29A (e)

Resolution Applicant(RA) is not eligible to submit Resolution Plan where RoC published a list prior to submission of Resolution Plan and disqualified from being Directors, Resolution Applicant has submitted plan during the disqualification and High Court quashed the list after submission of the plan – Mr. Rabindra Kumar Mintri IRP of MSA Developers Pvt. Ltd. – NCLT New Delhi Bench Court-VI

In this case, a list of disqualified Directors was published on 15.09.2017 by RoC by which SRA was disqualified from being Directors from 01.11.2016 to 31.10.2021. The SRA submitted the Resolution Plan on 20.03.2021. However, RoC list was quashed by Hon’ble Delhi High Court by order dated 29.09.2021.
NCLT New Delhi Bench Court-VI held that:
(i) The list was quashed by the Hon’ble Delhi High Court only after the SRA had submitted the Resolution Plan.
(ii) On the date of the submission of the Resolution Plan, the SRA was disqualified to act as Director and hence not eligible to submit a Resolution Plan under section 29A of the IBC 2016.
(iii) The duty of the IRP is not limited to obtaining an undertaking that SRA is eligible to submit a Resolution Plan under section 29A of the Code, however a basic verification was in order.
(vi) The Resolution Plan and the SRA cannot be treated as distinct from each other and must be dealt with in conjunction.
(vii)Rejects the Resolution Plan. The IRP may conduct meeting of the CoC and can decide the further course of action in the CIRP of the Corporate Debtor.
NCLT also held that the SRA has neither been convicted for a period of 2 years, nor is the Negotiable Instrument Act, 1881 mentioned under the 12th Schedule. Hence, the said conviction could not be a disqualification under section 29A of IBC 2016.

Resolution Applicant(RA) is not eligible to submit Resolution Plan where RoC published a list prior to submission of Resolution Plan and disqualified from being Directors, Resolution Applicant has submitted plan during the disqualification and High Court quashed the list after submission of the plan – Mr. Rabindra Kumar Mintri IRP of MSA Developers Pvt. Ltd. – NCLT New Delhi Bench Court-VI Read Post »

Former Promotor/Shareholder/Director of a Corporate Debtor resigned before filing of CIRP application u/s 10 of IBC and became SRA, Resolution Professional has the responsibility to conduct Section 29A due diligence, taking an affidavit for eligibility u/s 29A will not suffice – Vishram Narayan Panchpor RP of Blue Frog Media Pvt. Ltd. – NCLT Mumbai Bench

In this case, Successful Resolution Applicant(SRA) was a director of the company and resigned as a director of the company on 01.03.2018 and immediately within few months a section 10 petition was filed.

NCLT Mumbai Bench held that:
(i) This is nothing but misuse of the provisions of the Code. The SRA after contributing as a director in the mismanagement of the company is now coming forth as a Resolution Applicant, trying to gain a backdoor entry into the company.
(ii) The Resolution Professional has the responsibility to conduct Section 29A due diligence. A prospective Resolution Applicant submitting an affidavit stating that he/she is eligible under Section 29A to submit resolution plan will not suffice. Adequate due diligence on the prospective Resolution Applicants and its connected persons needs to be conducted effectively and within the requisite timeline to identify ineligibility, if any. The Resolution Professional should seek clarifications or additional information or document from the prospective Resolution Applicants, if needed for conducting the due diligence.
(iii) Section 29A in its entirety not only restricts promoters but also the people related/connected with the promoters. It is obvious that the intention behind inserting Section 29A is to restrict those persons from submitting a resolution plan who could have an adverse effect on the entire corporate insolvency resolution process.
(iv) The SRA is not eligible to submit a Resolution Plan as he was a former promotor/director of the company and has contributed to the downfall of the company.

Former Promotor/Shareholder/Director of a Corporate Debtor resigned before filing of CIRP application u/s 10 of IBC and became SRA, Resolution Professional has the responsibility to conduct Section 29A due diligence, taking an affidavit for eligibility u/s 29A will not suffice – Vishram Narayan Panchpor RP of Blue Frog Media Pvt. Ltd. – NCLT Mumbai Bench Read Post »

CoC has the power to consider the eligibility/ineligibility of the Resolution Applicant whether they are eligible/ineligible under Section 29A(e) of the Code – Everest Organics Ltd. Vs. Leesa Lifesciences Pvt. Ltd., Represented by its RP Mr. Jagadees Kumar Morri – NCLAT Chennai

