectively. 14. The operative portion of the order dated 04.08.2025 reads thus:- '2. Today, the en....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a person to take part in the CIRP of the Corporate Debtor. 4. 06.05.2024 Appellant submitted its Expression of Interest ('EOI') along with an undertaking expressly stating that the appellant is not ineligible under Section 29A of IBC. 5. 09.05.2024 A Consortium Agreement was executed between Myotic & Fortune to form a Consortium for participating in the CIRP of the Corporate Debtor. 6. 20.05.2024 Final List of the Prospective Resolution Applicants was issued. Appellant was included in the Final List of Prospective Resolution Applicants. No objection was raised by any stakeholder regarding eligibility of the appellant. 7. 21.06.2024 Appellant submitted its affidavit under Section 29A of the IBC. 8. 28.06.2024 'Plan Submission Date' The appellant submitted their Resolution Plan. 9. 16.08.2024 CoC in its 47th meeting decided to conduct challenge mechanism process amongst the Prospective Resolution Applicants for the CIRP of the Corporate Debtor. 10. 19.08.2024 Before conducting the challenge mechanism process, AHSK & Co. who are Chartered Accountants was appointed by the RP to conduct checks in relation to Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P sent the reply of the appellant to Priyanka Sharma & Associates ('PSA'), a Chartered Accountant Firm to give their final opinion on the eligibility of appellant under section 29A. PSA gave its final report opining the appellant to be ineligible under Section 29A. 20. 03.03.2025 RP thereafter sent the final report of PSA to a Senior Advocate for his legal opinion. The Senior Advocate after perusing all the documents opined the appellant to be eligible under Section 29A. 21. 06.03.2025 'CoC Holding Appellant Eligible' CoC unanimously declared the appellant to be eligible under Section 29A of IBC. 22. 07.03.2025 'Withdrawal by Fortune from Consortium' Letter/Email was sent by Fortune to RP categorically stating that Fortune had withdrawn themselves as the member of the consortium and their participation in the CIRP shall be deemed as withdrawn. 23. 10.03.2025 Application being IA 1240/ND/2025 was filed by Myotic in its individual capacity praying for setting aside the CoC's decision of 06.03.2025 declaring appellant to be ineligible under Section 29A of IBC. 24. 17.03.2025 The NCLT after hearing the parties in IA 1240/ND/2025, directed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....order to the extent it declared the appellant to be ineligible under Section 29A of IBC and directed continuation of CIRP of the Corporate Debtor by issuance of a fresh Form-G. This Court permitted appellant to approach NCLAT to point out the errors in the first impugned order The operative portion of the order dated 04.08.2025 reads as thus: '2. Today, the entire debate before us was on Section 29A of the Insolvency and Bankruptcy Code,2016 (for short "the IBC, 2016"). 3. According to the learned counsel appearing for the appellant, the findings recorded in paragraphs 105 and 106 respectively are incorrect and contrary to the records available. 4. If that be so, the appellant should go before the NCLAT and point out the factual errors to the Appellate Tribunal. 5. Since, this has something to do with factual errors, the bar of review should not come in the way of the NCLAT. 6. At this stage, Mr. Mukul Rohtagi and Mr. C. A. Sundaram, the learned counsel appearing for the respondents vehemently submitted that in no manner the findings recorded in the two paragraphs, referred to above, could be termed as perverse or contrary to the record.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... regard to the finalisation of EOIs till the receipt of the resolution plan, however, the resolution plan(s), if any, is received, shall not be opened and placed before the CoC without any further direction of this Tribunal.' 38. 12.03.2026 'Second Impugned Order' NCLAT dismissed I.A. 4810 of 2025 seeking recall of the impugned order and held the appellant to be ineligible under Section 29A (c) and (j) of IBC. 20. In such circumstances referred to above, the appellant is before us with the present two appeals against the order dated 25.07.2025 and 12.03.2026 respectively. ANALYSIS:- 21. Having heard the learned senior counsel appearing for the parties and having gone through the materials on record, the following question falls for our consideration:- "Whether the NCLAT erred in holding the appellant to be ineligible under Section 29A(c) and 29A(j) of the IBC?" 22. Section 29A(c) reads as under:- "29A. Person not eligible to be resolution applicant. --A person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person-- (c) at the time of submission of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....clauses (a) to (i) Explanation. I -- For the purposes of this clause, the expression connected person means-- (i) any person who is the promoter or in the management or control of the resolution applicant; or (ii) any person who shall be the promoter or in management or control of the business of the corporate debtor during the implementation of the resolution plan; or (iii) the holding company, subsidiary company, associate company or related party of a person referred to in clauses (i) and (ii): Provided that nothing in clause (iii) of Explanation I shall apply to a resolution applicant where such applicant is a financial entity and is not a related party of the corporate debtor: Provided further that the expression related party shall not include a financial entity, regulated by a financial sector regulator, if it is a financial creditor of the corporate debtor and is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares or completion of such transactions as may be prescribed, prior to the insolvency commencement date; ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....its objection by stating: '. . . Myotic Trading has therefore no objection if the observations contained in the judgment dated 25.7.2025 holding Cosmic CRF Ltd. to be ineligible under Section 29A of IBC and the direction relating to CIRP to proceed from the stage of issuance of a fresh Form-G are modified/set aside. ' 29. Thus, there is no party in the present appeal who is opposing the prayers of the appellant. Eligibility of the appellant under Section 29A(c) of IBC 30. The NCLAT has held the appellant to be ineligible under Section 29A(c) for the following reasons:- REASON 1: i. The appellant has been held to be ineligible as on 28.06.2024 (the date when the appellant submitted its R Plan) as there was shortfall/haircut suffered by financial creditors with respect to another company, Cosmic Ferro Alloys Ltd ('CFAL'). ii. The connected person of the appellant i.e. Aditya Vikram Birla (Managing Director of the appellant) was a shareholder of CFAL when CFAL was declared as an NPA (on 09.12.2016) and underwent CIRP (on 16.01.2018). iii. The father of Aditya Vikram Birla, i.e. Ravi Birla, was the promoter and shareholder of CFAL w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed below:- "46. According to us, it is clear that the opening words of Section 29-A furnish a clue as to the time at which clause (c) is to operate. The opening words of Section 29-A state: "a person shall not be eligible to submit a resolution plan...". It is clear therefore that the stage of ineligibility attaches when the resolution plan is submitted by a resolution applicant. The contrary view expressed by Shri Rohatgi is obviously incorrect, as the date of commencement of the corporate insolvency resolution process is only relevant for the purpose of calculating whether one year has lapsed from the date of classification of a person as a non-performing asset. Further, the expression used is "has", which as Dr Singhvi has correctly argued, is in praesenti. This is to be contrasted with the expression "has been", which is used in clauses (d) and (g), which refers to an anterior point of time. Consequently, the amendment of 2018 introducing the words "at the time of submission of the resolution plan" is clarificatory, as this was always the correct interpretation as to the point of time at which the disqualification in clause (c) of Section 29-A will attach. In fact, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 11.10.2018 and neither Aditya Vikram Birla is in management and control of CFAL, thus, the applicant is eligible under Section 29A(c). Whether the NCLAT proceeded on a wrong premise in as much as Aditya Vikram Birla was never in the management or control of CFAL 42. The appellant's promoter is Aditya Vikram Birla. He had a miniscule holding in CFAL but did not hold any post as a Director or a Promoter. The percentage of shareholding of Aditya Vikram Birla in CFAL was 0.09%. It was his father Ravi Birla who was the promoter of CFAL. 43. In Swiss Ribbons Private Limited and Anr. v. Union of India and Ors., reported in (2019) 4 SCC 17, this Court held that a mere familial relationship would not render a person ineligible unless there was actual involvement. There is no material on the record to show that Ravi Birla is in any manner involved in the management of Cosmic CRF. The relevant quotation from Swiss Ribbons (supra) is extracted below:- "109. We are of the view that persons who act jointly or in concert with others are connected with the business activity of the resolution applicant. Similarly, all the categories of persons mentioned in Section 5(24-A) show ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntrol and the management vested with the new company that took over CFAL. 46. It appears that after approval of the Resolution Plan of CFAL way back in 2018, the entire management, control and shareholding vested with the QVC Consortium. 47. The salient features of the Resolution Plan of CFAL by Consortium of United Tradeco FZC and QVC Exports Pvt. Ltd. are as follows:- i. Financial Debt of Secured Financial Creditors of Rs. 176.32 crores resolved at Rs. 91.69 crores as per the Resolution Plan. ii. The remaining dues of the Financial Creditors would stand extinguished. iii. Account of CFAL was upgraded to Standard Category from NPA. iv. The old shareholding would stand extinguished and vesting of entire shareholding in the new management. v. Old directors would retire and new directors would be appointed and the entire management would vest in the QVC consortium. vi. The Resolution Plan of CFAL was approved way back on 11.10.2018. Thus, after approval of the Resolution Plan, the account of CFAL stood upgraded to Standard category from NPA. The relevant portion is quoted hereunder:- 'Specific Order to the Secured F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the first proviso of Section 29A(c) has held that Aditya Vikram Birla must first pay off the outstanding debt of CFAL which was classified as NPA in order to become eligible under Section 29A(c). 51. The first proviso to Section 29A(c) reads as follows:- "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"; 52. As stated above, there were no dues in praesenti. This is because CFAL stood fully resolved on 11.10.2018 (6 years prior to the submission of Resolution Plan by the appellant) with a plan approval and a new management took over that company. 53. All parties are bound by the terms of the plan and there are no outstanding dues or claims remaining in terms of Section 31 of the IBC, 2016. Since all remaining dues stand extinguished and the company operates on a clean slate, there is no question of such unpaid dues being 'resurrected' for the purposes of gauging eligibility in terms of Section 29A. 54. The NCLAT could be said to have misinterpreted the judgment of ArcelorMit....