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Synopsis

The National Company Law Appellate Tribunal recently ruled that an ex-promoter or director of a corporate debtor, who resigned before the commencement of the Corporate Insolvency Resolution Process under Section 10, is eligible to submit a resolution plan under Section 29A of the Insolvency and Bankruptcy Code (IBC) 2016.

“Ineligibility is being held only on the ground that Respondent No.2 was promoter of the Corporate Debtor till 2018 when he resigned. The view taken by the Adjudicating Authority is not as per the true and correct interpretation of Section 29A. Section 29A does not make per se promoters and directors ineligible to submit a plan unless they are ineligible under clauses (a) to (g). Since in the present case, it is not the case that any of the clauses (a) to (g) are attracted on Respondent No.2, the mere fact that Respondent No.2 was promoter and director shall not make him ineligible to submit a Resolution Plan,” the order reads.

The NCLAT bench in Delhi, consisting of Chairperson Justice Ashok Bhushan, Technical Member Barun Mitra, and Technical Member Arun Baroka was hearing an appeal challenging the decision of the NCLT Mumbai.

The NCLT Mumbai had rejected a Resolution Plan that had been approved by the Committee of Creditors (CoC).

The NCLT Mumbai had admitted a petition under Section 10 of the IBC 2016 against the corporate debtor on May 19, 2021. The ex-director of the corporate debtor submitted a resolution plan, which was approved by the CoC on November 8, 2021, with 91.86% votes.

However, the NCLT Mumbai rejected the resolution plan, citing that its submission by the ex-director could have an adverse effect on the entire Corporate Insolvency Resolution Process (CIRP).

According to the eligibility criteria outlined in Section 29A, an ex-promoter or director is generally deemed ineligible to submit a resolution plan before the Committee of Creditors (CoC).

The counsel representing the Resolution Professional argued that the Successful Resolution Applicant, in this case, did not fall under any of the clauses that render promoters or ex-management ineligible.

The counsel emphasized that Section 29A does not automatically disqualify all promoters and directors but instead renders them ineligible only if they meet certain criteria outlined in its clauses.

Additionally, he pointed out that in the current case, the ex-director had resigned from the company and was not in control of the company when the Corporate Insolvency Resolution Process (CIRP) was initiated.

Consequently, the NCLAT set aside the NCLT's order rejecting the resolution plan submitted by the ex-director in light of the specific circumstances surrounding the case.

Case title: Vishram Narayan Panchpor vs CoC & Anr