NCLAT holds that the Code and the Regulations empowers the CoC approving the Resolution Plan and also empowers that it shall not approve a Resolution Plan where the Resolution Applicant is ineligible under Section 29A. In this case, the Adjudicating Authority directed the COC to consider whether the 3rd Respondent is really ineligible under Section 29A(e) of the IBC and therefore directed the COC, which has the power to approve the Resolution Plan and also consider the Resolution Applicant’s ineligibility under Section 29A. In accordance with the above Provisions of Law and the Regulations made thereunder, the COC has the power to consider the eligibility/ineligibility of the Resolution Applicant whether they are eligible/ineligible under Section 29A(e) of the Code. The stand of the 3rd Respondent is that the Resolution Professional did not afford any opportunity to cure the defect and Suo moto rejected on the ground of ineligibility which is mere technicality. The COC has power to take a decision with regard to approval of the Resolution Plan. Further in accordance with the Regulations, the Committee has power to evaluate the Resolution Plans received by the Resolution Professional. As per CIRP Regulation 39(4), the COC has power to approve the plan and after approving the Plan by the Committee the Resolution Professional shall submit to the Adjudicating Authority. Therefore, this Tribunal is of the view that the COC has power to decide and approve the Resolution Plan of the Resolution Applicants. Further, the COC also can consider the eligibility/ineligibility of the Resolution Applicants under Section 29(A)(e) of the Code. This Tribunal in unequivocal terms states that the order passed by the Adjudicating Authority has no legal infirmity or illegality.

CoC has the power to consider the eligibility/ineligibility of the Resolution Applicant whether they are eligible/ineligible under Section 29A(e) of the Code – Everest Organics Ltd. Vs. Leesa Lifesciences Pvt. Ltd., Represented by its RP Mr. Jagadees Kumar Morri – NCLAT Chennai Read Post »

If the Corporate Debtor is an MSME it is not necessary for the Promoters to compete with other Resolution Applicants to regain the control of the Corporate Debtor – Mr. C. Raja John Vs. Mr. R. Raghavendran RP of Springfield Shelters Pvt. Ltd. – NCLAT Chennai

In this case, Resolution Professional rejected the plan of the promoter of the Corporate Debtor(MSME) that the Appellant does not meet the eligibility norm as per Section 25(2)(h) of Code, prescribing the Net Worth of Rs.2 Crores by the COC and DIN of the Appellant is under default and not eligible as per Section 29A(e) of the Code, 2016. The AA upheld the view of the RP.
NCLAT set aside the AA’s order and held that in any event, it is unequivocal that the Corporate Debtor is an MSME and it is not necessary for the Promoters to compete with other Resolution Applicants to regain the control of the Corporate Debtor. Further, this Tribunal, keeping in view of the object of the Code that the Maximization of the Value of the Assets of Corporate Debtor is to be kept in mind in achieving its object. To give an opportunity to regain the control of the Corporate Debtor, the Management/Promoters/Erstwhile Directors of the Corporate Debtor being an MSME, not necessary to compete with other Resolution Applicants.

If the Corporate Debtor is an MSME it is not necessary for the Promoters to compete with other Resolution Applicants to regain the control of the Corporate Debtor – Mr. C. Raja John Vs. Mr. R. Raghavendran RP of Springfield Shelters Pvt. Ltd. – NCLAT Chennai Read Post »

The Promoter, if ineligible u/s 29A cannot make an application for Compromise & Arrangement u/s 230 of the Companies Act, 2013 – Arun Kumar Jagatramka Vs. Jindal Steel and Power Ltd. & Anr – Supreme Court

Hon’ble Supreme Court holds that the IBC has made a provision for ineligibility under Section 29A which operates during the course of the CIRP. A similar provision is engrafted in Section 35(1)(f) which forms a part of the liquidation provisions contained in Chapter III as well. In the context of the statutory linkage provided by the provisions of Section 230 of the Act of 2013 with Chapter III of the IBC, where a scheme is proposed of a company which is in liquidation under the IBC, it would be far-fetched to hold that the ineligibilities which attach under Section 35(1)(f) read with Section 29A would not apply when Section 230 is sought to be invoked. Such an interpretation would result in defeating the provisions of the IBC and must be eschewed.

The Promoter, if ineligible u/s 29A cannot make an application for Compromise & Arrangement u/s 230 of the Companies Act, 2013 – Arun Kumar Jagatramka Vs. Jindal Steel and Power Ltd. & Anr – Supreme Court Read Post »

M/s J.R. Agro Industries (P) Ltd. is disqualified under clause (e) read with clause (j) of Section 29A on the ground that Y.K. Jhunjhunwala, who is ‘connected person’ of M/s J.R. Agro Industries (P) Ltd. is disqualified to act as Director – J.R. Agro Industries Pvt. Ltd. Vs. Resolution Professional Swadisht Oils Pvt. Ltd. – NCLAT New Delhi

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M/s J.R. Agro Industries (P) Ltd. is disqualified under clause (e) read with clause (j) of Section 29A on the ground that Y.K. Jhunjhunwala, who is ‘connected person’ of M/s J.R. Agro Industries (P) Ltd. is disqualified to act as Director – J.R. Agro Industries Pvt. Ltd. Vs. Resolution Professional Swadisht Oils Pvt. Ltd. – NCLAT New Delhi Read Post »

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