Resolution Professional Cannot Decide The Eligibility Under Section 29A Of The Insolvency And Bankruptcy Code, 2016: NCLAT Delhi

NCLAT was hearing the appeal by the Resolution Professional against the order dated 02.03.2022 of NCLT Allahabad wherein NCLT directed the Resolution Professional to place all the Resolution Plans before the Committee of Creditors along with his opinion on the contravention of the various provisions of the Code.

Factual Background

Ms. Upma Jaiswal (Respondent before NCLAT) preferred an application before the NCLT Allahabad seeking direction to the Resolution Professional of Renu Residency Pvt. Ltd. to place the resolution plan before the Committee of Creditors. Resolution Professional opposed the same by stating that the Upma Jaiswal is ineligible under Section 29A of the Code and therefore, the plan cannot be place before the COC for voting.

NCLT after referring to the case of ArcelorMittal India Private Limited versus Satish Kumar Gupta, (2019) 2 SCC 1 held that the resolution plan can be placed before the COC along with the opinion of Resolution Professional on the eligibility of Upma Jaiswal under Section 29A of the Code and thereafter, an appeal was filed before the NCLAT.

Contentions Of Resolution Professional

It was contended by the Resolution Professional before NCLAT that as per the opinion obtained by the Resolution Professional, the Resolution Plan of Upma Jaiswal was not eligible as per Section 29A of the Code and therefore, Resolution Professional cannot place the plan before the COC for approval.

It was further contended by the Resolution Professional that the plan submitted by the other resolution applicant is already under consideration at advanced stage before the COC and therefore, NCLT cannot directed the plan of Upma Jaiswal to be considered by the COC.

Contentions Of Upma Jaiswal

It was contended on behalf of Upma Jaiswal that the question as to whether the plan submitted by Ms. Upma Jaiswal is to be rejected or approved is a question which need to be decided by the CoC. It was also contended that the Resolution Professional at best can give his opinion with regard to eligibility of the Resolution Applicant whether it conforms to Section 29A and other provisions of the Code or not. It was further contended that the Resolution Professional of its own cannot withhold any plan and refuse to submit the same before the CoC.

Decision Of NCLAT

NCLAT noted that both the parties relied on judgement of Supreme Court in the case of ArcelorMittal India Private Limited versus Satish Kumar Gupta, (2019) 2 SCC 1 to support their contentions. The NCLAT thereafter relied on Para 80 of the ArcelorMittal case which read as follows;

"80. However, it must not be forgotten that a Resolution Professional is only to "examine" and "confirm" that each resolution plan conforms to what is provided by Section 30(2). Under Section 25(2)(i), the Resolution Professional shall undertake to present all resolution plans at the meetings of the Committee of Creditors. This is followed by Section 30(3), which states that the Resolution Professional shall present to the Committee of Creditors, for its approval, such resolution plans which confirm the conditions referred to in sub-section (2). This provision has to be read in conjunction with Section 25(2)(i), and with the second proviso to Section 30(4), which provides that where a resolution applicant is found to be ineligible under Section 29A(c), the resolution applicant shall be allowed by the Committee of Creditors such period, not exceeding 30 days, to make payment of overdue amounts in accordance with the proviso to Section 29A(c). A conspectus of all these provisions would show that the Resolution Professional is required to examine that the resolution plan submitted by various applicants is complete in all respects, before submitting it to the Committee of Creditors. The Resolution Professional is not required to take any decision, but merely to ensure that the resolution plans submitted are complete in all respects before they are placed before the Committee of Creditors, who may or may not approve it. The fact that the Resolution Professional is also to confirm that a resolution plan does not contravene any of the provisions of law for the time-being in force, including Section 29A of the Code, only means that his prima facie opinion is to be given to the Committee of Creditors that a law has or has not been contravened. Section 30(2)(e) does not empower the Resolution Professional to "decide" whether the resolution plan does or does not contravene the provisions of law…"

Relying on the abovementioned paragraph, the NCLAT held that;

"7. The ratio of the judgment of the Hon'ble Supreme Court as is culled out from paras 80 & 81 is that the Resolution Professional is not to take a decision regarding the ineligibility of the Resolution Applicant. It has only to form its opinion because it is the duty of the Resolution Professional to find out as to whether the Resolution Plan is in compliance of the provisions of the Code or not the Resolution Professional can give his opinion with regard to each plan before the CoC and it is for the CoC to take a decision as to whether the plan is to be approved or not. In para 5 of the impugned order, we have noticed that the direction has been issued to the Resolution Professional to place all the Resolution Plans along with his opinion on the contravention or otherwise of the various provisions of law. The aforesaid direction clearly indicates that the Resolution Professional is free to submit his opinion with regard to contravention or otherwise of the various provisions of law. The aforesaid observations take care of the duties and responsibilities of the Resolution Professional. The Resolution Professional can give his opinion with regard to each Resolution Applicants and further steps are to be taken for the CoC as per the direction issued by the Adjudicating Authority."

NCLAT further held that various issues regarding the ineligibility or eligibility of the Resolution Applicant are not required to be gone into the present appeal. It further held that these issues regarding the eligibility of Resolution Applicant can be decided by the NCLT if any question arises regarding same after the approval of the Resolution plan by the Committee of Creditors and accordingly the NCLAT dismissed the appeal filed by the Resolution Professional.

Cause title: Sharavan Kumar Vishnoi versus Upma Jaiswal & Anr.

Counsel for Appellant: Mr. Abhishek Anand, Mr. A K Jain, Mr, Karan Kohli

Counsel for Respondent: Mr. Ramji Srinivasan, Sr. Advocate with Mr. Pranaynath Jha, Ms. Simran Soni, Mr. Mahesh Kumar, Mr. Shubham Gupta.

Click Here To Read/Download Order