Date of eligibility under Section 29A

The exemption under Section 240A of IBC is not applicable to Section 29A(b) of IBC | MSME Promoters are exempted only from clauses (c) and (h) of Section 29A of IBC and other eligibility criteria as stipulated under section 29A will be applicable – Namdev Hindurao Patil Vs. Virendra Kumar Jain, Liquidator, Warana Dairy and Agro Industries Ltd. and Ors. – NCLAT New Delhi

In this important case, Hon’ble NCLAT interpreted Section 29A read with Section 240A that:

(i) In a way, Section 29A intends to give protection to the genuine creditors of the Corporate Debtor by preventing unscrupulous persons from rewarding themselves at the expenses of the creditors and undermine the process and object of the Code.
(ii) The Promoters of MSME are exempted only from clauses (c) and (h) of the Section 29A of the Code and other eligibility criteria as stipulated under section 29A of the Code will be applicable i.e., Section 29A(b) is not carved out.
(iii) The CoC has full powers to decide regarding approval or non-approval of the Resolution Plan. The CoC is also duty bound to consider the eligibility or ineligibility of the Resolution Applicant under section 29A of the Code.
(iv) The ineligibility for submission of the Resolution Plan, would be determinate w.r.t date on which the Resolution Applicant submits his Plan.

The exemption under Section 240A of IBC is not applicable to Section 29A(b) of IBC | MSME Promoters are exempted only from clauses (c) and (h) of Section 29A of IBC and other eligibility criteria as stipulated under section 29A will be applicable – Namdev Hindurao Patil Vs. Virendra Kumar Jain, Liquidator, Warana Dairy and Agro Industries Ltd. and Ors. – NCLAT New Delhi Read Post »

Section 29A(c) of IBC does, not only disqualify, those who were in management and control of Corporate Debtor at the time when its account was declared NPA, but also disqualifies those, who were in management and control of Corporate Debtor and in close proximity of time, before submission of Resolution Plan, who failed to clear the debts of Corporate Debtor – Navayuga Engineering Company Ltd. Vs. Mr. Umesh Garg RP of Athena Demwe Power Ltd. and Ors. – NCLAT New Delhi

Hon’ble NCLAT holds that:

(i) The submission of the Appellant that since the Appellant was not in control and management of the Corporate Debtor admittedly on 31.05.2013, when the Corporate Debtor’s account declared as NPA, he cannot be held to be ineligible under Section 29A, cannot be accepted. The relevant date for examining the ineligibility is the date of submission of Resolution Plan.
(ii) Section 29A(c) does, not only disqualify, those who were in management and control of the Corporate Debtor at the time when its account was declared NPA, but also disqualifies those, who were in management and control of the Corporate Debtor and in close proximity of time, before submission of Resolution Plan, who failed to clear the debts of the Corporate Debtor.

Section 29A(c) of IBC does, not only disqualify, those who were in management and control of Corporate Debtor at the time when its account was declared NPA, but also disqualifies those, who were in management and control of Corporate Debtor and in close proximity of time, before submission of Resolution Plan, who failed to clear the debts of Corporate Debtor – Navayuga Engineering Company Ltd. Vs. Mr. Umesh Garg RP of Athena Demwe Power Ltd. and Ors. – NCLAT New Delhi Read Post »

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 »

The trigger point of Section 29A of IBC is the date when Resolution Plan was actually submitted by Resolution Applicant to CoC – Navayuga Engineering Company Ltd. Vs. Mr. Umesh Garg, RP of Athena Demwe Power Ltd. – NCLT New Delhi Bench Court-II

The Adjudicating Authority held that in view of the Judgement of the Hon’ble Apex Court in Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta & Ors. [2018] ibclaw.in 31 SC, it can be inferred that the amendment in Section 29(A)(c) i.e., “at the time of submission of the resolution plan” was clarificatory in nature. Hence, the trigger point of Section 29A is the date when the Resolution Plan was actually submitted by the Resolution Applicant to the CoC. In view of the above and therefore, the date of transfer of shares by the Applicant/NECL in Regina (RIPL) during the period when Section 29A of IBC, 2016 was not notified, will/does not create an escape route for the Applicant, since the date on which the Resolution plan was actually submitted by the Applicant/NECL to the CoC i.e., on 04.06.2018, the Section 29A of IBC, 2016 was in force.

The trigger point of Section 29A of IBC is the date when Resolution Plan was actually submitted by Resolution Applicant to CoC – Navayuga Engineering Company Ltd. Vs. Mr. Umesh Garg, RP of Athena Demwe Power Ltd. – NCLT New Delhi Bench Court-II Read Post »

A purposive interpretation of section 29A of IBC also permeates the provisions of section 35(1)(f) of the IBC and, therefore, a similar prohibition is applicable to a successful auction purchaser so that backdoor entry of erstwhile management is not permissible – Kanti Mohan Rustagi Vs. Redbrick Consulting Pvt. Ltd. – NCLAT New Delhi

NCLAT held that in the judgment in Bank of Baroda v. MBL Infrastructures Ltd., the Hon’ble Supreme Court has held that a ‘purposive interpretation’ of section 29-A is required when the primary aim is to restart the corporate debtor, which is also the case in the present appeal since the corporate debtor is being sold as a ‘going concern’. This judgment, in addition, also clarifies that the management which has ran the company aground, because of which the company has gone into insolvency resolution/liquidation, cannot be allowed to return in a new avatar as a resolution applicant. This judgment also lays down that the erstwhile promoter of a corporate debtor has no vested right to bid for the property of the corporate debtor in liquidation. Such a purposive interpretation of section 29-A also permeates the provisions of section 35 (1)(f) of the IBC and, therefore, a similar prohibition is applicable to a successful auction purchaser so that backdoor entry of erstwhile management is not permissible.

It also held that the successful auction purchaser Redbrick Consulting Pvt. Ltd. did not produce any Udyam Registration Certificate when the e-auction of the corporate debtor as a ‘going concern’ took place on 16.6.2021. The notification dated 26.6.2020 of the Ministry of Micro, Small and Medium Enterprise was in existence on the date of e-auction, and therefore, it was incumbent upon the successful auction purchaser Redbrick Consulting Pvt. Ltd. to have obtained and submitted such a certificate to the liquidator to claim benefit under section 240-A.

A purposive interpretation of section 29A of IBC also permeates the provisions of section 35(1)(f) of the IBC and, therefore, a similar prohibition is applicable to a successful auction purchaser so that backdoor entry of erstwhile management is not permissible – Kanti Mohan Rustagi Vs. Redbrick Consulting Pvt. Ltd. – NCLAT New Delhi Read Post »

Date of eligibility under Section 29A of IBC should be the date on which all plans are finally considered by the CoC before it is put to vote in terms of regulation 39 of the CIRP Regulations – Avantha Holdings Ltd. and another Vs. Abhilash Lall, RP of Jhabua Power Ltd. & others – NCLT Kolkata Bench

In this landmark judgment, the Adjudicating Authority held that in dealing with a provision such as section 29A, it is not the literal interpretation that is preferred, but rather a purposive interpretation, whereby the provisions can be looked at in the context of the entire statute, which should be preferred. This is especially and expressly held to be so in the case of interpretation of section 29A. The words, “at the time of submission of the resolution plan,” occurring in section 29A(c) of the Code, should really be read as, “at the time of submission of the relevant resolution plan.”. the crucial date of eligibility should be the date on which all plans are finally considered by the CoC before it is put to vote in terms of regulation 39 of the CIRP Regulations. Therefore, the gate-pass theory advanced during the course of oral arguments, which adopts a mechanical check-box approach, is rejected.
It also held that it does not really matter if a single resolution applicant submits plans any number of times, and also whether it is really a revision or a fresh plan. It does not make any material difference at all.

Date of eligibility under Section 29A of IBC should be the date on which all plans are finally considered by the CoC before it is put to vote in terms of regulation 39 of the CIRP Regulations – Avantha Holdings Ltd. and another Vs. Abhilash Lall, RP of Jhabua Power Ltd. & others – NCLT Kolkata Bench Read Post »

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