Appellant Was to Be Allowed to Submit Fresh RP and EoI After BSE Revoked Debarment from Securities Market | SC

Case Details: Aggarsain Spinners Ltd. v. Rajiv Khurana - [2024] 166 taxmann.com 59 (SC)

Judiciary and Counsel Details

• Dr. Dhananjaya Y Chandrachud, CJI & Pamidighantam Sri Narasimha, J.
• Mukul Rohatgi, Puneet Bali, Sr. Advs., Surjeet Bhadu, Cyrus Jal, Advs. & Aditya Soni, AOR for the Petitioner.
• Abhishek Anand, Karan Kohli, Mohak Sharma, Viren Sharma, Nikhil Jain, Sahil Bhatia, Shekhar Raj Sharma, Paras Dutta, Manish Jain, Siddhant Jain, Advs., Mithu Jain, AOR, Jinendra Jain & Abhinav Agrawal, AORs. for the Respondent.

Facts of the Case

In the instant case, the corporate debtor was under Corporate Insolvency Resolution Process (CIRP) and Resolution Professional (RP) was appointed. The RP received several resolution plans, with appellant’s plan ultimately being approved by Committee of Creditors (CoC) with a 92.55 per cent voting share.

Later, the RP filed an application under section 31 of the Insolvency and Bankruptcy Code, 2016, to approve appellant’s resolution plan. However, it was discovered that appellant was ineligible under section 29A(f) because it had been barred by SEBI from securities market at time of plan submission and approval.

The NCLT agreed with RP’s assessment, declaring appellant ineligible and dismissing appellant’s request to clarify SEBI’s position. Consequently, the appellant challenged NCLT’s order.

The NCLAT upheld NCLT’s order on ground that appellant was categorically debarred for reasons that it failed to comply with mandatory direction issued by SEBI in circular dated 10.10.2016 and 01.08.2017 by which appellant was repeatedly cautioned that if one of option was not exercised within time line prescribed, necessary action would be taken as prescribed in clause 6 of circular dated 10.10.2016

Further, NCLAT held that appellant was barred in list of BSE from accessing security market for 10 years and, when resolution plan was submitted on 28.01.2019, appellant was ineligible in view of section 29(A) (f) and, therefore impugned order did not require any interference as there was no merit in instant appeals and hence, same was to be dismissed.

Subsequently, an appeal was preferred before the Supreme Court. It was noted that BSE had revoked its recommendation on restraint status of appellant, as a consequence of which, prohibition on accessing securities market stood lifted. It was further noted that resolution plan submitted by appellant was submitted before NCLT and, no final orders had been passed.

Supreme Court Held

The Supreme Court observed that since BSE lifted restrained status, it would be appropriate to permit appellants to submit a resolution plan and an expression of interest to CoC within thirty days.

The Supreme Court held that the bank guarantees and earnest money which were submitted by the appellant with their resolution plan were to be returned back to appellant, so as to facilitate the submission of a fresh resolution plan together with a fresh bank guarantee.

List of Cases Reviewed

• Aggarsain Spinners Ltd. v. Shreeji Cotfab Ltd.[2024] 166 taxmann.com 44 (NCLAT -New Delhi) (para 15) reversed