NCLAT Nod To Roma Unicon Designex Consortium As The Successful Resolution Applicant Of Earth Infrastructure Ltd.

The National Company Law Appellate Tribunal ("NCLAT") Principal Bench comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Dr. Alok Srivastava (Technical Member), recently adjudicated an appeal filed by a Financial Creditor in Bipin Sharma v Earth Infrastructure Ltd. & Anr., challenging the eligibility of the Successful Resolution Applicant, Roma Unicon Designex Consortium ("SRA"), under Section 29A(c) of the Insolvency and Bankruptcy Code, 2016 ("IBC"). The NCLAT Bench has declined to intervene in the Resolution Plan of SRA, as the same has been approved by the Committee of Creditors ("CoC") including Financial Creditors in class. The order was passed on 27.04.2022. The appeal was filed by Mr. Bipin Sharma ("Appellant"), one of Financial Creditors of the Earth Infrastructure Ltd. ("Corporate Debtor"), under Section 61 of the IBC against the order dated 07.12.2020 ("Impugned Order") passed by the National Company Law Tribunal, New Delhi ("Adjudicating Authority") in CP No. (IB)-401 (ND)/2017, wherein it had approved the Resolution Plan submitted by the SRA in the Corporate Insolvency Resolution Process ("CIRP") of the Corporate Debtor. Relevant Law "Section 29-A(c): Persons not eligible to be resolution applicant. "(c) at the time of submission of the resolution plan has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949 or the guidelines of a financial sector regulator issued under any other law for the time being in force, and at least a period of one year has lapsed from the date of such classification till the date of commencement of the corporate insolvency resolution process of the corporate debtor: Provided that the person shall be eligible to submit a resolution plan if such person makes payment of all overdue amounts with interest thereon and charges relating to non-performing asset accounts before submission of resolution plan; Provided further that nothing in this clause shall apply to a resolution applicant where such applicant is a financial entity and is not a related party to the corporate debtor. Explanation I– For the purposes of this proviso, 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 or completion of such transactions as may be prescribed, prior to the insolvency commencement date." Contentions Of The Appellant The Appellant submitted that the authorized functionary of the SRA, Mrs. Rashmi Saxena, was a director in a company named Zillion Infra Project Pvt. Ltd. ("Zillion Infra") whose account was declared as Non Performing Asset ("NPA") on 31.01.2018. Thereafter, Mrs. Rashmi Saxena had submitted the Resolution Plan of the Corporate Debtor on behalf of SRA on 31.07.2019 and was therefore ineligible to submit it in terms of Section 29A(c). The Appellant further contended that the condition in Section 29A(c) that "a period of one year has elapsed from the date of such classification till the date of commencement of the CIRP" is a condition not necessarily to be complied. Further, the word 'and' in Section 29-A(c) of IBC should be read as 'or'. The Appellant submitted that the purpose of IBC is rehabilitation of the Corporate Debtor through a financially sound entity, which will not be possible if the Resolution Applicant itself is operating an account which has been declared NPA due to mismanagement of operations. The Appellant claimed locus standi to file the appeal as he is a Financial Creditor who after becoming aware of the ineligibility of the SRA has attained locus standi to file the appeal. Contentions Of Resolution Professional (Respondent No. 1) The Erstwhile Resolution Professional ("Respondent No. 1") argued that the appeal became infructuous as the Resolution Plan stands approved by the Adjudicating Authority and is binding on all the stakeholders. It was further contended that the NCLAT has no power to substitute "and" with "or" in sub-section (c) of Section 29A of IBC in view of Supreme Court judgment in Arcelormittal India Pvt. Ltd. v Satish Kumar Gupta & Ors., (2019) 2 SCC 1. The Respondent No. 1 also relied on the provision of Section 25-A (3A) of the IBC which does not allow an individual Financial Creditor to assail the approval of Resolution Plan since the financial creditor in class of homebuyers has voted with more than 50% voting share for approval of the resolution plan. Further, reliance was also placed on...

NCLAT Nod To Roma Unicon Designex Consortium As The Successful Resolution Applicant Of Earth Infrastructure Ltd.

Pallavi Mishra

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