Resolution Applicant Eligibility in Corporate Insolvency: former director/ promotor of the corporate debtor

2024 (1) TMI 530 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB

This case revolves around the eligibility of a resolution applicant under Section 29A of the Insolvency and Bankruptcy Code (IBC).

Key Issues and Deliberations:

1. Core Legal Issue: The central issue was whether Mr. Mahesh Mathai, the successful resolution applicant and a former director of Blue Frog Media Pvt. Ltd., was eligible to submit a resolution plan under Section 29A of the IBC.

2. Submissions and Arguments:

   • The appellant (Resolution Professional) challenged the order of the National Company Law Tribunal (NCLT), which had rejected the resolution plan on the grounds of ineligibility under Section 29A.
   • The counsel for the Resolution Professional argued that the NCLT erred in its interpretation of Section 29A, asserting that ex-promoters or management are not per se ineligible unless specified under the clauses of Section 29A.
   • The Committee of Creditors (CoC), having approved the resolution plan, did not find the applicant ineligible.

3. Court's Analysis and Findings:

   • The NCLAT examined whether Mr. Mathai, as a former promoter/director, was ineligible under Section 29A.
   • It was noted that Section 29A does not automatically disqualify all promoters and directors; disqualification applies only if specified under its clauses.
   • The Tribunal referenced the Supreme Court judgment in "Hari Babu Thota vs. Shree Aashraya Infra-Con Ltd.", which clarified that there is no per se disqualification under Section 29A for promoters.
   • The NCLAT found that none of the disqualifying conditions under Section 29A were applicable to Mr. Mathai, particularly Section 29A(c), as there was no evidence that his or the corporate debtor's account was a non-performing asset at the time of submitting the resolution plan.

Conclusion:

The NCLAT set aside the NCLT's order, ruling that Mr. Mahesh Mathai was eligible to submit a resolution plan. This decision underscores the nuanced interpretation of Section 29A of the IBC, emphasizing that former promoters or directors are not automatically disqualified from being resolution applicants. This judgment is significant in the context of corporate insolvency resolutions in India, as it clarifies the eligibility criteria for resolution applicants, ensuring a fair and equitable process for all stakeholders.

Implications:

This ruling has significant implications for the corporate insolvency resolution process in India. It provides clarity on the eligibility criteria for resolution applicants, particularly ex-promoters and directors. This decision could influence future cases where the eligibility of resolution applicants is in question, guiding the NCLT and other stakeholders in their decision-making processes.

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2024 (1) TMI 530 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB