FC, who was aware of ineligibility of a resolution applicant, had right to appeal against AA’s order

Case Details: Bipin Sharma v. Earth Infrastructure Ltd. - [2023] 147 taxmann.com 179 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson, Dr Alok Srivastava & Mrs Shreesha Merla, Technical Member
  • Kumar Mihir, Adv. for the Appellant.
  • Ashish Makhija, Mrs Akanksha Vasudeva, Abhishek Anand & Karan Kohli, Advs. for the Respondent.

Facts of the Case

In the present case, the CIRP was initiated against respondent no. 1 – the corporate debtor on 06.06.2018. The respondent no. 2 (RUDC) through its director ‘R’ submitted its resolution plan for CIRP of the corporate debtor. However, the Adjudicating Authority (NCLT) by impugned order approved the said resolution plan.

On appeal, the appellant – the financial creditor, alleged that successful resolution applicant (RUDC) was not eligible under section 29A of IBC to submit a resolution plan for the corporate debtor since ‘R’, was also the director of company ‘Z’ whose account was declared NPA on 31.01.2018. Hence, the condition of section 29-A (j) read with Explanation – I was infringed.

Further, it was also noted from the record of the Ministry of Corporate Affairs (MCA) that ‘R’ ceased to be a director of ‘Z’ on 02.12.2009 whereas the account of ‘Z’ was declared NPA on 31.01.2018. Moreover, CIRP was initiated against the corporate debtor on 06.06.2018, i.e., within a period of one year from the declaration of NPA of ‘Z’.

The respondent also raised the issue that the appellant who claimed to be a financial creditor had no locus standi to file the appeal and underlying application before the NCLT.

NCLAT Held

The NCLAT observed that since ‘R’ ceased to a director of ‘Z’ on 02.12.2009, her entitlement to submit a resolution plan in CIRP of the corporate debtor was not hit by section 29A wherein a period of 1 year should not have lapsed from the date of declaration of NPA of a company who was in management and control of successful resolution applicant (SRA).

It was also observed by the NCLAT that since appellant became aware of ineligibility of one of resolution applicants submitting plan for insolvency resolution of corporate debtor, he acquired right under section 60(5) to raise issue before Adjudicating Authority and also right to file appeal as he found a material irregularity in exercise of powers by RP during CIRP.

The NCLAT held that since respondent No. 2 working through ‘R’ was not ineligible to submit a resolution plan of the corporate debtor and moreover resolution plan had been approved by financial creditors in class voting through their authorized representatives, impugned order passed by the NCLT was not to be interfered with.

Accordingly, the appeal was to be dismissed.

List of Cases Reviewed

• • Order passed by NCLT – New Delhi in Deepak Khanna v. Earth Infrastructure Ltd. [I.A. No. 1663 of 2020 in CP No. (IB) – 401(ND)/2017 order dated 7-12-2020] (para 20) affirmed.
  • Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd. [2021] 125 taxmann.com 360/166 SCL 678 (SC)/2021 SCC online SC 253, (para 19) followed.

List of Cases Referred to

• • Arcelormittal India (P.) Ltd. v. Satish Kumar Gupta [2018] 98 taxmann.com 99/150 SCL 354 (SC)/[2019] 2 SCC 1 (para 7)
  • Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd. [2021] 125 taxmann.com 360/166 SCL 678 (SC)/2021 SCC Online SC 253 (para 7)
  • Maharashtra Seamless Ltd. v. Padmanabhan Venkatesh [2020] 113 taxmann.com 421/158 SCL 567 (SC)/[2020] 11 SCC 467 (para 7)
  • Kalpraj Dharamshi v. Kotak Investment Advisors Ltd. [2021] 125 taxmann.com 194/166 SCL 583 (SC)/2021 SCC Online SC 204 (para 7)
  • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC)/[2019] 4 SCC 17 (para 9)
  • Anuj Jain v. Axis Bank Ltd. [2020] 114 taxmann.com 656 (SC) (para 19).