The National Company Law Appellate Tribunal (NCLAT), Delhi Bench comprising Justice Ashok Bhushan, Chairperson with Technical Members, Barun Mitra and Arun Baroka was recently hearing an appeal and held that the mere fact of being a former promoter/director did not make him ineligible to submit a Resolution Plan.
NCLAT observed that Section 29A of the Insolvency and Bankruptcy Code does not automatically disqualify former promoters/directors from submitting a Resolution Plan unless specific disqualifications under clauses (a) to (g) are proven. The Appellate Tribunal noted that Mere past association does not render a person ineligible. The decision clarifies that the ineligibility criterion is not absolute and requires a case-by-case examination based on the stipulated clauses.
In this NCLAT judgment, the appeal was filed against the order dated 18.08.2023 by the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench-I. The order rejected the Resolution Plan submitted by Mr. Mahesh Mathai, the Successful Resolution Applicant, under Section 29A of the Insolvency and Bankruptcy Code (IBC).
The Corporate Debtor, 'M/s. Blue Frog Media Private Limited,' filed for insolvency under Section 10 of the IBC, and Mr. Mahesh Mathai, an Ex-Director, submitted a Resolution Plan which was approved by the Committee of Creditors (CoC). However, the Adjudicating Authority rejected the plan, citing Mr. Mathai's ineligibility under Section 29A, as he was a former promoter/director of the company.
The Appellant argued that Section 29A does not per se disqualify promoters/directors unless specific clauses under Section 29A are violated. The Adjudicating Authority's decision was challenged, asserting that Mr. Mathai met none of the disqualifying conditions under Section 29A.
The NCLAT, after considering the submissions, disagreed with the Adjudicating Authority's interpretation of Section 29A and referred to the Supreme Court's decision In the Matter of Hari Babu Thota, Resolution Professional of Shree Aashraya Infra-Con Limited, REED 2023 NCLAT Chn 06515, which clarified that there is no automatic disqualification for promoters under Section 29A.
The NCLAT concluded that since none of the clauses (a) to (g) of Section 29A applied to Mr. Mathai, the mere fact of being a former promoter/director did not make him ineligible to submit a Resolution Plan. The rejection of Mr. Mathai's plan was deemed unsustainable, and the Adjudicating Authority's order was set aside. The case was remitted back for fresh consideration, and the Resolution Plan approval process was revived. The Appeal was disposed of accordingly.