Stage Of Ineligibility Attaches When The Resolution Plan Is Submitted By A Resolution Applicant; 270 Days Time Limit For Completion Of Insolvency Resolution Process Mandatory: SC

The Supreme Court, interpreting Section 29A(c) of the Insolvency and Bankruptcy Code, 2016, has observed the stage of ineligibility attaches when the resolution plan is submitted by a resolution applicant and not any anterior stage.The bench comprising Justice Rohinton Fali Nariman and Justice Indu Malhotra in Arcelormittal India Private Limited vs. Satish Kumar Gupta also held that the time limit for completion of the insolvency resolution process as laid down in Section 12 is mandatory and it cannot be extended beyond 270 days.Interpreting the Section 29A(c), the bench observed that any person who wishes to submit a resolution plan, if he or it does so acting jointly, or in concert with other persons, which person or other persons happen to either manage or control or be promoters of a corporate debtor, who is classified as a non-performing asset and whose debts have not been paid off for a period of at least one year before commencement of the corporate insolvency resolution process, becomes ineligible to submit a resolution plan.The bench also added that any person who wishes to submit a resolution plan acting jointly or in concert with other persons, any of whom may either manage, control or be a promoter of a corporate debtor classified as a non-performing asset, must first pay off the debt of the said corporate debtor classified as a non-performing asset in order to become eligible under Section 29A(c).Referring to the section, the bench said: "The interpretation of Section 29A(c) now becomes clear. Any person who wishes to submit a resolution plan, if he or it does so acting jointly, or in concert with other persons, which person or other persons happen to either manage or control or be promoters of a corporate debtor, who is classified as a non-performing asset and whose debts have not been paid off for a period of at least one year before commencement of the corporate insolvency resolution process, becomes ineligible to submit a resolution plan. This provision therefore ensures that if a person wishes to submit a resolution plan, and if such person or any person acting jointly or any person in concert with such person, happens to either manage, control, or be promoter of a corporate debtor declared as a non-performing asset one year before the corporate insolvency resolution process begins, is ineligible to submit a resolution plan. The first proviso to sub-clause (c) makes it clear that the ineligibility can only be removed if the person submitting a resolution plan makes payment of all overdue amounts with interest thereon and charges relating to the non-performing asset in question before submission of a resolution plan. The position in law is thus clear. Any person who wishes to submit a resolution plan acting jointly or in concert with other persons, any of whom may either manage, control or be a promoter of a corporate debtor classified as a non-performing asset in the period abovementioned, must first pay off the debt of the said corporate debtor classified as a non-performing asset in order to become eligible under Section 29A(c)."The bench, however disagreed with submissions made by Senior Advocate Abhishek Singhwi that proviso to Section 29A(c) be interpreted to make it workable, and create a situation so that banks can recover the maximum possible amounts from the NPAs generally, and not merely from the NPAs of the corporate debtor in respect of which it is receiving resolution plans.The bench, in this regard, said: "The plain language of the proviso makes it clear, that ineligibility can only be removed if the necessary payment is made before submission of a resolution plan. It is not possible to accede to the argument that, commercially speaking, no person would ever make a speculative bid, where he would pay off the debt of another related corporate debtor, classified as an NPA, without being certain that his resolution plan would be accepted, as this would narrow the pool of resolution applicants to nil, and therefore stultify the object sought to be achieved by the proviso to Section 29A(c). First, it is clear that there may be persons who may submit resolution plans, either by themselves, or in concert, or jointly with other persons who do not have debts which are declared as NPAs. Also, it is very difficult to say that in no circumstance whatsoever would a person submitting a resolution plan pay off the NPA dues of another person, with whom it is acting in concert or jointly. The dues may be such that it may be worth the while of the person, together with the persons with whom he is acting in concert or jointly, to first pay off the dues of the concerned corporate debtor whose account has been declared to be an NPA, as such dues may be negligible when compared with the gaining of control of the corporate debtor that is sought to be run as a going concern as per a resolution plan submitted. It is, therefore, impossible to say that the plain, literal, meaning of the language used...

Stage Of Ineligibility Attaches When The Resolution Plan Is Submitted By A Resolution Applicant; 270 Days Time Limit For Completion Of Insolvency Resolution Process Mandatory: SC

ASHOK KINI

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