Promoter’s Control Over Subsidiary CD Leads to Ineligibility u/s 29A(c) for Resolution Plan Submission

Case Details: Indian Bank v. Athena Demwe Power Ltd - [2023] 153 taxmann.com 381 (NCLT-New Delhi) (SB)

Judiciary and Counsel Details

• • Bachu Venkat Balaram Das, Judicial Member & L.N. Gupta, Technical Member
  • Saurav Agarwal, Ms Medha Sachdev, S. Jhanwar, Ms Devpriya, Sujoy C. Dutta, NPS Chawla, Brijesh Kumar Tamber, Gargi Tyagi, Advs., Vinay Singh & Yashu Rustagi for the Appearing Parties.

Facts of the Case

In the instant case, the CIRP application filed by the financial creditor against the corporate debtor was admitted. The Resolution Professional (RP) of the corporate debtor invited the submission of resolution plans and disqualified the applicant under section 29A of IBC on the ground that the applicant was a promoter of the corporate debtor and approved the resolution plan submitted by ‘S’.

As a result, the applicant (i.e. unsuccessful resolution applicant) challenged its disqualification and sought direction for RP or CoC to accept the resolution plan submitted by the applicant and declare the applicant as a successful resolution applicant (SRA).

Further, it was submitted that the applicant had been a promoter of the corporate debtor since 2013 because of its shareholding and was in management and control of the corporate debtor through its subsidiary company ‘R’.

It was noted that the applicant was exercising control through its directors of subsidiary and related entities in ‘R’ even on the date of submission of the resolution plan.

NCLT Held

The NCLT held that, on the lifting of the corporate veil, it had no doubt that the applicant was indeed exercising control over ‘R’ through directors of its related/connected companies and was in control of the corporate debtor.

Therefore, no error had been committed by the RP/CoC in holding the applicant as ineligible in terms of section 29A(c) of the IBC to submit a resolution plan.

List of Cases Reviewed

• • Arcelormittal India (P.) Ltd. v. Satish Kumar Gupta [2018] 98 taxmann.com 99/150 SCL 354 (SC) (para 32) followed.

List of Cases Referred to

• • Bipinchandra Parshottamdas Patel v State of Gujarat [2003] 4 SCC 642 (para 6.3)
  • Thampanoor Ravi v. Charupara Ravi, [1999] 8 SCC 74 (para 6.3)
  • Arcelormittal India (P.) Ltd. v. Satish Kumar Gupta [2018] 98 taxmann.com 99/150 SCL 354 (SC) (para 6.10.2).