Advisory Role Not Ground for Section 29A Disqualification, Says NCLAT; Sets Aside Rejection of Resolution Plan
- REEDLAW
- 2 days ago
- 3 min read
REEDLAW Legal News Network reports: In a pivotal ruling, the National Company Law Appellate Tribunal (NCLAT) held that a resolution applicant cannot be disqualified under Section 29A of the Insolvency and Bankruptcy Code (IBC) merely on speculative grounds or advisory associations with individuals alleged to be ineligible. The Tribunal set aside the NCLT’s rejection of the Resolution Plan, observing that there was no concrete evidence of disqualification or non-performing asset (NPA) status, and the involvement of the said individual was limited to a non-controlling advisory role. The NCLAT reaffirmed that disqualifications under Section 29A must be strictly construed and based on verified records, especially when the Resolution Plan has been unanimously approved by the Committee of Creditors (CoC).
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member), while adjudicating a company appeal, held that a resolution applicant cannot be disqualified under Section 29A of the IBC merely based on speculative or unsubstantiated connections to a person alleged to be ineligible, especially when there is no official record of disqualification or NPA status, and the person’s role is purely advisory without control or management. The Tribunal emphasized that disqualification must be supported by concrete evidence and cannot rest on presumptions, particularly where the Resolution Plan has received 100% approval from the CoC.
In this case, the NCLAT allowed the appeal filed by the Successful Resolution Applicant (SRA) in the CIRP of M/s Vijay Citispace Pvt. Ltd., setting aside the NCLT’s order that had denied approval to the Resolution Plan. The NCLT had rejected the plan, citing the disqualification of the Appellant under Section 29A(e) and (j) of the IBC, based on the alleged ineligibility of Mr. Anil Gupta, whose expertise was mentioned in the Resolution Plan, claiming he was a “connected person” and a disqualified director under the Companies Act.
The NCLAT found that the companies allegedly linked to Mr. Anil Gupta had been struck off voluntarily under Section 248(2) of the Companies Act, and there was no finding or evidence showing disqualification by the ROC. It held that mere assumptions based on striking off without any order of disqualification could not be the basis for invoking Section 29A(e). Furthermore, the tribunal observed that the reference to Mr. Anil Gupta in the plan did not imply that he was in control or management of the Appellant, and no material evidence established his involvement beyond an advisory capacity. The tribunal also rejected allegations under Section 29A(c) regarding NPA classification, noting no relevant account was NPA at the time of plan submission and that a related Chhattisgarh entity had no present connection to the appellant.
The NCLAT emphasized that the plan was approved unanimously by the CoC and found the objections raised by a suspended director, who was in judicial custody, to be lacking in credibility. Concluding that the appellant was not disqualified under Section 29A, the NCLAT allowed the appeal and directed the NCLT to consider the application for plan approval afresh on merits.
Mr. Ravi Prakash, Sr Advocate, with Mr. Aman Malik, Mr. Kumar Anurag Singh, Mr. Zain A Khan, Mohd A Khan and Mr. Vijay Kumar, Advocates, represented the Appellant.
Mr. Sumesh Dhawan, Mr. Chitranshul A. Sinha, Ms. Pallavi, Mr. Shaurya Shyam, Mr. Shivam Shoirewala and Ms. Rakshita Bhargava, Advocates, appeared for the Respondent No. 3.
Mr. Manaswi Agrawal, Ms. Bhavana Duhoon, Ms. Saloni Kalwade and Mr. Ashish Vyas, Advocates, appeared for the Respondents.
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