TMI Blog2022 (8) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... cess Regulations as amended, to submit Scheme of Compromise and Arrangement. In the judgment of Arun Kumar Jagatramka [ 2021 (3) TMI 611 - SUPREME COURT ], Arcelor Mittal India Private Limited [ 2018 (10) TMI 312 - SUPREME COURT ] was considered only to the extent of intendment of IBC and not for any other principle however concluded that some scheme mentioned in Section 29A of IBC is applicable to Section 35(1)(f) of IBC. The Apex Court went on to consider the disqualification clause under Section 230(1) of the Companies Act, 2013 amended provisions i.e., proviso to the Regulation 2-B- Liquidation Regulation Act. The Apex Court undertook clarificatory exercise and concluded in the judgment that rationale which permeates the resolution process under Chapter-2 (by virtue of Section 29A of IBC) permeates the liquidation process under Chapter-3 of Section 35(i)(f). There can be no doubt that the proviso to Regulation 2B of Liquidation Process Regulation, a person who is ineligible under Section 29A of IBC would not be permitted to propose a Compromise or Arrangement under Section 230 of the Companies Act, 2013. At the end of the judgment, the Hon ble Supreme Court concluded that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiated against this Company. Nobody came forward to submit a resolution plan in pursuance of information memorandum calling for Expression of Interest. As there was no approved Resolution Plan, the Company went into liquidation and in the process, the Appellant submitted a Scheme of Compromise and Arrangement. The same was rejected by the Adjudicating Authority on the ground that he is a related person and disqualified to submit such Scheme of Compromise and Arrangement in view of bar as per Regulation 2B of (Liquidation Process) Regulation and under Section 29(j)(ii) IBC. 3. The finding of the Adjudicating Authority is challenged on the ground that the independent Director is not disqualified either under Section 29A of IBC or in terms of Regulation 2B (Liquidation Process) Regulation, as Corporate Debtor went into liquidation, thereby Judgment in Arun Kumar Jagatramka Vs. Jindal Steel and Power Ltd. Anr. Civil Appeal No. 9664 of 2019 is not applicable but the Adjudicating Authority erroneously and without considering Section 29-A of IBC and Regulation 2B (Liquidation Process) Regulation (as amended) dismissed the Application and thereby the order is liable to be set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sputed by both the Counsel for Appellant and Respondent on the ground that the Independent Director is not disqualified to apply for Compromise and Arrangement, therefore the principle laid down in Arun Kumar Jagatramka is not applicable. 9. The disqualification attached to Interim Resolution Professional under Section 29A is as follows: 29A. Person not eligible to be resolution applicant. --A person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person-- . (j) has a connected person not eligible under clauses (a) to (i) Provided that nothing in clause (iii) of Explanation I shall apply to a resolution applicant where such applicant is a financial entity and is not a related party of the corporate debtor: Provided further that the expression related party shall not include a financial entity, regulated by a financial sector regulator, if it is a financial creditor of the corporate debtor and is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares 12[or completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , of any nonprofit organisation that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent. or more of the total voting power of the company; or (f) who possesses such other qualifications as may be prescribed. 11. Meaning of the word control is defined under the Companies Act and it shall include the right to appoint majority of the Directors or to control the management or policy decision exercisable by a person or person acting individually or in concert directly or indirectly including by virtue of their shareholding or management rights or shareholder s arrangements of voting agreement or any other mean. 12. The Apex Court considering the purport of Section 149(6) and meaning of the word Director in the judgment Arcelor Mittal India Private Limited and in para 45 47 of the Judgment, Court held as follows: The expression management would refer to the de jure management of a corporate debtor. The de jure management of a corporate debtor would ordinarily vest in a Board of Directors, and would include, in accord with the definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on who is ineligible under Section 29A of IBC would not be permitted to propose a Compromise or Arrangement under Section 230 of the Companies Act, 2013. At the end of the judgment, the Hon ble Supreme Court concluded that the disqualification placed by the Parliament in Section 29A and 35(i)(f) of IBC must also attach itself to Scheme of Compromise and Arrangement under Section 230 of the Companies Act, and when the Company is undergoing liquidation under the auspicious of IBC. As such, Regulation 2B of Liquidation Process Regulation, especially, proviso to 2B is also constitutionally valid. 16. Viewed from any angle, principle laid down in Arcelor Mittal India Private Limited Vs. Satish Kumar Gupta Ors. is applicable to the present case, since, the dispute relates to pre-amendment to Regulation 2B of Liquidation Process Regulation and that no disqualification be attached to independent non-executive Director as per Regulation 2-B of Liquidation Process Regulation r/w Section 29-A and 35(1)(f) of IBC to submit Scheme of Compromise and Arrangement. The Appellant being independent non-executive is not disqualified to propose Compromise and Arrangement in the pendency proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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