The Supreme Court, in its interpretation of Section 240A of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘the Code’), declared that promoters can submit a resolution plan irrespective of obtaining MSME registration post the initiation of the Corporate Insolvency Resolution Process (CIRP).
Brief Facts of the Case:
Shree Aashraya Infra-Con Limited entered CIRP under the Code. The appellant, the Resolution Professional, presented a plan approved by the Committee of Creditors (COC), but the application was dismissed on the grounds that the promoters could not have presented the plan. The appellant argued that this affected his eligibility as a Resolution Professional and sought the court's intervention.
Contentions of the Parties:
The appellant, who was also the Resolution Professional, contended that the National Company Law Tribunal (NCLT) had erroneously dismissed the resolution plan submitted by them. They argued that the NCLT's decision had significant implications for their role and eligibility. The appellant asserted that the promoters were ineligible to submit the plan, and as a consequence, the appellant, as the Resolution Professional, submitted the plan on behalf of the corporate debtor.
The promoters, who were disqualified by the NCLT from submitting the resolution plan, were represented by an Amicus appointed by the court. The main contention from this side was that the disqualification of the promoters was justifiable under Section 29A of the Code. The Respondent's case arguments on upholding the NCLT's decision regarding the ineligibility of the promoters to present the resolution plan.
Observations of the Court:
The Court heard arguments on two aspects:
- whether the resolution applicant was disqualified under Section 29A of the Code, and
- whether the corporate debtor's lack of MSME status at the commencement of CIRP would disqualify the resolution applicant.
The Court examined Section 29A, specifically clauses (c), (g), and (h). It was noted that, in the factual scenario, there was no per se disqualification under Section 29A.
The Court delved into the interpretation of Section 29A(c) and its application to the case. The Court referred to the judgment in Arcelormittal India Private Limited vs. Satish Kumar Gupta & Ors. and stated that ineligibility under Section 29A(c) occurs at the time of submitting the resolution plan. The court also discussed Section 240A, exempting micro, small, and medium enterprises (MSMEs) from certain provisions of Section 29A.
The Court accepted the plea that the crucial date for Section 240A is the date of submitting the resolution plan, not the initiation of CIRP proceedings.
The Decision of the Court:
The Supreme Court set aside the orders of the NCLT and NCLAT, allowing the appeal. As a result, a related application for intervention before the Adjudicating Authority was restored for reconsideration, and any consequential action by the Insolvency and Bankruptcy Board of India against the appellant was deemed not to survive.
Case Title: Hari Babu Thota vs. xyz
Coram: Hon'ble Mr. Justice Sanjay Kishan Kaul and Hon'ble Mr. Justice Sudhanshu Dhulia
Case no.: Civil Appeal No.4422/2023
Citation: 2023 Latest Caselaw 919 SC
Advocates for the Appellant: Mr. Bishwaji Dubey, Ld. Amicus Curiae; Mr. Adhitya Srinivasan, Adv.; Mr. Nikhil Saran, Adv.; Ms. Pritha Srikumar Iyer, AOR; Mr. Arun Srikumar, Adv.; Ms. Neha Mathem, Adv.; Mr. Shubhansh Thakur, Adv.
Advocates for the Respondent: Mr. Praveen Kumar Jha, AOR; Mr. S. Thennavan, Adv.; Mr. Bholle Taguru Phanendra, Adv.; Mr. N. Sakthivel, Adv.; Mr. Chembugari Abheeshna, Adv.; Mr. Sunil Fernandes, Adv.; Mr. Zeeshan Diwan, Adv.; Ms. Priyansha Indira Sharma, Adv.; Mr. Faraz Ahmed, Adv.
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