NCLAT observed that disqualification extends not only to those in control at the time of NPA declaration but also to those in control in close proximity to Resolution Plan submission who fail to clear debts.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) was hearing an appeal and held that disqualification under Section 29A extends not only to those in control at the time of NPA declaration but also to those in control in close proximity to Resolution Plan submission who fail to clear debts. The NCLAT Bench noted that this interpretation, broader than the Appellant's contention, aligns with legislative intent.
The court's analysis focused on determining the timing of control over the Corporate Debtor, emphasizing that control transferred at the effective date of the Memorandum of Understanding (MoU), irrespective of equity investment completion. Ultimately, this interpretation led to the dismissal of the appeal and the upholding of disqualification under Section 29A (c) of the IBC.
In the appeal filed against the NCLT's rejection of their challenge under Section 29A, the Appellant contested their disqualification from submitting a Resolution Plan for Athena Demwe Power Limited. The Corporate Debtor, a company overseeing a hydroelectric project, had its account declared an NPA in 2013. Disputes arose over the Appellant's eligibility due to agreements regarding equity infusion, leading to disagreements over control and management.
The Adjudicating Authority found the Appellant disqualified under Section 29A, alleging control over the Corporate Debtor. The Appellant argued they lacked control at the time of the NPA declaration and that subsequent agreements didn't confer control. Legal arguments centred on the interpretation of Section 29A and the timing of control over the Corporate Debtor, with reference to the ArcelorMittal India Private Limited v. Satish Kumar Gupta and Others, REEDLAW 2018 SC 10541 judgment and the validity of agreements establishing control.
The NCLAT, examining the scope of Section 29A, concluded that disqualification extends not only to those in control at the time of NPA declaration but also to those in control in close proximity to Resolution Plan submission who fail to clear debts. This interpretation, broader than the Appellant's counsel's stance, aligns with legislative intent.
Regarding a crucial Memorandum of Understanding (MoU), the Appellant argued that control wasn't transferred until fulfilling the equity investment obligation. However, the court determined that control was transferred from the MoU's effective date, dismissing the appeal and upholding the disqualification under Section 29A (c) of the IBC.
An interlocutory application by THDC India Limited was also addressed and disposed of. Ultimately, the appeal was dismissed, with no order as to costs.
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